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):
September 25, 1997
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-09781 74-2099724
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2929 Allen Parkway, Suite 2010, Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
(713) 834-2950
(Registrant's telephone number, including area code)
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Item 7. Financial Statements and Exhibits.
(c) Exhibits. The documents listed below are filed as Exhibits with
reference to the Registration Statement on Form S-3 (Registration No. 333-31285)
of Continental Airlines, Inc. The Registration Statement and the Prospectus
Supplement, dated September 12, 1997, to the Prospectus, dated July 23, 1997,
relate to the offering of Continental Airlines, Inc.'s Pass Through
Certificates, Series 1997-3.
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4.1 Revolving Credit Agreement 1997-3A between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.2 Revolving Credit Agreement 1997-3B between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.3 Revolving Credit Agreement 1997-3C between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.4 Pass Through Trust Agreement between Continental Airlines,
Inc. and Wilmington Trust Company, as Trustee
4.5 Trust Supplement No. 1997-3A Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.6 Trust Supplement No. 1997-3B Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.8 Trust Supplement No. 1997-3C Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.9 Intercreditor Agreement among Wilmington Trust Company,
Trustee, ABN AMRO Bank, N.V., Chicago Branch, Liquidity
Provider, and Wilmington Trust Company, Subordination Agent
and Trustee
4.10 Form of Trust Agreement between ICX Corporation, Owner
Participant, and First Security Bank, National Association,
Owner Trustee
4.11 Form of Trust Agreement between MetLife Capital Credit L.P.,
Owner Participant, and First Security Bank, National
Association, Owner Trustee
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4.12 Form of Trust Agreement between Pacific Century Leasing,
Inc., Owner Participant, and First Security Bank, National
Association, Owner Trustee
4.13 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, Pacific Century Leasing, Inc., Owner
Participant, First Security Bank National Association,
Owner Trustee, Wilmington Trust Company, Mortgagee and Loan
Participant, Corcim, Inc., Existing Lessor, Rolls-Royce plc,
Existing Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.14 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, ICX Corporation, Owner Participant, First
Security Bank National Association, Owner Trustee,
Wilmington Trust Company, Mortgagee and Loan Participant,
Corcim, Inc., Existing Lessor, Rolls-Royce plc, Existing
Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.15 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, MetLife Capital Credit L.P., Owner
Participant, First Security Bank National Association,
Owner Trustee, Wilmington Trust Company, Mortgagee and Loan
Participant, Corcim, Inc., Existing Lessor, Rolls-Royce plc,
Existing Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.16 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[Pacific Century Leasing, Inc., Owner Participant]
4.17 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[ICX Corporation, Owner Participant]
4.18 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[MetLife Capital Credit L.P., Owner Participant]
4.19 Form of Trust Indenture and Mortgage between First Security
Bank, National Association, Owner Trustee, and Wilmington
Trust Company, Mortgagee
23.1 Consent of Avmark, Inc.
23.2 Consent of Simat, Helliesen & Eichner, Inc.
23.3 Consent of Morten Beyer and Agnew
<PAGE>
23.4 Consent of Avmark, Inc.
23.5 Consent of Morten Beyer and Agnew
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Continental
Airlines, Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONTINENTAL AIRLINES, INC.
By /S/ JEFFERY A. SMISEK
--------------------------------
Jeffery A. Smisek
Executive Vice President
and General Counsel
October 13, 1997
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EXHIBIT INDEX
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4.1 Revolving Credit Agreement 1997-3A between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.2 Revolving Credit Agreement 1997-3B between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.3 Revolving Credit Agreement 1997-3C between Wilmington Trust
Company, Subordination Agent and Borrower, and ABN AMRO
Bank, N.V., Chicago Branch, as Liquidity Provider
4.4 Pass Through Trust Agreement between Continental Airlines,
Inc. and Wilmington Trust Company, as Trustee
4.5 Trust Supplement No. 1997-3A Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.6 Trust Supplement No. 1997-3B Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.8 Trust Supplement No. 1997-3C Dated September 25, 1997
between Wilmington Trust Company, as Trustee, and
Continental Airlines, Inc. to Pass Through Trust Agreement
Dated as of September 25, 1997
4.9 Intercreditor Agreement among Wilmington Trust Company,
Trustee, ABN AMRO Bank, N.V., Chicago Branch, Liquidity
Provider, and Wilmington Trust Company, Subordination Agent
and Trustee
4.10 Form of Trust Agreement between ICX Corporation, Owner
Participant, and First Security Bank, National Association,
Owner Trustee
4.11 Form of Trust Agreement between MetLife Capital Credit L.P.,
Owner Participant, and First Security Bank, National
Association, Owner Trustee
<PAGE>
4.12 Form of Trust Agreement between Pacific Century Leasing,
Inc., Owner Participant, and First Security Bank, National
Association, Owner Trustee
4.13 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, Pacific Century Leasing, Inc., Owner
Participant, First Security Bank National Association,
Owner Trustee, Wilmington Trust Company, Mortgagee and Loan
Participant, Corcim, Inc., Existing Lessor, Rolls-Royce plc,
Existing Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.14 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, ICX Corporation, Owner Participant, First
Security Bank National Association, Owner Trustee,
Wilmington Trust Company, Mortgagee and Loan Participant,
Corcim, Inc., Existing Lessor, Rolls-Royce plc, Existing
Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.15 Form of Participation Agreement among Continental Airlines,
Inc., Lessee, MetLife Capital Credit L.P., Owner
Participant, First Security Bank National Association,
Owner Trustee, Wilmington Trust Company, Mortgagee and Loan
Participant, Corcim, Inc., Existing Lessor, Rolls-Royce plc,
Existing Mortgagee and Equity Guarantor and Embraer-Empresa
Brasileira de Aeronautica S.A., Airframe Manufacturer
4.16 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[Pacific Century Leasing, Inc., Owner Participant]
4.17 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[ICX Corporation, Owner Participant]
4.18 Form of Lease Agreement between First Security Bank National
Association, Lessor and Continental Airlines, Inc., Lessee
[MetLife Capital Credit L.P., Owner Participant]
4.19 Form of Trust Indenture and Mortgage between First Security
Bank, National Association, Owner Trustee, and Wilmington
Trust Company, Mortgagee
23.1 Consent of Avmark, Inc.
23.2 Consent of Simat, Helliesen & Eichner, Inc.
23.3 Consent of Morten Beyer and Agnew
<PAGE>
23.4 Consent of Avmark, Inc.
23.5 Consent of Morten Beyer and Agnew
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REVOLVING CREDIT AGREEMENT
(1997-3A)
Dated as of September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Subordination Agent,
as agent and trustee for the
Continental Airlines Pass Through Trust 1997-3A
as Borrower
and
ABN AMRO BANK N.V., CHICAGO BRANCH
as Liquidity Provider
Relating to
Continental Airlines Pass Through Trust 1997-3A
7.160% Continental Airlines Pass Through Certificates,
Series 1997-3A
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TABLE OF CONTENTS
PAGE
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ARTICLE I.
DEFINITIONS
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Section 1.1 Certain Defined Terms......................................... 1
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.1 The Advances...................................................6
Section 2.2 Making the Advances............................................7
Section 2.3. Fees...........................................................9
Section 2.4. Adjustments or Termination of the Maximum Commitment...........9
Section 2.5. Repayments of Interest Advances or the Final Advance...........9
Section 2.6. Repayments of Provider Advances...............................10
Section 2.7. Payments to the Liquidity Provider Under the Intercreditor
Agreement.....................................................11
Section 2.8. Book Entries..................................................11
Section 2.9. Payments from Available Funds Only............................11
ARTICLE III.
OBLIGATIONS OF THE BORROWER
Section 3.1. Increased Costs...............................................12
Section 3.2. Capital Adequacy..............................................13
Section 3.3. Payments Free of Deductions...................................13
Section 3.4. Payments......................................................14
Section 3.5. Computations..................................................14
Section 3.6. Payment on Non-Business Days..................................14
Section 3.7. Interest......................................................14
Section 3.8. Replacement of Borrower.......................................16
Section 3.9. Funding Loss Indemnification..................................16
Section 3.10. Illegality....................................................17
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TABLE OF CONTENTS
(Continued)
PAGE
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ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Effectiveness of Section 2.1..........17
Section 4.2. Conditions Precedent to Borrowing.............................19
ARTICLE V.
COVENANTS
Section 5.1. Affirmative Covenants of the Borrower.........................19
Section 5.2. Negative Covenants of the Borrower............................19
ARTICLE VI.
LIQUIDITY EVENTS OF DEFAULT
Section 6.1. Liquidity Events of Default...................................20
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Amendments, Etc...............................................20
Section 7.2. Notices, Etc..................................................20
Section 7.3. No Waiver; Remedies...........................................21
Section 7.4. Further Assurances............................................21
Section 7.5. Indemnification; Survival of Certain Provisions...............21
Section 7.6. Liability of the Liquidity Provider...........................22
Section 7.7. Costs, Expenses and Taxes.....................................22
Section 7.8. Binding Effect; Participations................................23
Section 7.9. Severability..................................................24
Section 7.10. Governing Law.................................................25
Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of
Immunity......................................................25
Section 7.12. Execution in Counterparts.....................................26
Section 7.13. Entirety......................................................26
Section 7.14. Headings......................................................26
Section 7.15. Liquidity Provider's Obligation To Make Advances..............26
<PAGE>
TABLE OF CONTENTS
(Continued)
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Non-Extension Advance Notice of Borrowing
ANNEX III Downgrade Advance Notice of Borrowing
ANNEX IV Final Advance Notice of Borrowing
ANNEX V Notice of Termination
ANNEX VI Notice of Replacement Subordination Agent
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
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REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT dated as of September 25, 1997,
between WILMINGTON TRUST COMPANY, a Delaware corporation, not in its individual
capacity but solely as Subordination Agent under the Intercreditor Agreement
(each as defined below), as agent and trustee for the Class A Trust (as defined
below) (the "BORROWER"), and ABN AMRO BANK N.V., a bank organized under the laws
of The Netherlands, acting through its Chicago Branch ("ABN AMRO" or the
"LIQUIDITY PROVIDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Class A Trust Agreement (such term and all
other capitalized terms used in these recitals having the meanings set forth or
referred to in Section 1.1), the Class A Trust is issuing the Class A
Certificates; and
WHEREAS, the Borrower, in order to support the timely payment of a
portion of the interest on the Class A Certificates in accordance with their
terms, has requested the Liquidity Provider to enter into this Agreement,
providing in part for the Borrower to request in specified circumstances that
Advances be made hereunder.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
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Section 1.1. CERTAIN DEFINED TERMS. (a) DEFINITIONS. As used in this
Agreement and unless otherwise expressly indicated, or unless the context
clearly requires otherwise, the following capitalized terms shall have the
following respective meanings for all purposes of this Agreement:
"ADDITIONAL COST" has the meaning assigned to such term in Section
3.1.
"ADVANCE" means an Interest Advance, a Final Advance, a Provider
Advance, an Applied Provider Advance or an Unpaid Advance, as the case may
be.
"APPLICABLE LIQUIDITY RATE" has the meaning assigned to such term in
Section 3.7(g).
"APPLICABLE MARGIN" means (w) with respect to any Unpaid Advance or
Applied Provider Advance, 2.00% or (x) with respect to any Unapplied
Provider Advance, .40%.
"APPLIED DOWNGRADE ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
<PAGE>
"APPLIED NON-EXTENSION ADVANCE" has the meaning assigned to such term
in Section 2.6(a).
"APPLIED PROVIDER ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to (a) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected
by it, plus (b) one-quarter of one percent (1/4 of 1%).
"BASE RATE ADVANCE" means an Advance that bears interest at a rate
based upon the Base Rate.
"BORROWER" has the meaning assigned to such term in the recital of
parties to this Agreement.
"BORROWING" means the making of Advances requested by delivery of a
Notice of Borrowing.
"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 Houston,
Texas, New York, New York, Chicago, Illinois or, so long as any Class A
Certificate is outstanding, the city and state in which the Class A
Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust
Office or receives or disburses funds, and, if the applicable Business Day
relates to any Advance or other amount bearing interest based on the LIBOR
Rate, on which dealings are carried on in the London interbank market.
"DOWNGRADE ADVANCE" means an Advance made pursuant to Section 2.2(c).
"EFFECTIVE DATE" has the meaning specified in Section 4.1. The
delivery of the certificate of the Liquidity Provider contemplated by
Section 4.1(e) shall be conclusive evidence that the Effective Date has
occurred.
"EXCLUDED TAXES" means (i) taxes imposed on the overall net income of
the Liquidity Provider or of its Lending Office by the jurisdiction where
such Liquidity Provider's principal office or such Lending Office is
located, and (ii) Excluded Withholding Taxes.
"EXCLUDED WITHHOLDING TAXES" means (i) withholding Taxes imposed by
the United States except to the extent that such United States withholding
<PAGE>
Taxes are imposed as a result of any change in applicable law after the
date hereof (excluding from change in applicable law for this purpose a
change in an applicable treaty or other change in law affecting the
applicability of a treaty), or in the case of a successor Liquidity
Provider (including a transferee of an Advance) or Lending Office, after
the date on which such successor Liquidity Provider obtains its interest or
on which the Lending Office is changed, and (ii) any withholding Taxes
imposed by the United States which are imposed or increased as a result of
the Liquidity Provider failing to deliver to the Borrower any certificate
or document (which certificate or document in the good faith judgment of
the Liquidity Provider it is legally entitled to provide) which is
reasonably requested by the Borrower to establish that payments under this
Agreement are exempt from (or entitled to a reduced rate of) withholding
Tax.
"EXPENSES" means liabilities, obligations, damages, settlements,
penalties, claims, actions, suits, costs, expenses, and disbursements
(including, without limitation, reasonable fees and disbursements of legal
counsel and costs of investigation), provided that Expenses shall not
include any Taxes.
"EXPIRY DATE" means September 24, 1998, initially, or any date to
which the Expiry Date is extended pursuant to Section 2.10.
"FINAL ADVANCE" means an Advance made pursuant to Section 2.2(d).
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated the
date hereof, among the Trustees, the Liquidity Provider, the liquidity
provider under each Liquidity Facility (other than this Agreement) and the
Subordination Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"INTEREST ADVANCE" means an Advance made pursuant to Section 2.2(a).
"INTEREST PERIOD" means, with respect to any LIBOR Advance, each of
the following periods:
(i) the period beginning on the third Business Day following
either (x) the Liquidity Provider's receipt of the Notice of Borrowing for
such LIBOR Advance or (y) the withdrawal of funds from the Class A Cash
Collateral Account for the purpose of paying interest on the Class A
Certificates as contemplated by Section 2.6(a) hereof and, in either case,
ending on the next Regular Distribution Date; and
(ii) each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the next Regular
Distribution Date;
PROVIDED, HOWEVER, that if (x) the Final Advance shall have been made, or
(y) other outstanding Advances shall have been converted into the Final
Advance, then the Interest Periods shall be successive periods of one month
beginning on the third Business Day following the Liquidity Provider's
receipt of the Notice of Borrowing for such Final Advance (in the case of
<PAGE>
clause (x) above) or the Regular Distribution Date following such
conversion (in the case of clause (y) above).
"LENDING OFFICE" means the lending office of the Liquidity Provider
presently located at Chicago, Illinois, or such other lending office as the
Liquidity Provider from time to time shall notify the Borrower as its
lending office hereunder; provided that the Liquidity Provider shall not
change its Lending Office to a Lending Office outside the United States of
America except in accordance with Section 3.1, 3.2 or 3.3 hereof.
"LIBOR ADVANCE" means an Advance bearing interest at a rate based upon
the LIBOR Rate.
"LIBOR RATE" means, with respect to any Interest Period, the average
(rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates
per annum at which deposits in dollars are offered to major banks in the
London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Advance to which such
Interest Period is to apply and for a period of time comparable to such
Interest Period.
"LIQUIDITY EVENT OF DEFAULT" means the occurrence of either (a) the
Acceleration of all of the Equipment Notes or (b) a Continental Bankruptcy
Event.
"LIQUIDITY INDEMNITEE" means (i) the Liquidity Provider, (ii) the
directors, officers, employees and agents of the Liquidity Provider, and
(iii) the successors and permitted assigns of the persons described in
clauses (i) and (ii), inclusive.
"LIQUIDITY PROVIDER" has the meaning assigned to such term in the
recital of parties to this Agreement.
"MAXIMUM AVAILABLE COMMITMENT" shall mean, subject to the proviso
contained in the third sentence of Section 2.2(a), at any time of
determination, (a) the Maximum Commitment at such time less (b) the
aggregate amount of each Interest Advance outstanding at such time;
provided that following a Provider Advance or a Final Advance, the Maximum
Available Commitment shall be zero.
"MAXIMUM COMMITMENT" means, for any day, the lesser of (x) $5,846,856
and (y) the Required Amount on such day.
"NON-EXTENSION ADVANCE" means an Advance made pursuant to Section
2.2(b).
"NOTICE OF BORROWING" has the meaning specified in Section 2.2(e).
"NOTICE OF REPLACEMENT SUBORDINATION AGENT" has the meaning specified
in Section 3.8.
<PAGE>
"PERFORMING NOTE DEFICIENCY" means any time that less than 65% of the
then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"PROSPECTUS" means the Prospectus dated July 23, 1997, as modified and
supplemented by the Prospectus Supplement dated September 12, 1997,
relating to the Certificates; and as such Prospectus may be further amended
or supplemented.
"PROVIDER ADVANCE" means a Downgrade Advance or a Non-Extension
Advance.
"REGULATORY CHANGE" has the meaning assigned to such term in Section
3.1.
"REPLENISHMENT AMOUNT" has the meaning assigned to such term in
Section 2.6(b).
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount
of interest, calculated at the rate per annum equal to the Stated Interest
Rate for the Class A Certificates, that would be payable on the Class A
Certificates on each of the six successive quarterly Regular Distribution
Dates immediately following such day or, if such day is a Regular
Distribution Date, on such day and the succeeding five quarterly Regular
Distribution Dates, in each case calculated on the basis of the Pool
Balance of the Class A Certificates on such day and without regard to
expected future payments of principal on the Class A Certificates.
"ROLLS ROYCE" means Rolls-Royce plc, a corporation organized under the
laws of England.
"TAX LETTER" means the letter dated the date hereof between the
Liquidity Provider and Rolls Royce pertaining to this Agreement.
"TERMINATION DATE" means the earliest to occur of the following: (i)
the Expiry Date; (ii) the date on which the Borrower delivers to the
Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that all of the Class A Certificates have been paid in
full (or provision has been made for such payment in accordance with the
Intercreditor Agreement and the Trust Agreements) or are otherwise no
longer entitled to the benefits of this Agreement; (iii) the date on which
the Borrower delivers to the Liquidity Provider a certificate, signed by a
Responsible Officer of the Borrower, certifying that a Replacement
Liquidity Facility has been substituted for this Agreement in full pursuant
to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business
Day following the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.1 hereof; and (v) the date on
which no Advance is or may (including by reason of reinstatement as herein
provided) become available for a Borrowing hereunder.
"TERMINATION NOTICE" means the Notice of Termination substantially in
the form of Annex V to this Agreement.
<PAGE>
"TRANSFEREE" has the meaning assigned to such term in Section 7.8(b).
"UNAPPLIED DOWNGRADE ADVANCE" means any Downgrade Advance other than
an Applied Downgrade Advance.
"UNAPPLIED PROVIDER ADVANCE" means any Provider Advance other than an
Applied Provider Advance.
"UNPAID ADVANCE" has the meaning assigned to such term in Section 2.5.
(b) TERMS DEFINED IN THE INTERCREDITOR AGREEMENT. For all purposes of
this Agreement, the following terms shall have the respective meanings assigned
to such terms in the Intercreditor Agreement:
"ACCELERATION", "CERTIFICATES", "CLASS A CASH COLLATERAL ACCOUNT",
"CLASS A CERTIFICATES", "CLASS A CERTIFICATEHOLDERS", "CLASS A TRUST",
"CLASS A TRUST AGREEMENT", "CLASS A TRUSTEE", "CLASS B CASH COLLATERAL
ACCOUNT", "CLASS B CERTIFICATES", "CLASS B CERTIFICATEHOLDERS", "CLASS
B TRUST", "CLASS B TRUST AGREEMENT", "CLASS B TRUSTEE", "CLASS C CASH
COLLATERAL ACCOUNT", "CLASS C CERTIFICATES", "CLASS C
CERTIFICATEHOLDERS", "CLASS C TRUST", "CLASS C TRUST AGREEMENT",
"CLASS C TRUSTEE", "CLOSING DATE", "CONTINENTAL", "CONTINENTAL
BANKRUPTCY EVENT", "CONTROLLING PARTY", "CORPORATE TRUST OFFICE",
"DELIVERY PERIOD EXPIRY DATE", "DISTRIBUTION DATE", "DOWNGRADED
FACILITY", "EQUIPMENT NOTES", "FEE LETTER", "FINANCING AGREEMENT",
"INDENTURE", "INVESTMENT EARNINGS", "LIQUIDITY FACILITY", "LOAN
TRUSTEE", "MOODY'S", "NON-EXTENDED FACILITY", "OPERATIVE AGREEMENTS",
"PERFORMING EQUIPMENT NOTE", "PERSON", "POOL BALANCE", "PURCHASE
AGREEMENT", "RATING AGENCY", "REGULAR DISTRIBUTION DATE", "REPLACEMENT
LIQUIDITY FACILITY", "RESPONSIBLE OFFICER", "SCHEDULED PAYMENT",
"SPECIAL PAYMENT", "STANDARD & POOR'S", "STATED INTEREST RATE",
"SUBORDINATION AGENT", "TAXES", "THRESHOLD RATING", "TRANSFER", "TRUST
AGREEMENTS", "TRUSTEE", "UNDERWRITERS", "UNDERWRITING AGREEMENT" AND
"WRITTEN NOTICE".
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
----------------------------------
Section 2.1. THE ADVANCES. The Liquidity Provider hereby irrevocably
agrees, on the terms and conditions hereinafter set forth, to make Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless
the obligations of the Liquidity Provider shall be earlier terminated in
accordance with the terms of Section 2.4(b)) in an aggregate amount at any time
outstanding not to exceed the Maximum Commitment.
<PAGE>
Section 2.2. MAKING THE ADVANCES.
2.2.1. Interest Advances shall be made in one or more
Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the form
of Annex I attached hereto, signed by a Responsible Officer of the
Borrower, in an amount not exceeding the Maximum Available Commitment
at such time and shall be used solely for the payment when due of the
interest on the Class A Certificates at the Stated Interest Rate
therefor in accordance with Section 3.6(a) of the Intercreditor
Agreement. Each Interest Advance made hereunder shall automatically
reduce the Maximum Available Commitment and the amount available to be
borrowed hereunder by subsequent Advances by the amount of such
Interest Advance (subject to reinstatement as provided in the next
sentence). Upon repayment to the Liquidity Provider in full of the
amount of any Interest Advance made pursuant to this Section 2.2(a),
together with accrued interest thereon (as provided herein), the
Maximum Available Commitment shall be reinstated by the amount of such
repaid Interest Advance, but not to exceed the Maximum Commitment;
PROVIDED, HOWEVER, that the Maximum Available Commitment shall not be
so reinstated at any time if (i) a Liquidity Event of Default shall
have occurred and be continuing and (ii) there is a Performing Note
Deficiency.
2.2.2. A Non-Extension Advance shall be made in a single
Borrowing if this Agreement is not extended in accordance with Section
3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity
Facility to replace this Agreement shall have been previously
delivered to the Borrower in accordance with said Section 3.6(d)) by
delivery to the Liquidity Provider of a written and completed Notice
of Borrowing in substantially the form of Annex II attached hereto,
signed by a Responsible Officer of the Borrower, in an amount equal to
the Maximum Available Commitment at such time, and shall be used to
fund the Class A Cash Collateral Account in accordance with said
Section 3.6(d).
2.2.3. A Downgrade Advance shall be made in a single
Borrowing upon a downgrading of the Liquidity Provider's short-term
unsecured debt rating issued by either Rating Agency below the
Threshold Rating (as provided for in Section 3.6(c) of the
Intercreditor Agreement) unless a Replacement Liquidity Facility to
replace this Agreement shall have been previously delivered to the
Borrower in accordance with said Section 3.6(c), by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex III attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
A Cash Collateral Account in accordance with said Section 3.6(c).
2.2.4. A Final Advance shall be made in a single Borrowing
upon the receipt by the Borrower of a Termination Notice from the
<PAGE>
Liquidity Provider pursuant to Section 6.1 hereof by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex IV attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
A Cash Collateral Account (in accordance with Section 3.6(i) of the
Intercreditor Agreement).
2.2.5. Each Borrowing shall be made on notice in writing
(a "NOTICE OF BORROWING") in substantially the form required by
Section 2.2(a), 2.2(b), 2.2(c) or 2.2(d), as the case may be, given by
the Borrower to the Liquidity Provider. If a Notice of Borrowing is
delivered by the Borrower in respect of any Borrowing no later than
12:00 Noon (New York City time) on a Business Day, the Liquidity
Provider shall, upon satisfaction of the conditions precedent set
forth in Section 4.2 with respect to a requested Borrowing, before
12:00 Noon (New York City time) on the first Business Day next
following the day of receipt of such Notice of Borrowing or on such
later Business Day specified in such Notice of Borrowing, make
available to the Borrower, in accordance with its payment
instructions, in U.S. dollars and immediately available funds, the
amount of such Borrowing. If a Notice of Borrowing is delivered by the
Borrower in respect of any Borrowing after 12:00 Noon (New York City
time) on a Business Day, the Liquidity Provider shall, upon
satisfaction of the conditions precedent set forth in Section 4.2 with
respect to a requested Borrowing, before 12:00 Noon (New York City
time) on the second Business Day next following the day of receipt of
such Notice of Borrowing or on such later Business Day specified by
the Borrower in such Notice of Borrowing, make available to the
Borrower, in accordance with its payment instructions, in U.S. dollars
and in immediately available funds, the amount of such Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such
wire transfer instructions as the Borrower shall furnish from time to
time to the Liquidity Provider for such purpose. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower.
2.2.6. Upon the making of any Advance requested pursuant
to a Notice of Borrowing, in accordance with the Borrower's payment
instructions, the Liquidity Provider shall be fully discharged of its
obligation hereunder with respect to such Notice of Borrowing, and the
Liquidity Provider shall not thereafter be obligated to make any
further Advances hereunder in respect of such Notice of Borrowing to
the Borrower or to any other Person. Following the making of any
Advance pursuant to Section 2.2(b), (c) or (d) hereof to fund the
Class A Cash Collateral Account, the Liquidity Provider shall have no
interest in or rights to the Class A Cash Collateral Account, such
Advance or any other amounts from time to time on deposit in the Class
A Cash Collateral Account; provided that the foregoing shall not
affect or impair the obligations of the Subordination Agent to make
the distributions contemplated by Section 3.6(e) or (f) of the
Intercreditor Agreement. By paying to the Borrower proceeds of
<PAGE>
Advances requested by the Borrower in accordance with the provisions
of this Agreement, the Liquidity Provider makes no representation as
to, and assumes no responsibility for, the correctness or sufficiency
for any purpose of the amount of the Advances so made and requested.
Section 2.3. FEES. The Borrower agrees to pay to the Liquidity
Provider the fees set forth in the Fee Letter.
Section 2.4. ADJUSTMENTS OR TERMINATION OF THE MAXIMUM COMMITMENT.
2.4.1. AUTOMATIC ADJUSTMENTS. Promptly following each date
on which the Required Amount is reduced as a result of a reduction in
the Pool Balance of the Class A Certificates or otherwise, clause (y)
of the definition of Maximum Commitment shall automatically be reduced
to an amount equal to the Required Amount (as calculated by the
Borrower). The Borrower shall give notice of any such automatic
reduction of the Maximum Commitment to the Liquidity Provider within
two Business Days thereof. The failure by the Borrower to furnish any
such notice shall not affect such automatic reduction of the Maximum
Commitment.
2.4.2 TERMINATION. Upon the making of any Provider Advance
or Final Advance hereunder or the occurrence of the Termination Date,
the obligation of the Liquidity Provider to make further Advances
hereunder shall automatically and irrevocably terminate, and the
Borrower shall not be entitled to request any further Borrowing
hereunder.
Section 2.5. REPAYMENTS OF INTEREST ADVANCES OR THE FINAL ADVANCE.
Subject to Sections 2.6, 2.7 and 2.9 hereof, the Borrower hereby agrees, without
notice of an Advance or demand for repayment from the Liquidity Provider (which
notice and demand are hereby waived by the Borrower), to pay, or to cause to be
paid, to the Liquidity Provider on each date on which the Liquidity Provider
shall make an Interest Advance or the Final Advance, an amount equal to (a) the
amount of such Advance (any such Advance, until repaid, is referred to herein as
an "UNPAID ADVANCE"), plus (b) interest on the amount of each such Unpaid
Advance as provided in Section 3.7 hereof; PROVIDED that if (i) the Liquidity
Provider shall make a Provider Advance at any time after making one or more
Interest Advances which shall not have been repaid in accordance with this
Section 2.5 or (ii) this Liquidity Facility shall become a Downgraded Facility
or Non-Extended Facility at any time when unreimbursed Interest Advances have
reduced the Maximum Available Commitment to zero, then such Interest Advances
shall cease to constitute Unpaid Advances and shall be deemed to have been
changed into an Applied Downgrade Advance or an Applied Non-Extension Advance,
as the case may be, for all purposes of this Agreement (including, without
limitation, for the purpose of determining when such Interest Advance is
required to be repaid to the Liquidity Provider in accordance with Section 2.6
and for the purposes of Section 2.6(b)). The Borrower and the Liquidity Provider
agree that the repayment in full of each Interest Advance and Final Advance on
<PAGE>
the date such Advance is made is intended to be a contemporaneous exchange for
new value given to the Borrower by the Liquidity Provider.
Section 2.6. REPAYMENTS OF PROVIDER ADVANCES.
2.6.1 Amounts advanced hereunder in respect of a Provider
Advance shall be deposited in the Class A Cash Collateral Account,
invested and withdrawn from the Class A Cash Collateral Account as set
forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement.
The Borrower agrees to pay to the Liquidity Provider, on each Regular
Distribution Date, commencing on the first Regular Distribution Date
after the making of a Provider Advance, interest on the principal
amount of any such Provider Advance as provided in Section 3.7;
PROVIDED, HOWEVER, that amounts in respect of a Provider Advance
withdrawn from the Class A Cash Collateral Account for the purpose of
paying interest on the Class A Certificates in accordance with Section
3.6(f) of the Intercreditor Agreement (the amount of any such
withdrawal being (y) in the case of a Downgrade Advance, an "APPLIED
DOWNGRADE ADVANCE" and (z) in the case of a Non-Extension Advance, an
"APPLIED NON-EXTENSION ADVANCE" and, together with an Applied
Downgrade Advance, an "APPLIED PROVIDER ADVANCE") shall thereafter
(subject to Section 2.6(b)) be treated as an Interest Advance under
this Agreement for purposes of determining the Applicable Liquidity
Rate for interest payable thereon; PROVIDED FURTHER, HOWEVER, that if,
following the making of a Provider Advance, the Liquidity Provider
delivers a Termination Notice to the Borrower pursuant to Section 6.1
hereof, such Provider Advance shall thereafter be treated as a Final
Advance under this Agreement for purposes of determining the
Applicable Liquidity Rate for interest payable thereon. Subject to
Sections 2.7 and 2.9 hereof, immediately upon the withdrawal of any
amounts from the Class A Cash Collateral Account on account of a
reduction in the Required Amount, the Borrower shall repay to the
Liquidity Provider a portion of the Provider Advances in a principal
amount equal to the amount of such reduction, plus interest on the
principal amount prepaid as provided in Section 3.7 hereof.
2.6.2. At any time when an Applied Provider Advance (or
any portion thereof) is outstanding, upon the deposit in the Class A
Cash Collateral Account of any amount pursuant to clause "THIRD" of
Section 2.4(b) of the Intercreditor Agreement, clause "THIRD" of
Section 3.2 of the Intercreditor Agreement or clause "FOURTH" of
Section 3.3 of the Intercreditor Agreement (any such amount being a
"REPLENISHMENT AMOUNT") for the purpose of replenishing or increasing
the balance thereof up to the Required Amount at such time, (i) the
aggregate outstanding principal amount of all Applied Provider
Advances (and of Provider Advances treated as an Interest Advance for
purposes of determining the Applicable Liquidity Rate for interest
payable thereon) shall be automatically reduced by the amount of such
Replenishment Amount and (ii) the aggregate outstanding principal
amount of all Unapplied Provider Advances shall be automatically
increased by the amount of such Replenishment Amount.
<PAGE>
2.6.3. Upon the provision of a Replacement Liquidity
Facility in replacement of this Agreement in accordance with Section
3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in
the Class A Cash Collateral Account after giving effect to any Applied
Provider Advance on the date of such replacement shall be reimbursed
to the Liquidity Provider, but only to the extent such amounts are
necessary to repay in full to the Liquidity Provider all amounts owing
to it hereunder.
Section 2.7. PAYMENTS TO THE LIQUIDITY PROVIDER UNDER THE
INTERCREDITOR AGREEMENT. In order to provide for payment or repayment to the
Liquidity Provider of any amounts hereunder, the Intercreditor Agreement
provides that amounts available and referred to in Articles II and III of the
Intercreditor Agreement, to the extent payable to the Liquidity Provider
pursuant to the terms of the Intercreditor Agreement (including, without
limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the
Liquidity Provider in accordance with the terms thereof. Amounts so paid to the
Liquidity Provider shall be applied by the Liquidity Provider to Liquidity
Obligations then due and payable in accordance with the Intercreditor Agreement
or, if not provided for in the Intercreditor Agreement, then in such manner as
the Liquidity Provider shall deem appropriate.
Section 2.8. BOOK ENTRIES. The Liquidity Provider shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower resulting from Advances made from time to time and
the amounts of principal and interest payable hereunder and paid from time to
time in respect thereof; PROVIDED, HOWEVER, that the failure by the Liquidity
Provider to maintain such account or accounts shall not affect the obligations
of the Borrower in respect of Advances.
Section 2.9. PAYMENTS FROM AVAILABLE FUNDS ONLY. All payments to be
made by the Borrower under this Agreement shall be made only from the amounts
that constitute Scheduled Payments, Special Payments or payments under Section
9.1 of the Participation Agreements and only to the extent that the Borrower
shall have sufficient income or proceeds therefrom to enable the Borrower to
make payments in accordance with the terms hereof after giving effect to the
priority of payments provisions set forth in the Intercreditor Agreement. The
Liquidity Provider agrees that it will look solely to such amounts to the extent
available for distribution to it as provided in the Intercreditor Agreement and
this Agreement and that the Borrower, in its individual capacity, is not
personally liable to it for any amounts payable or liability under this
Agreement except as expressly provided in this Agreement, the Intercreditor
Agreement or any Participation Agreement. Amounts on deposit in the Class A Cash
Collateral Account shall be available to the Borrower to make payments under
this Agreement only to the extent and for the purposes expressly contemplated in
Section 3.6(f) of the Intercreditor Agreement.
Section 2.10. EXTENSION OF THE EXPIRY DATE; NON-EXTENSION ADVANCE. No
earlier than the 60th day and no later than the 40th day prior to the then
effective Expiry Date (unless such Expiry Date is on or after the date that is
15 days after the Final Maturity Date for the Class A Certificates), the
Borrower shall request that the Liquidity Provider extend the Expiry Date for a
<PAGE>
period of 364 days after the then effective Expiry Date (unless the obligations
of the Liquidity Provider are earlier terminated in accordance with the terms
hereof). The Liquidity Provider shall advise the Borrower, no earlier than 40
days and no later than 25 days prior to the then effective Expiry Date, whether,
in its sole discretion, it agrees to so extend the Expiry Date. If the Liquidity
Provider advises the Borrower on or before the 25th day prior to the Expiry Date
then in effect that such Expiry Date shall not be so extended, or fails to
irrevocably and unconditionally advise the Borrower on or before the 25th day
prior to the Expiry Date then in effect that such Expiry Date shall be so
extended (and, in each case, if the Liquidity Provider shall not have been
replaced in accordance with Section 3.6(e) of the Intercreditor Agreement), the
Borrower shall be entitled on and after such 25th day (but prior to the then
effective Expiry Date) to request a Non-Extension Advance in accordance with
Section 2.2(b) hereof and Section 3.6(d) of the Intercreditor Agreement.
ARTICLE III.
OBLIGATIONS OF THE BORROWER
---------------------------
Section 3.1. INCREASED COSTS. Subject to the Fee Letter, the Borrower
shall pay to the Liquidity Provider from time to time such amounts as may be
necessary to compensate the Liquidity Provider for any increased costs incurred
by the Liquidity Provider which are attributable to its making or maintaining
any LIBOR Advances hereunder or its obligation to make any such Advances
hereunder, or any reduction in any amount receivable by the Liquidity Provider
under this Agreement or the Intercreditor Agreement in respect of any such
Advances or such obligation (such increases in costs and reductions in amounts
receivable being herein called "ADDITIONAL COSTS"), resulting from any change
after the date of this Agreement in U.S. federal, state, municipal, or foreign
laws or regulations (including Regulation D), or the adoption or making after
the date of this Agreement of any interpretations, directives, or requirements
applying to a class of banks including the Liquidity Provider under any U.S.
federal, state, municipal, or any foreign laws or regulations (whether or not
having the force of law) by any court, central bank or monetary authority
charged with the interpretation or administration thereof (a "REGULATORY
CHANGE"), which: (1) changes the basis of taxation of any amounts payable to the
Liquidity Provider under this Agreement in respect of any such Advances (other
than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit,
compulsory loan or similar requirements relating to any extensions of credit or
other assets of, or any deposits with other liabilities of, the Liquidity
Provider (including any such Advances or any deposits referred to in the
definition of LIBOR Rate or related definitions). The Liquidity Provider agrees
to use reasonable efforts (consistent with applicable legal and regulatory
restrictions) to change the jurisdiction of its Lending Office if making such
change would avoid the need for, or reduce the amount of, any amount payable
under this Section 3.1 that may thereafter accrue and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to
the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.1 as promptly as practicable after it
<PAGE>
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.1 of the effect of any Regulatory Change on its costs of making
or maintaining Advances or on amounts receivable by it in respect of Advances,
and of the additional amounts required to compensate the Liquidity Provider in
respect of any Additional Costs, shall be prima facie evidence of the amount
owed under this Section.
Section 3.2. CAPITAL ADEQUACY. Subject to the Fee Letter, if (1) the
adoption, after the date hereof, of any applicable governmental law, rule or
regulation regarding capital adequacy, (2) any change, after the date hereof, in
the interpretation or administration of any such law, rule or regulation by any
central bank or other governmental authority charged with the interpretation or
administration thereof or (3) compliance by the Liquidity Provider or any
corporation controlling the Liquidity Provider with any applicable guideline or
request of general applicability, issued after the date hereof, by any central
bank or other governmental authority (whether or not having the force of law)
that constitutes a change of the nature described in clause (2), has the effect
of requiring an increase in the amount of capital required to be maintained by
the Liquidity Provider or any corporation controlling the Liquidity Provider,
and such increase is based upon the Liquidity Provider's obligations hereunder
and other similar obligations, the Borrower shall pay to the Liquidity Provider
from time to time such additional amount or amounts as are necessary to
compensate the Liquidity Provider for such portion of such increase as shall be
reasonably allocable to the Liquidity Provider's obligations to the Borrower
hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent
with applicable legal and regulatory restrictions) to change the jurisdiction of
its Lending Office if making such change would avoid the need for, or reduce the
amount of, any amount payable under this Section that may thereafter accrue and
would not, in the reasonable judgment of the Liquidity Provider, be otherwise
materially disadvantageous to the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.2 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.2 of the effect of any increase in the amount of capital required
to be maintained by the bank and of the amount allocable to the Liquidity
Provider's obligations to the Borrower hereunder shall be prima facie evidence
of the amounts owed under this Section.
Section 3.3. PAYMENTS FREE OF DEDUCTIONS. All payments made by the
Borrower under this Agreement shall be made free and clear of, and without
reduction for or on account of, any present or future stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever now or hereafter imposed, levied,
collected, withheld or assessed, excluding Excluded Taxes (such non-excluded
taxes being referred to herein, collectively, as "Non-Excluded Taxes" and,
individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider under this
Agreement, the amounts so payable to the Liquidity Provider shall be increased
to the extent necessary to yield to the Liquidity Provider (after payment of all
<PAGE>
Non-Excluded Taxes) interest or any other such amounts payable under this
Agreement at the rates or in the amounts specified in this Agreement. The
Liquidity Provider agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of the Liquidity Provider, be
otherwise disadvantageous to the Liquidity Provider. From time to time upon the
reasonable request of the Borrower, the Liquidity Provider agrees to provide to
the Borrower two original Internal Revenue Service Forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that the Liquidity Provider is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement.
Section 3.4. PAYMENTS. The Borrower shall make or cause to be made
each payment to the Liquidity Provider under this Agreement so as to cause the
same to be received by the Liquidity Provider not later than 1:00 P.M. (New York
City time) on the day when due. The Borrower shall make all such payments in
lawful money of the United States of America, to the Liquidity Provider in
immediately available funds, by wire transfer to ABN AMRO Bank N.V., New York,
NY, ABA # 026009580, Account Name: ABN AMRO Bank, N.V. - Chicago Branch, Account
# 650-001-1789-41, Reference: Continental Airlines, Inc. Pass Through Trust
1997-3A .
Section 3.5. COMPUTATIONS. All computations of interest based on the
Base Rate shall be made on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the LIBOR Rate shall be made
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
Section 3.6. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and no additional
interest shall be due as a result (and if so made, shall be deemed to have been
made when due). If any payment in respect of interest on an Advance is so
deferred to the next succeeding Business Day, such deferral shall not delay the
commencement of the next Interest Period for such Advance or reduce the number
of days for which interest will be payable on such Advance on the next interest
payment date for such Advance.
Section 3.7. INTEREST.
3.7.1. Subject to Section 2.9, the Borrower shall pay, or
shall cause to be paid, without duplication, interest on (i) the
unpaid principal amount of each Advance from and including the date of
such Advance (or, in the case of an Applied Provider Advance, from and
including the date on which the amount thereof was withdrawn from the
Class A Cash Collateral Account to pay interest on the Class A
Certificates) to but excluding the date such principal amount shall be
paid in full (or, in the case of an Applied Provider Advance, the date
<PAGE>
on which the Class A Cash Collateral Account is fully replenished in
respect of such Advance) and (ii) any other amount due hereunder
(whether fees, commissions, expenses or other amounts or, to the
extent permitted by law, installments of interest on Advances or any
such other amount) which is not paid when due (whether at stated
maturity, by acceleration or otherwise) from and including the due
date thereof to but excluding the date such amount is paid in full, in
each such case, at a fluctuating interest rate per annum for each day
equal to the Applicable Liquidity Rate (as defined below) for such
Advance or such other amount as in effect for such day, but in no
event at a rate per annum greater than the maximum rate permitted by
applicable law; PROVIDED, HOWEVER, that, if at any time the otherwise
applicable interest rate as set forth in this Section 3.7 shall exceed
the maximum rate permitted by applicable law, then any subsequent
reduction in such interest rate will not reduce the rate of interest
payable pursuant to this Section 3.7 below the maximum rate permitted
by applicable law until the total amount of interest accrued equals
the amount of interest that would have accrued if such otherwise
applicable interest rate as set forth in this Section 3.7 had at all
times been in effect.
3.7.2. Except as provided in clause (e) below, each
Advance will be either a Base Rate Advance or a LIBOR Advance as
provided in this Section. Each Advance will be a Base Rate Advance for
the period from the date of its borrowing to (but excluding) the third
Business Day following the Liquidity Provider's receipt of the Notice
of Borrowing for such Advance. Thereafter, such Advance shall be a
LIBOR Advance; provided that the Borrower (at the direction of the
Controlling Party, so long as the Liquidity Provider is not the
Controlling Party) may (x) convert the Final Advance into a Base Rate
Advance on the last day of an Interest Period for such Advance by
giving the Liquidity Provider no less than four Business Days' prior
written notice of such election or (y) elect to maintain the Final
Advance as Base Rate Advance by not requesting a conversion of the
Final Advance to a LIBOR Advance under Clause (5) of the applicable
Notice of Borrowing.
3.7.3. Each LIBOR Advance shall bear interest during each
Interest Period at a rate per annum equal to the LIBOR Rate for such
Interest Period plus the Applicable Margin for such LIBOR Advance,
payable in arrears on the last day of such Interest Period and, in the
event of the payment of principal of such LIBOR Advance on a day other
than such last day, on the date of such payment (to the extent of
interest accrued on the amount of principal repaid).
3.7.4. Each Base Rate Advance shall bear interest at a
rate per annum equal to the Base Rate plus the Applicable Margin for
such Base Rate Advance, payable in arrears on each Regular
Distribution Date and, in the event of the payment of principal of
such Base Rate Advance on a day other than a Regular Distribution
<PAGE>
Date, on the date of such payment (to the extent of interest accrued
on the amount of principal repaid).
3.7.5. Each Unapplied Provider Advance (i) during the
period from and including the date of the making of such Unapplied
Provider Advance through but excluding the date of repayment thereof
or of conversion thereof into a Final Advance or Applied Provider
Advance (and for any additional periods of time during which such
Advance no longer constitutes an Applied Provider Advance but again
constitutes an Unapplied Provider Advance pursuant to Sections 2.6(a)
and (b) hereof), shall bear interest in an amount equal to the
Investment Earnings on amounts on deposit in the Class A Cash
Collateral Account for such period plus the Applicable Margin on the
amount of such Unapplied Provider Advance from time to time during
such period, payable in arrears on each Regular Distribution Date and
(ii) after conversion thereof into a Final Advance or Applied Provider
Advance (but only for such period of time during which such Advance
constitutes an Applied Provider Advance pursuant to Sections 2.6(a)
and (b) hereof), as the case may be, shall be a LIBOR Advance and
shall bear interest in accordance with clause (c) above.
3.7.6. Each amount not paid when due hereunder (whether
fees, commissions, expenses or other amounts or, to the extent
permitted by applicable law, installments of interest on Advances but
excluding Advances) shall bear interest at a rate per annum equal to
the Base Rate plus 2.00% until paid.
3.7.7. Each change in the Base Rate shall become effective
immediately. The rates of interest specified in this Section 3.7 with
respect to any Advance or other amount shall be referred to as the
"APPLICABLE LIQUIDITY RATE".
Section 3.8. REPLACEMENT OF BORROWER. From time to time and subject to
the successor Borrower's meeting the eligibility requirements set forth in
Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent
upon the effective date and time specified in a written and completed Notice of
Replacement Subordination Agent in substantially the form of Annex VI attached
hereto (a "NOTICE OF REPLACEMENT SUBORDINATION AGENT") delivered to the
Liquidity Provider by the then Borrower, the successor Borrower designated
therein shall be substituted for as the Borrower for all purposes hereunder.
Section 3.9. FUNDING LOSS INDEMNIFICATION. The Borrower shall pay to
the Liquidity Provider, upon the request of the Liquidity Provider, such amount
or amounts as shall be sufficient (in the reasonable opinion of the Liquidity
Provider) to compensate it for any loss, cost, or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired by the
Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of
anticipated profits) incurred as a result of:
(a) Any repayment of a LIBOR Advance on a date other than the last day
of the Interest Period for such Advance; or
<PAGE>
(b) Any failure by the Borrower to borrow a LIBOR Advance on the date
for borrowing specified in the relevant notice under Section 2.2.
Section 3.10. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Liquidity Provider (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for the Liquidity Provider (or its Lending Office) to maintain or
fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity
Provider, the outstanding principal amount of the LIBOR Advances shall be
converted to Base Rate Advances (a) immediately upon demand of the Liquidity
Provider, if such change or compliance with such request, in the judgment of the
Liquidity Provider, requires immediate repayment; or (b) at the expiration of
the last Interest Period to expire before the effective date of any such change
or request.
ARTICLE IV.
CONDITIONS PRECEDENT
--------------------
Section 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTION 2.1.
Section 2.1 of this Agreement shall become effective on and as of the first date
(the "EFFECTIVE DATE") on which the following conditions precedent have been
satisfied or waived:
4.1.1. The Liquidity Provider shall have received on or
before the Closing Date each of the following, and in the case of each
document delivered pursuant to paragraphs (i), (ii) and (iii), each in
form and substance satisfactory to the Liquidity Provider:
(i) This Agreement duly executed on behalf of the
Borrower;
(ii) The Intercreditor Agreement duly executed on
behalf of each of the parties thereto;
(iii) Fully executed copies of each of the Operative
Agreements executed and delivered on or before the Closing
Date (other than this Agreement and the Intercreditor
Agreement);
(iv) A copy of the Prospectus and specimen copies of
the Class A Certificates;
(v) An executed copy of each document, instrument,
certificate and opinion delivered on or before the Closing
Date pursuant to the Class A Trust Agreement, the
Intercreditor Agreement and the other Operative Agreements
<PAGE>
(together with, in the case of each such opinion, other than
the opinion of counsel for the Underwriters, a letter from
the counsel rendering such opinion to the effect that the
Liquidity Provider is entitled to rely on such opinion as of
its date as if it were addressed to the Liquidity Provider);
(vi) Evidence that there shall have been made and
shall be in full force and effect, all filings, recordings
and/or registrations, and there shall have been given or
taken any notice or other similar action as may be
reasonably necessary or, to the extent reasonably requested
by the Liquidity Provider, reasonably advisable, in order to
establish, perfect, protect and preserve the right, title
and interest, remedies, powers, privileges, liens and
security interests of, or for the benefit of, the Trustees,
the Borrower and the Liquidity Provider created by the
Operative Agreements executed and delivered on or prior to
the Closing Date;
(vii) An agreement from Continental, pursuant to
which (i) Continental agrees to provide copies of quarterly
financial statements and audited annual financial statements
to the Liquidity Provider, and such other information as the
Liquidity Provider shall reasonably request with respect to
the transactions contemplated by the Operative Agreements,
in each case, only to the extent that Continental is
obligated to provide such information pursuant to Section
8.2.1 of the Leases to the parties thereto and (ii)
Continental agrees to allow the Liquidity Provider to
inspect Continental's books and records regarding such
transactions, and to discuss such transactions with officers
and employees of Continental; and
(viii) Such other documents, instruments, opinions
and approvals as the Liquidity Provider shall have
reasonably requested.
4.1.2. The following statement shall be true on and as of
the Effective Date: no event has occurred and is continuing, or would
result from the entering into of this Agreement or the making of any
Advance, which constitutes a Liquidity Event of Default.
4.1.3. The Liquidity Provider shall have received payment
in full of all fees and other sums required to be paid to or for the
account of the Liquidity Provider on or prior to the Effective Date.
4.1.4. All conditions precedent to the issuance of the
Certificates under the Trust Agreements shall have been satisfied, all
conditions precedent to the effectiveness of the other Liquidity
Facilities shall have been satisfied, and all conditions precedent to
the purchase of the Certificates by the Underwriters under the
Underwriting Agreement shall have been satisfied (unless any of such
conditions precedent shall have been waived by the Underwriters).
<PAGE>
4.1.5. The Borrower shall have received a certificate,
dated the date hereof, signed by a duly authorized representative of
the Liquidity Provider, certifying that all conditions precedent to
the effectiveness of Section 2.1 have been satisfied or waived.
Section 4.2. CONDITIONS PRECEDENT TO BORROWING. The obligation of the
Liquidity Provider to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and, prior to the date of such Borrowing, the Borrower shall have delivered a
Notice of Borrowing which conforms to the terms and conditions of this Agreement
and has been completed as may be required by the relevant form of the Notice of
Borrowing for the type of Advances requested.
ARTICLE V.
COVENANTS
---------
Section 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity
Provider shall otherwise consent in writing:
5.1.1. PERFORMANCE OF THIS AND OTHER AGREEMENTS.
Punctually pay or cause to be paid all amounts payable by it under
this Agreement and the other Operative Agreements and observe and
perform in all material respects the conditions, covenants and
requirements applicable to it contained in this Agreement and the
other Operative Agreements.
5.1.2. REPORTING REQUIREMENTS. Furnish to the Liquidity
Provider with reasonable promptness, such other information and data
with respect to the transactions contemplated by the Operative
Agreements as from time to time may be reasonably requested by the
Liquidity Provider; and permit the Liquidity Provider, upon reasonable
notice, to inspect the Borrower's books and records with respect to
such transactions and to meet with officers and employees of the
Borrower to discuss such transactions.
5.1.3. CERTAIN OPERATIVE AGREEMENTS. Furnish to the
Liquidity Provider with reasonable promptness, such Operative
Agreements entered into after the date hereof as from time to time may
be reasonably requested by the Liquidity Provider.
Section 5.2. NEGATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will not appoint or permit or
suffer to be appointed any successor Borrower without the written consent of the
Liquidity Provider, which consent shall not be unreasonably withheld or delayed.
<PAGE>
ARTICLE VI.
LIQUIDITY EVENTS OF DEFAULT
---------------------------
Section 6.1. LIQUIDITY EVENTS OF DEFAULT. If (a) any Liquidity Event
of Default has occurred and is continuing and (b) there is a Performing Note
Deficiency, the Liquidity Provider may, in its discretion, deliver to the
Borrower a Termination Notice, the effect of which shall be to cause (i) this
Agreement to expire on the fifth Business Day after the date on which such
Termination Notice is received by the Borrower, (ii) the Borrower to promptly
request, and the Liquidity Provider to promptly make, a Final Advance in
accordance with Section 2.2(d) hereof and Section 3.6(i) of the Intercreditor
Agreement, (iii) all other outstanding Advances to be automatically converted
into Final Advances for purposes of determining the Applicable Liquidity Rate
for interest payable thereon, and (iv) subject to Sections 2.7 and 2.9 hereof,
all Advances (including, without limitation, any Provider Advance and Applied
Provider Advance), any accrued interest thereon and any other amounts
outstanding hereunder to become immediately due and payable to the Liquidity
Provider.
ARTICLE VII.
MISCELLANEOUS
-------------
Section 7.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Liquidity Provider, and, in the case of an amendment or of a waiver by the
Borrower, the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 7.2. NOTICES, ETC. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telecopier and mailed or delivered or sent by telecopier):
Borrower: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopy: (302) 651-8882
Liquidity Provider: ABN AMRO BANK N.V.
Aerospace Department
135 South LaSalle Street, #820
Chicago, IL 60674-9135
<PAGE>
Attention: Claudia Heldring, V.P.
Telephone: (312) 904-5031
Telecopy: (312) 606-8428
with a copy to:
ABN AMRO Bank N.V.
135 South LaSalle St., #625
Chicago, IL 60674-9135
Attention: Loan Operations
Telephone: (312) 904-2961
Telecopy: (312) 606-6893
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above, (ii) if given by mail, when deposited
in the mails addressed as specified above, and (iii) if given by other means,
when delivered at the address specified above, except that written notices to
the Liquidity Provider pursuant to the provisions of Articles II and III hereof
shall not be effective until received by the Liquidity Provider. A copy of all
notices delivered hereunder to either party shall in addition be delivered to
each of the parties to the Participation Agreements at their respective
addresses set forth therein.
Section 7.3. NO WAIVER; REMEDIES. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 7.4. FURTHER ASSURANCES. The Borrower agrees to do such
further acts and things and to execute and deliver to the Liquidity Provider
such additional assignments, agreements, powers and instruments as the Liquidity
Provider may reasonably require or deem advisable to carry into effect the
purposes of this Agreement and the other Operative Agreements or to better
assure and confirm unto the Liquidity Provider its rights, powers and remedies
hereunder and under the other Operative Agreements.
Section 7.5. INDEMNIFICATION; SURVIVAL OF CERTAIN PROVISIONS. The
Liquidity Provider shall be indemnified hereunder to the extent and in the
manner described in Section 9.1 of the Participation Agreements. In addition,
the Borrower agrees to indemnify, protect, defend and hold harmless the
Liquidity Provider from, against and in respect of, and shall pay on demand, all
Expenses of any kind or nature whatsoever (other than any Expenses of the nature
described in Sections 3.1, 3.2 or 7.7 hereof or in the Fee Letter (regardless of
whether indemnified against pursuant to said Sections or in such Fee Letter)),
that may be imposed, incurred by or asserted against any Liquidity Indemnitee,
in any way relating to, resulting from, or arising out of or in connection with
any action, suit or proceeding by any third party against such Liquidity
<PAGE>
Indemnitee and relating to this Agreement, the Fee Letter, the Intercreditor
Agreement or any Financing Agreement; PROVIDED, HOWEVER, that the Borrower shall
not be required to indemnify, protect, defend and hold harmless any Liquidity
Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent
such Expense is (i) attributable to the gross negligence or willful misconduct
of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary
and usual operating overhead expense, or (iii) attributable to the failure by
such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or
observe any agreement, covenant or condition on its part to be performed or
observed in this Agreement, the Intercreditor Agreement, the Fee Letter, the Tax
Letter or any other Operative Agreement to which it is a party. The indemnities
contained in such Section 9.1, and the provisions of Sections 3.1, 3.2, 3.3,
3.9, 7.5 and 7.7 hereof, shall survive the termination of this Agreement.
Section 7.6. LIABILITY OF THE LIQUIDITY PROVIDER.
7.6.1. Neither the Liquidity Provider nor any of its
officers, employees, directors or affiliates shall be liable or
responsible for: (i) the use which may be made of the Advances or any
acts or omissions of the Borrower or any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; or (iii) the making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other documents
which do not comply with the terms hereof; PROVIDED, HOWEVER, that the
Borrower shall have a claim against the Liquidity Provider, and the
Liquidity Provider shall be liable to the Borrower, to the extent of
any damages suffered by the Borrower which were the result of (A) the
Liquidity Provider's willful misconduct or negligence in determining
whether documents presented hereunder comply with the terms hereof, or
(B) any breach by the Liquidity Provider of any of the terms of this
Agreement, including, but not limited to, the Liquidity Provider's
failure to make lawful payment hereunder after the delivery to it by
the Borrower of a Notice of Borrowing strictly complying with the
terms and conditions hereof.
7.6.2. Neither the Liquidity Provider nor any of its
officers, employees, director or affiliates shall be liable or
responsible in any respect for (i) any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with this Agreement or any
Notice of Borrowing delivered hereunder, or (ii) any action, inaction
or omission which may be taken by it in good faith, absent willful
misconduct or negligence (in which event the extent of the Liquidity
Provider's potential liability to the Borrower shall be limited as set
forth in the immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing.
Section 7.7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay, or
cause to be paid (A) on the Effective Date and on such later date or dates on
which the Liquidity Provider shall make demand, all reasonable out-of-pocket
<PAGE>
costs and expenses (including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider) of the Liquidity
Provider in connection with the preparation, negotiation, execution, delivery,
filing and recording of this Agreement, any other Operative Agreement and any
other documents which may be delivered in connection with this Agreement and (B)
on demand, all reasonable costs and expenses (including reasonable counsel fees
and expenses) of the Liquidity Provider in connection with (i) the enforcement
of this Agreement or any other Operative Agreement, (ii) the modification or
amendment of, or supplement to, this Agreement or any other Operative Agreement
or such other documents which may be delivered in connection herewith or
therewith (whether or not the same shall become effective) or (iii) any action
or proceeding relating to any order, injunction, or other process or decree
restraining or seeking to restrain the Liquidity Provider from paying any amount
under this Agreement, the Intercreditor Agreement or any other Operative
Agreement or otherwise affecting the application of funds in the Cash Collateral
Accounts. In addition, the Borrower shall pay any and all recording, stamp and
other similar taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement, any other
Operative Agreement and such other documents, and agrees to save the Liquidity
Provider harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
Section 7.8. BINDING EFFECT; PARTICIPATIONS.
7.8.1. This Agreement shall be binding upon and inure to
the benefit of the Borrower and the Liquidity Provider and their
respective successors and assigns, except that neither the Liquidity
Provider (except as otherwise provided in this Section 7.8) nor
(except as contemplated by Section 3.8) the Borrower shall have the
right to assign its rights or obligations hereunder or any interest
herein without the prior written consent of the other party, subject
to the requirements of Section 7.8(b). The Liquidity Provider may
grant participations herein or in any of its rights hereunder
(including, without limitation, funded participations and
participations in rights to receive interest payments hereunder) and
under the other Operative Agreements to such Persons as the Liquidity
Provider may in its sole discretion select, subject to the
requirements of Section 7.8(b). No such participation by the Liquidity
Provider, however, will relieve the Liquidity Provider of its
obligations hereunder. In connection with any participation or any
proposed participation, the Liquidity Provider may disclose to the
participant or the proposed participant any information that the
Borrower is required to deliver or to disclose to the Liquidity
Provider pursuant to this Agreement. The Borrower acknowledges and
agrees that the Liquidity Provider's source of funds may derive in
part from its participants (other than Continental). Accordingly,
references in this Agreement and the other Operative Agreements to
determinations, reserve and capital adequacy requirements, increased
costs, reduced receipts, additional amounts due pursuant to Section
3.3(a) and the like as they pertain to the Liquidity Provider shall be
<PAGE>
deemed also to include those of each of its participants (subject, in
each case, to the maximum amount that would have been incurred by or
attributable to the Liquidity Provider directly if the Liquidity
Provider, rather than the participant, had held the interest
participated).
7.8.2. If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation in this Agreement to any bank or
other entity (each, a "TRANSFEREE"), then, concurrently with the
effectiveness of such participation, the Transferee shall (i)
represent to the Liquidity Provider (for the benefit of the Liquidity
Provider and the Borrower) either (A) that it is incorporated under
the laws of the United States or a state thereof or (B) that under
applicable law and treaties, no taxes will be required to be withheld
with respect to any payments to be made to such Transferee in respect
of this Agreement, (ii) furnish to the Liquidity Provider and the
Borrower either (x) a statement that it is incorporated under the laws
of the United States or a state thereof or (y) if it is not so
incorporated, two copies of a properly completed United States
Internal Revenue Service Form 4224 or Form 1001, as appropriate, or
other applicable form, certificate or document prescribed by the
Internal Revenue Service certifying, in each case, such Transferee's
entitlement to a complete exemption from United States federal
withholding tax in respect to any and all payments to be made
hereunder, and (iii) agree (for the benefit of the Liquidity Provider
and the Borrower) to provide the Liquidity Provider and the Borrower a
new Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent form
previously delivered by it and prior to the immediately following due
date of any payment by the Borrower hereunder, certifying in the case
of a Form 1001 or Form 4224 that such Transferee is entitled to a
complete exemption from United States federal withholding tax on
payments under this Agreement. Unless the Borrower has received forms
or other documents reasonably satisfactory to it (and required by
applicable law) indicating that payments hereunder are not subject to
United States federal withholding tax, the Borrower will withhold
taxes as required by law from such payments at the applicable
statutory rate.
7.8.3. Notwithstanding the other provisions of this
Section 7.8, the Liquidity Provider may assign and pledge all or any
portion of the Advances owing to it to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A
of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank, provided that
any payment in respect of such assigned Advances made by the Borrower
to the Liquidity Provider in accordance with the terms of this
Agreement shall satisfy the Borrower's obligations hereunder in
respect of such assigned Advance to the extent of such payment. No
such assignment shall release the Liquidity Provider from its
obligations hereunder.
Section 7.9. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
<PAGE>
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 7.11. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF IMMUNITY.
7.11.1. Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other
Operative Agreement, or for recognition and enforcement of
any judgment in respect hereof or thereof, to the
nonexclusive general jurisdiction of the courts of the State
of New York, the courts of the United States of America for
the Southern District of New York, and the appellate courts
from any thereof;
(ii) consents that any such action or proceeding may
be brought in such courts, and waives any objection that it
may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to
each party hereto at its address set forth in Section 7.2
hereof, or at such other address of which the Liquidity
Provider shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any
other jurisdiction.
7.11.2. THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. The Borrower and the
<PAGE>
Liquidity Provider each warrant and represent that it has reviewed
this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with
such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
7.11.3. The Liquidity Provider hereby waives any immunity
it may have from the jurisdiction of the courts of the United States
or of any State and waives any immunity any of its properties located
in the United States may have from attachment or execution upon a
judgement entered by any such court under the United States Foreign
Sovereign Immunities Act of 1976 or any similar successor legislation.
Section 7.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 7.13. ENTIRETY. This Agreement, the Intercreditor Agreement
and the other Operative Agreements to which the Liquidity Provider is a party
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings and agreements of
such parties.
Section 7.14. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY
PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER
NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duty
executed and delivered by their respective officers thereunto duly authorized as
of the date first set forth above.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as agent and
trustee for the Class A Trust, as
Borrower
By:_______________________________________
Name:
Title:
ABN AMRO BANK N.V., acting through its
Chicago Branch, as Liquidity Provider
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
<PAGE>
Annex I to
Revolving Credit Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO N.V., Chicago Branch
(the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit Agreement
(1997-3A) dated as of September 25, 1997, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of an Interest Advance by the Liquidity Provider to be used for the payment of
the interest on the Class A Certificates which was payable on
_____________________ (the "DISTRIBUTION DATE") in accordance with the terms and
provisions of the Class A Trust Agreement and the Class A Certificates, which
Advance is requested to be made on __________.
(c) The amount of the Interest Advance requested hereby (i) is
$_________________, to be applied in respect of the payment of the interest
which was due and payable on the Class A Certificates on the Distribution Date,
(ii) does not include any amount with respect to the payment of principal of, or
premium on, the Class A Certificates, the Class B Certificates or the Class C
Certificates, or interest on the Class B Certificates or the Class C
Certificates, (iii) was computed in accordance with the provisions of the Class
A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a
copy of which computation is attached hereto as Schedule I), (iv) does not
exceed the Maximum Available Commitment on the date hereof and (v) has not been
and is not the subject of a prior or contemporaneous Notice of Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will apply the same in accordance with the
terms of Section 3.6(b) of the Intercreditor Agreement (b) no portion of such
amount shall be applied by the Borrower for any other purpose and (c) no portion
of such amount until so applied shall be commingled with other funds held by the
Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Maximum Available Commitment by
an amount equal to the amount of the Interest Advance requested to be made
hereby as set forth in clause (i) of paragraph (3) of this Certificate and such
reduction shall automatically result in corresponding reductions in the amounts
available to be borrowed pursuant to a subsequent Advance.
<PAGE>
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of _________ day of ________________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Interest Advance Notice of
Borrowing]
<PAGE>
Annex II
Revolving Credit Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3A) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Non-Extension Advance by the Liquidity Provider to be used for the
funding of the Class A Cash Collateral Account in accordance with Section 3.6(d)
of the Intercreditor Agreement, which Advance is requested to be made on
__________________.
(c) The amount of the Non-Extension Advance requested hereby (i) is
$__________, which equals the Maximum Available Commitment on the date hereof
and is to be applied in respect of the funding of the Class A Cash Collateral
Account in accordance with Section 3.6(d) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of the principal of, or
premium on, the Class A Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class A Certificates, the Class A Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class A Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(d) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
<PAGE>
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Non-Extension Advance as requested by this
Notice of Borrowing shall automatically and irrevocably terminate the obligation
of the Liquidity Provider to make further Advances under the Liquidity
Agreement; and (B) following the making by the Liquidity Provider of the
Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall
not be entitled to request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of _______ day of ___________________, ______.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_____________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Non-Extension Advance Notice of Borrowing]
<PAGE>
Annex III to
Revolving Credit Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3A) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Downgrade Advance by the Liquidity Provider to be used for the funding of
the Class A Cash Collateral Account in accordance with Section 3.6(c) of the
Intercreditor Agreement by reason of the downgrading of the short-term unsecured
debt rating of the Liquidity Provider issued by either Rating Agency below the
Threshold Rating, which Advance is requested to be made on ____________, _____.
(c) The amount of the Downgrade Advance requested hereby (i) is
$_______, which equals the Maximum Available Commitment on the date hereof and
is to be applied in respect of the funding of the Class A Cash Collateral
Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of the principal of, or
premium on, the Class A Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class A Certificates, the Class A Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class A Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Downgrade Advance as requested by this Notice
of Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
<PAGE>
(B) following the making by the Liquidity Provider of the Downgrade Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ___ day of ____________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Downgrade Advance Notice of Borrowing]
<PAGE>
Annex IV to
Revolving Credit Agreement
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V., Chicago
Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement (1997-3A) dated as of September 25, 1997, between the Borrower and the
Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined or referenced),
that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Final Advance by the Liquidity Provider to be used for the funding of the
Class A Cash Collateral Account in accordance with Section 3.6(i) of the
Intercreditor Agreement by reason of the receipt by the Borrower of a
Termination Notice from the Liquidity Provider with respect to the Liquidity
Agreement, which Advance is requested to be made on ______________, ___.
(c) The amount of the Final Advance requested hereby (i) is
$__________, which equals the Maximum Available Commitment on the date hereof
and is to be applied in respect of the funding of the Class A Cash Collateral
Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of principal of, or
premium on, the Class A Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class A Certificates, the Class A Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class A Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
(e) The Borrower hereby requests that the Advance requested hereby be
a Base Rate Advance [and that such Base Rate Advance be converted into a LIBOR
Advance on the third Business Day following your receipt of this notice].<F1>
___________________
<F1>Bracketed language is optional.
<PAGE>
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Final Advance as requested by this Notice of
Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Final Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ___ day of _________________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_____________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Final Advance Notice of Borrowing]
<PAGE>
Annex V to
Revolving Credit Agreement
NOTICE OF TERMINATION
[Date]
Wilmington Trust Company,
as Subordination Agent, as Borrower
Rodney Square North
North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3A, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.1 of the Liquidity
Agreement, by reason of the occurrence of a Liquidity Event of Default and the
existence of a Performing Note Deficiency (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make Advances
(as defined therein) under such Liquidity Agreement to terminate on the fifth
Business Day after the date on which you receive this notice and (ii) you to
request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i)
of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a
consequence of your receipt of this notice.
<PAGE>
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE
LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
Very truly yours,
ABN AMRO BANK N.V., Chicago Branch, as
Liquidity Provider
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
cc: Wilmington Trust Company,
as Class A Trustee
<PAGE>
Annex VI to
Revolving Credit Agreement
NOTICE OF REPLACEMENT SUBORDINATION AGENT
[Date]
Attention:
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3A, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Name of Transferee)
all rights and obligations of the undersigned as Borrower under the Liquidity
Agreement referred to above. The transferee has succeeded the undersigned as
Subordination Agent under the Intercreditor Agreement referred to in the first
paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of
the Intercreditor Agreement.
By this transfer, all rights of the undersigned as Borrower under the
Liquidity Agreement are transferred to the transferee and the transferee shall
hereafter have the sole rights and obligations as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.
We ask that this transfer be effective as of _______________, ___.
WILMINGTON TRUST COMPANY, not in its
____________ individual capacity but
solely as Subordination Agent, as
Borrower
By:_____________________________________
Name:
Title:
================================================================================
REVOLVING CREDIT AGREEMENT
(1997-3B)
Dated as of September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Subordination Agent,
as agent and trustee for the
Continental Airlines Pass Through Trust 1997-3B
as Borrower
and
ABN AMRO BANK N.V., CHICAGO BRANCH
as Liquidity Provider
Relating to
Continental Airlines Pass Through Trust 1997-3B
7.140% Continental Airlines Pass Through Certificates,
Series 1997-3B
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE I.
DEFINITIONS
<S> <C> <C>
Section 1.1 Certain Defined Terms..........................................1
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.1 The Advances....................................................6
Section 2.2 Making the Advances.............................................7
Section 2.3. Fees............................................................9
Section 2.4. Adjustments or Termination of the Maximum Commitment............9
Section 2.5. Repayments of Interest Advances or the Final Advance............9
Section 2.6. Repayments of Provider Advances................................10
Section 2.7. Payments to the Liquidity Provider Under the Intercreditor
Agreement......................................................11
Section 2.8. Book Entries...................................................11
Section 2.9. Payments from Available Funds Only.............................11
Section 2.10. Extension of the Expiry Date; Non-Extension Advance............11
ARTICLE III.
OBLIGATIONS OF THE BORROWER
Section 3.1. Increased Costs................................................12
Section 3.2. Capital Adequacy...............................................13
Section 3.3. Payments Free of Deductions....................................13
Section 3.4. Payments.......................................................14
Section 3.5. Computations...................................................14
Section 3.6. Payment on Non-Business Days...................................14
Section 3.7. Interest.......................................................14
Section 3.8. Replacement of Borrower........................................16
Section 3.9. Funding Loss Indemnification...................................16
Section 3.10. Illegality.....................................................17
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Effectiveness of Section 2.1...........17
Section 4.2. Conditions Precedent to Borrowing..............................19
ARTICLE V.
COVENANTS
Section 5.1. Affirmative Covenants of the Borrower..........................19
Section 5.2. Negative Covenants of the Borrower.............................19
ARTICLE VI.
LIQUIDITY EVENTS OF DEFAULT
Section 6.1. Liquidity Events of Default....................................20
ARTICLE VII.
MISCELLANEOUS
Section 7.1. Amendments, Etc................................................20
Section 7.2. Notices, Etc...................................................20
Section 7.3. No Waiver; Remedies............................................21
Section 7.4. Further Assurances.............................................21
Section 7.5. Indemnification; Survival of Certain Provisions................21
Section 7.6. Liability of the Liquidity Provider............................22
Section 7.7. Costs, Expenses and Taxes......................................22
Section 7.8. Binding Effect; Participations.................................23
Section 7.9. Severability...................................................24
Section 7.10. Governing Law..................................................25
Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver of
Immunity.......................................................25
Section 7.12. Execution in Counterparts......................................26
Section 7.13. Entirety.......................................................26
Section 7.14. Headings.......................................................26
Section 7.15. Liquidity Provider's Obligation To Make Advances...............26
<PAGE>
TABLE OF CONTENTS
(Continued)
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Non-Extension Advance Notice of Borrowing
ANNEX III Downgrade Advance Notice of Borrowing
ANNEX IV Final Advance Notice of Borrowing
ANNEX V Notice of Termination
ANNEX VI Notice of Replacement Subordination Agent
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT dated as of September 25, 1997,
between WILMINGTON TRUST COMPANY, a Delaware corporation, not in its individual
capacity but solely as Subordination Agent under the Intercreditor Agreement
(each as defined below), as agent and trustee for the Class B Trust (as defined
below) (the "BORROWER"), and ABN AMRO BANK N.V., a bank organized under the laws
of The Netherlands, acting through its Chicago Branch ("ABN AMRO" or the
"LIQUIDITY PROVIDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Class B Trust Agreement (such term and all
other capitalized terms used in these recitals having the meanings set forth or
referred to in Section 1.1), the Class B Trust is issuing the Class B
Certificates; and
WHEREAS, the Borrower, in order to support the timely payment of a
portion of the interest on the Class B Certificates in accordance with their
terms, has requested the Liquidity Provider to enter into this Agreement,
providing in part for the Borrower to request in specified circumstances that
Advances be made hereunder.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
-----------
Section 1.1. CERTAIN DEFINED TERMS. (a) DEFINITIONS. As used in this
Agreement and unless otherwise expressly indicated, or unless the context
clearly requires otherwise, the following capitalized terms shall have the
following respective meanings for all purposes of this Agreement:
"ADDITIONAL COST" has the meaning assigned to such term in Section
3.1.
"ADVANCE" means an Interest Advance, a Final Advance, a Provider
Advance, an Applied Provider Advance or an Unpaid Advance, as the case may
be.
"APPLICABLE LIQUIDITY RATE" has the meaning assigned to such term in
Section 3.7(g).
"APPLICABLE MARGIN" means (w) with respect to any Unpaid Advance or
Applied Provider Advance, 2.00% or (x) with respect to any Unapplied
Provider Advance, .40%.
"APPLIED DOWNGRADE ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
<PAGE>
"APPLIED NON-EXTENSION ADVANCE" has the meaning assigned to such term
in Section 2.6(a).
"APPLIED PROVIDER ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to (a) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected
by it, plus (b) one-quarter of one percent (1/4 of 1%).
"BASE RATE ADVANCE" means an Advance that bears interest at a rate
based upon the Base Rate.
"BORROWER" has the meaning assigned to such term in the recital of
parties to this Agreement.
"BORROWING" means the making of Advances requested by delivery of a
Notice of Borrowing.
"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 Houston,
Texas, New York, New York, Chicago, Illinois or, so long as any Class B
Certificate is outstanding, the city and state in which the Class B
Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust
Office or receives or disburses funds, and, if the applicable Business Day
relates to any Advance or other amount bearing interest based on the LIBOR
Rate, on which dealings are carried on in the London interbank market.
"DOWNGRADE ADVANCE" means an Advance made pursuant to Section 2.2(c).
"EFFECTIVE DATE" has the meaning specified in Section 4.1. The
delivery of the certificate of the Liquidity Provider contemplated by
Section 4.1(e) shall be conclusive evidence that the Effective Date has
occurred.
"EXCLUDED TAXES" means (i) taxes imposed on the overall net income of
the Liquidity Provider or of its Lending Office by the jurisdiction where
such Liquidity Provider's principal office or such Lending Office is
located, and (ii) Excluded Withholding Taxes.
"EXCLUDED WITHHOLDING TAXES" means (i) withholding Taxes imposed by
the United States except to the extent that such United States withholding
<PAGE>
Taxes are imposed as a result of any change in applicable law after the
date hereof (excluding from change in applicable law for this purpose a
change in an applicable treaty or other change in law affecting the
applicability of a treaty), or in the case of a successor Liquidity
Provider (including a transferee of an Advance) or Lending Office, after
the date on which such successor Liquidity Provider obtains its interest or
on which the Lending Office is changed, and (ii) any withholding Taxes
imposed by the United States which are imposed or increased as a result of
the Liquidity Provider failing to deliver to the Borrower any certificate
or document (which certificate or document in the good faith judgment of
the Liquidity Provider it is legally entitled to provide) which is
reasonably requested by the Borrower to establish that payments under this
Agreement are exempt from (or entitled to a reduced rate of) withholding
Tax.
"EXPENSES" means liabilities, obligations, damages, settlements,
penalties, claims, actions, suits, costs, expenses, and disbursements
(including, without limitation, reasonable fees and disbursements of legal
counsel and costs of investigation), provided that Expenses shall not
include any Taxes.
"EXPIRY DATE" means September 24, 1998, initially, or any date to
which the Expiry Date is extended pursuant to Section 2.10.
"FINAL ADVANCE" means an Advance made pursuant to Section 2.2(d).
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated the
date hereof, among the Trustees, the Liquidity Provider, the liquidity
provider under each Liquidity Facility (other than this Agreement) and the
Subordination Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"INTEREST ADVANCE" means an Advance made pursuant to Section 2.2(a).
"INTEREST PERIOD" means, with respect to any LIBOR Advance, each of
the following periods:
(i) the period beginning on the third Business Day following
either (x) the Liquidity Provider's receipt of the Notice of Borrowing for
such LIBOR Advance or (y) the withdrawal of funds from the Class B Cash
Collateral Account for the purpose of paying interest on the Class B
Certificates as contemplated by Section 2.6(a) hereof and, in either case,
ending on the next Regular Distribution Date; and
(ii) each subsequent period co mmencing on the last day of the
immediately preceding Interest Period and ending on the next Regular
Distribution Date;
PROVIDED, HOWEVER, that if (x) the Final Advance shall have been made, or
(y) other outstanding Advances shall have been converted into the Final
Advance, then the Interest Periods shall be successive periods of one month
beginning on the third Business Day following the Liquidity Provider's
receipt of the Notice of Borrowing for such Final Advance (in the case of
<PAGE>
clause (x) above) or the Regular Distribution Date following such
conversion (in the case of clause (y) above).
"LENDING OFFICE" means the lending office of the Liquidity Provider
presently located at Chicago, Illinois, or such other lending office as the
Liquidity Provider from time to time shall notify the Borrower as its
lending office hereunder; provided that the Liquidity Provider shall not
change its Lending Office to a Lending Office outside the United States of
America except in accordance with Section 3.1, 3.2 or 3.3 hereof.
"LIBOR ADVANCE" means an Advance bearing interest at a rate based upon
the LIBOR Rate.
"LIBOR RATE" means, with respect to any Interest Period, the average
(rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates
per annum at which deposits in dollars are offered to major banks in the
London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Advance to which such
Interest Period is to apply and for a period of time comparable to such
Interest Period.
"LIQUIDITY EVENT OF DEFAULT" means the occurrence of either (a) the
Acceleration of all of the Equipment Notes or (b) a Continental Bankruptcy
Event.
"LIQUIDITY INDEMNITEE" means (i) the Liquidity Provider, (ii) the
directors, officers, employees and agents of the Liquidity Provider, and
(iii) the successors and permitted assigns of the persons described in
clauses (i) and (ii), inclusive.
"LIQUIDITY PROVIDER" has the meaning assigned to such term in the
recital of parties to this Agreement.
"MAXIMUM AVAILABLE COMMITMENT" shall mean, subject to the proviso
contained in the third sentence of Section 2.2(a), at any time of
determination, (a) the Maximum Commitment at such time less (b) the
aggregate amount of each Interest Advance outstanding at such time;
provided that following a Provider Advance or a Final Advance, the Maximum
Available Commitment shall be zero.
"MAXIMUM COMMITMENT" means, for any day, the lesser of (x) $2,113,190
and (y) the Required Amount on such day.
"NON-EXTENSION ADVANCE" means an Advance made pursuant to Section
2.2(b).
"NOTICE OF BORROWING" has the meaning specified in Section 2.2(e).
"NOTICE OF REPLACEMENT SUBORDINATION AGENT" has the meaning specified
in Section 3.8.
<PAGE>
"PERFORMING NOTE DEFICIENCY" means any time that less than 65% of the
then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"PROSPECTUS" means the Prospectus dated July 23, 1997, as modified and
supplemented by the Prospectus Supplement dated September 12, 1997,
relating to the Certificates; and as such Prospectus may be further amended
or supplemented.
"PROVIDER ADVANCE" means a Downgrade Advance or a Non-Extension
Advance.
"REGULATORY CHANGE" has the meaning assigned to such term in Section
3.1.
"REPLENISHMENT AMOUNT" has the meaning assigned to such term in
Section 2.6(b).
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount
of interest, calculated at the rate per annum equal to the Stated Interest
Rate for the Class B Certificates, that would be payable on the Class B
Certificates on each of the six successive quarterly Regular Distribution
Dates immediately following such day or, if such day is a Regular
Distribution Date, on such day and the succeeding five quarterly Regular
Distribution Dates, in each case calculated on the basis of the Pool
Balance of the Class B Certificates on such day and without regard to
expected future payments of principal on the Class B Certificates.
"ROLLS ROYCE" means Rolls-Royce plc, a corporation organized under the
laws of England.
"TAX LETTER" means the letter dated the date hereof between the
Liquidity Provider and Rolls Royce pertaining to this Agreement.
"TERMINATION DATE" means the earliest to occur of the following: (i)
the Expiry Date; (ii) the date on which the Borrower delivers to the
Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that all of the Class B Certificates have been paid in
full (or provision has been made for such payment in accordance with the
Intercreditor Agreement and the Trust Agreements) or are otherwise no
longer entitled to the benefits of this Agreement; (iii) the date on which
the Borrower delivers to the Liquidity Provider a certificate, signed by a
Responsible Officer of the Borrower, certifying that a Replacement
Liquidity Facility has been substituted for this Agreement in full pursuant
to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business
Day following the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.1 hereof; and (v) the date on
which no Advance is or may (including by reason of reinstatement as herein
provided) become available for a Borrowing hereunder.
"TERMINATION NOTICE" means the Notice of Termination substantially in
the form of Annex V to this Agreement.
<PAGE>
"TRANSFEREE" has the meaning assigned to such term in Section 7.8(b).
"UNAPPLIED DOWNGRADE ADVANCE" means any Downgrade Advance other than
an Applied Downgrade Advance.
"UNAPPLIED PROVIDER ADVANCE" means any Provider Advance other than an
Applied Provider Advance.
"UNPAID ADVANCE" has the meaning assigned to such term in Section 2.5.
(b) TERMS DEFINED IN THE INTERCREDITOR AGREEMENT. For all purposes of
this Agreement, the following terms shall have the respective meanings assigned
to such terms in the Intercreditor Agreement:
"Acceleration," "Certificates", "Class A Cash Collateral Account",
"Class A Certificates", "Class A Certificateholders", "Class A Trust",
"Class A Trust "ACCELERATION," "CERTIFICATES", "CLASS A CASH
COLLATERAL ACCOUNT", "CLASS A CERTIFICATES", "CLASS A
CERTIFICATEHOLDERS", "CLASS A TRUST", "CLASS A TRUST AGREEMENT",
"CLASS A TRUSTEE", "CLASS B CASH COLLATERAL ACCOUNT", "CLASS B
CERTIFICATES", "CLASS B CERTIFICATEHOLDERS", "CLASS B TRUST", "CLASS B
TRUST AGREEMENT", "CLASS B TRUSTEE", "CLASS C CASH COLLATERAL
ACCOUNT", "CLASS C CERTIFICATES", "CLASS C CERTIFICATEHOLDERS", "CLASS
C TRUST", "CLASS C TRUST AGREEMENT", "CLASS C TRUSTEE", "CLOSING
DATE", "CONTINENTAL", "CONTINENTAL BANKRUPTCY EVENT", "CONTROLLING
PARTY", "CORPORATE TRUST OFFICE", "DELIVERY PERIOD EXPIRY DATE",
"DISTRIBUTION DATE", "DOWNGRADED FACILITY", "EQUIPMENT NOTES", "FEE
LETTER", "FINANCING AGREEMENT", "INDENTURE", "INVESTMENT EARNINGS",
"LIQUIDITY FACILITY", "LOAN TRUSTEE", "MOODY'S", "NON-EXTENDED
FACILITY", "OPERATIVE AGREEMENTS", "PERFORMING EQUIPMENT NOTE",
"PERSON", "POOL BALANCE", "PURCHASE AGREEMENT", "RATING AGENCY",
"REGULAR DISTRIBUTION DATE", "REPLACEMENT LIQUIDITY FACILITY",
"RESPONSIBLE OFFICER", "SCHEDULED PAYMENT", "SPECIAL PAYMENT",
"STANDARD & POOR'S", "STATED INTEREST RATE", "SUBORDINATION AGENT",
"TAXES", "THRESHOLD RATING", "TRANSFER", "TRUST AGREEMENTS",
"TRUSTEE", "UNDERWRITERS", "UNDERWRITING AGREEMENT" and "WRITTEN
NOTICE".
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
----------------------------------
Section 2.1. THE ADVANCES. The Liquidity Provider hereby irrevocably
agrees, on the terms and conditions hereinafter set forth, to make Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless
the obligations of the Liquidity Provider shall be earlier terminated in
accordance with the terms of Section 2.4(b)) in an aggregate amount at any time
outstanding not to exceed the Maximum Commitment.
<PAGE>
Section 2.2. MAKING THE ADVANCES.
2.2.1. Interest Advances shall be made in one or more
Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the form
of Annex I attached hereto, signed by a Responsible Officer of the
Borrower, in an amount not exceeding the Maximum Available Commitment
at such time and shall be used solely for the payment when due of the
interest on the Class B Certificates at the Stated Interest Rate
therefor in accordance with Section 3.6(a) of the Intercreditor
Agreement. Each Interest Advance made hereunder shall automatically
reduce the Maximum Available Commitment and the amount available to be
borrowed hereunder by subsequent Advances by the amount of such
Interest Advance (subject to reinstatement as provided in the next
sentence). Upon repayment to the Liquidity Provider in full of the
amount of any Interest Advance made pursuant to this Section 2.2(a),
together with accrued interest thereon (as provided herein), the
Maximum Available Commitment shall be reinstated by the amount of such
repaid Interest Advance, but not to exceed the Maximum Commitment;
PROVIDED, HOWEVER, that the Maximum Available Commitment shall not be
so reinstated at any time if (i) a Liquidity Event of Default shall
have occurred and be continuing and (ii) there is a Performing Note
Deficiency.
2.2.2. A Non-Extension Advance shall be made in a single
Borrowing if this Agreement is not extended in accordance with Section
3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity
Facility to replace this Agreement shall have been previously
delivered to the Borrower in accordance with said Section 3.6(d)) by
delivery to the Liquidity Provider of a written and completed Notice
of Borrowing in substantially the form of Annex II attached hereto,
signed by a Responsible Officer of the Borrower, in an amount equal to
the Maximum Available Commitment at such time, and shall be used to
fund the Class B Cash Collateral Account in accordance with said
Section 3.6(d).
2.2.3. A Downgrade Advance shall be made in a single
Borrowing upon a downgrading of the Liquidity Provider's short-term
unsecured debt rating issued by either Rating Agency below the
Threshold Rating (as provided for in Section 3.6(c) of the
Intercreditor Agreement) unless a Replacement Liquidity Facility to
replace this Agreement shall have been previously delivered to the
Borrower in accordance with said Section 3.6(c), by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex III attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
B Cash Collateral Account in accordance with said Section 3.6(c).
2.2.4. A Final Advance shall be made in a single Borrowing
upon the receipt by the Borrower of a Termination Notice from the
<PAGE>
Liquidity Provider pursuant to Section 6.1 hereof by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex IV attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
B Cash Collateral Account (in accordance with Section 3.6(i) of the
Intercreditor Agreement).
2.2.5. Each Borrowing shall be made on notice in writing
(a "NOTICE OF BORROWING") in substantially the form required by
Section 2.2(a), 2.2(b), 2.2(c) or 2.2(d), as the case may be, given by
the Borrower to the Liquidity Provider. If a Notice of Borrowing is
delivered by the Borrower in respect of any Borrowing no later than
12:00 Noon (New York City time) on a Business Day, the Liquidity
Provider shall, upon satisfaction of the conditions precedent set
forth in Section 4.2 with respect to a requested Borrowing, before
12:00 Noon (New York City time) on the first Business Day next
following the day of receipt of such Notice of Borrowing or on such
later Business Day specified in such Notice of Borrowing, make
available to the Borrower, in accordance with its payment
instructions, in U.S. dollars and immediately available funds, the
amount of such Borrowing. If a Notice of Borrowing is delivered by the
Borrower in respect of any Borrowing after 12:00 Noon (New York City
time) on a Business Day, the Liquidity Provider shall, upon
satisfaction of the conditions precedent set forth in Section 4.2 with
respect to a requested Borrowing, before 12:00 Noon (New York City
time) on the second Business Day next following the day of receipt of
such Notice of Borrowing or on such later Business Day specified by
the Borrower in such Notice of Borrowing, make available to the
Borrower, in accordance with its payment instructions, in U.S. dollars
and in immediately available funds, the amount of such Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such
wire transfer instructions as the Borrower shall furnish from time to
time to the Liquidity Provider for such purpose. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower.
2.2.6. Upon the making of any Advance requested pursuant
to a Notice of Borrowing, in accordance with the Borrower's payment
instructions, the Liquidity Provider shall be fully discharged of its
obligation hereunder with respect to such Notice of Borrowing, and the
Liquidity Provider shall not thereafter be obligated to make any
further Advances hereunder in respect of such Notice of Borrowing to
the Borrower or to any other Person. Following the making of any
Advance pursuant to Section 2.2(b), (c) or (d) hereof to fund the
Class B Cash Collateral Account, the Liquidity Provider shall have no
interest in or rights to the Class B Cash Collateral Account, such
Advance or any other amounts from time to time on deposit in the Class
B Cash Collateral Account; provided that the foregoing shall not
affect or impair the obligations of the Subordination Agent to make
the distributions contemplated by Section 3.6(e) or (f) of the
Intercreditor Agreement. By paying to the Borrower proceeds of
<PAGE>
Advances requested by the Borrower in accordance with the provisions
of this Agreement, the Liquidity Provider makes no representation as
to, and assumes no responsibility for, the correctness or sufficiency
for any purpose of the amount of the Advances so made and requested.
Section 2.3. FEES. Borrower agrees to pay to the Liquidity Provider
the fees set forth in the Fee Letter.
Section 2.4. ADJUSTMENTS OR TERMINATION OF THE MAXIMUM COMMITMENT.
2.4.1. AUTOMATIC ADJUSTMENTS. Promptly following each date
on which the Required Amount is reduced as a result of a reduction in
the Pool Balance of the Class B Certificates or otherwise, clause (y)
of the definition of Maximum Commitment shall automatically be reduced
to an amount equal to the Required Amount (as calculated by the
Borrower). The Borrower shall give notice of any such automatic
reduction of the Maximum Commitment to the Liquidity Provider within
two Business Days thereof. The failure by the Borrower to furnish any
such notice shall not affect such automatic reduction of the Maximum
Commitment.
2.4.2. TERMINATION. Upon the making of any Provider
Advance or Final Advance hereunder or the occurrence of the
Termination Date, the obligation of the Liquidity Provider to make
further Advances hereunder shall automatically and irrevocably
terminate, and the Borrower shall not be entitled to request any
further Borrowing hereunder.
Section 2.5. REPAYMENTS OF INTEREST ADVANCES OR THE FINAL ADVANCE.
Subject to Sections 2.6, 2.7 and 2.9 hereof, the Borrower hereby agrees, without
notice of an Advance or demand for repayment from the Liquidity Provider (which
notice and demand are hereby waived by the Borrower), to pay, or to cause to be
paid, to the Liquidity Provider on each date on which the Liquidity Provider
shall make an Interest Advance or the Final Advance, an amount equal to (a) the
amount of such Advance (any such Advance, until repaid, is referred to herein as
an "UNPAID ADVANCE"), plus (b) interest on the amount of each such Unpaid
Advance as provided in Section 3.7 hereof; PROVIDED that if (i) the Liquidity
Provider shall make a Provider Advance at any time after making one or more
Interest Advances which shall not have been repaid in accordance with this
Section 2.5 or (ii) this Liquidity Facility shall become a Downgraded Facility
or Non-Extended Facility at any time when unreimbursed Interest Advances have
reduced the Maximum Available Commitment to zero, then such Interest Advances
shall cease to constitute Unpaid Advances and shall be deemed to have been
changed into an Applied Downgrade Advance or an Applied Non-Extension Advance,
as the case may be, for all purposes of this Agreement (including, without
limitation, for the purpose of determining when such Interest Advance is
required to be repaid to the Liquidity Provider in accordance with Section 2.6
and for the purposes of Section 2.6(b)). The Borrower and the Liquidity Provider
agree that the repayment in full of each Interest Advance and Final Advance on
<PAGE>
the date such Advance is made is intended to be a contemporaneous exchange for
new value given to the Borrower by the Liquidity Provider.
Section 2.6. REPAYMENTS OF PROVIDER ADVANCES.
2.6.1. Amounts advanced hereunder in respect of a Provider
Advance shall be deposited in the Class B Cash Collateral Account,
invested and withdrawn from the Class B Cash Collateral Account as set
forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement.
The Borrower agrees to pay to the Liquidity Provider, on each Regular
Distribution Date, commencing on the first Regular Distribution Date
after the making of a Provider Advance, interest on the principal
amount of any such Provider Advance as provided in Section 3.7;
PROVIDED, HOWEVER, that amounts in respect of a Provider Advance
withdrawn from the Class B Cash Collateral Account for the purpose of
paying interest on the Class B Certificates in accordance with Section
3.6(f) of the Intercreditor Agreement (the amount of any such
withdrawal being (y) in the case of a Downgrade Advance, an "APPLIED
DOWNGRADE ADVANCE" and (z) in the case of a Non-Extension Advance, an
"APPLIED NON-EXTENSION ADVANCE" and, together with an Applied
Downgrade Advance, an "APPLIED PROVIDER ADVANCE") shall thereafter
(subject to Section 2.6(b)) be treated as an Interest Advance under
this Agreement for purposes of determining the Applicable Liquidity
Rate for interest payable thereon; PROVIDED FURTHER, HOWEVER, that if,
following the making of a Provider Advance, the Liquidity Provider
delivers a Termination Notice to the Borrower pursuant to Section 6.1
hereof, such Provider Advance shall thereafter be treated as a Final
Advance under this Agreement for purposes of determining the
Applicable Liquidity Rate for interest payable thereon. Subject to
Sections 2.7 and 2.9 hereof, immediately upon the withdrawal of any
amounts from the Class B Cash Collateral Account on account of a
reduction in the Required Amount, the Borrower shall repay to the
Liquidity Provider a portion of the Provider Advances in a principal
amount equal to the amount of such reduction, plus interest on the
principal amount prepaid as provided in Section 3.7 hereof.
2.6.2. At any time when an Applied Provider Advance (or
any portion thereof) is outstanding, upon the deposit in the Class B
Cash Collateral Account of any amount pursuant to clause "THIRD" of
Section 2.4(b) of the Intercreditor Agreement, clause "THIRD" of
Section 3.2 of the Intercreditor Agreement or clause "FOURTH" of
Section 3.3 of the Intercreditor Agreement (any such amount being a
"REPLENISHMENT AMOUNT") for the purpose of replenishing or increasing
the balance thereof up to the Required Amount at such time, (i) the
aggregate outstanding principal amount of all Applied Provider
Advances (and of Provider Advances treated as an Interest Advance for
purposes of determining the Applicable Liquidity Rate for interest
payable thereon) shall be automatically reduced by the amount of such
Replenishment Amount and (ii) the aggregate outstanding principal
amount of all Unapplied Provider Advances shall be automatically
increased by the amount of such Replenishment Amount.
<PAGE>
2.6.3. Upon the provision of a Replacement Liquidity
Facility in replacement of this Agreement in accordance with Section
3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in
the Class B Cash Collateral Account after giving effect to any Applied
Provider Advance on the date of such replacement shall be reimbursed
to the Liquidity Provider, but only to the extent such amounts are
necessary to repay in full to the Liquidity Provider all amounts owing
to it hereunder.
Section 2.7. PAYMENTS TO THE LIQUIDITY PROVIDER UNDER THE
INTERCREDITOR AGREEMENT. In order to provide for payment or repayment to the
Liquidity Provider of any amounts hereunder, the Intercreditor Agreement
provides that amounts available and referred to in Articles II and III of the
Intercreditor Agreement, to the extent payable to the Liquidity Provider
pursuant to the terms of the Intercreditor Agreement (including, without
limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the
Liquidity Provider in accordance with the terms thereof. Amounts so paid to the
Liquidity Provider shall be applied by the Liquidity Provider to Liquidity
Obligations then due and payable in accordance with the Intercreditor Agreement
or, if not provided for in the Intercreditor Agreement, then in such manner as
the Liquidity Provider shall deem appropriate.
Section 2.8. BOOK ENTRIES. The Liquidity Provider shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower resulting from Advances made from time to time and
the amounts of principal and interest payable hereunder and paid from time to
time in respect thereof; PROVIDED, HOWEVER, that the failure by the Liquidity
Provider to maintain such account or accounts shall not affect the obligations
of the Borrower in respect of Advances.
Section 2.9. PAYMENTS FROM AVAILABLE FUNDS ONLY. All payments to be
made by the Borrower under this Agreement shall be made only from the amounts
that constitute Scheduled Payments, Special Payments or payments under Section
9.1 of the Participation Agreements and only to the extent that the Borrower
shall have sufficient income or proceeds therefrom to enable the Borrower to
make payments in accordance with the terms hereof after giving effect to the
priority of payments provisions set forth in the Intercreditor Agreement. The
Liquidity Provider agrees that it will look solely to such amounts to the extent
available for distribution to it as provided in the Intercreditor Agreement and
this Agreement and that the Borrower, in its individual capacity, is not
personally liable to it for any amounts payable or liability under this
Agreement except as expressly provided in this Agreement, the Intercreditor
Agreement or any Participation Agreement. Amounts on deposit in the Class B Cash
Collateral Account shall be available to the Borrower to make payments under
this Agreement only to the extent and for the purposes expressly contemplated in
Section 3.6(f) of the Intercreditor Agreement.
Section 2.10. EXTENSION OF THE EXPIRY DATE; NON-EXTENSION ADVANCE. No
earlier than the 60th day and no later than the 40th day prior to the then
effective Expiry Date (unless such Expiry Date is on or after the date that is
15 days after the Final Maturity Date for the Class B Certificates), the
Borrower shall request that the Liquidity Provider extend the Expiry Date for a
<PAGE>
period of 364 days after the then effective Expiry Date (unless the obligations
of the Liquidity Provider are earlier terminated in accordance with the terms
hereof). The Liquidity Provider shall advise the Borrower, no earlier than 40
days and no later than 25 days prior to the then effective Expiry Date, whether,
in its sole discretion, it agrees to so extend the Expiry Date. If the Liquidity
Provider advises the Borrower on or before the 25th day prior to the Expiry Date
then in effect that such Expiry Date shall not be so extended, or fails to
irrevocably and unconditionally advise the Borrower on or before the 25th day
prior to the Expiry Date then in effect that such Expiry Date shall be so
extended (and, in each case, if the Liquidity Provider shall not have been
replaced in accordance with Section 3.6(e) of the Intercreditor Agreement), the
Borrower shall be entitled on and after such 25th day (but prior to the then
effective Expiry Date) to request a Non-Extension Advance in accordance with
Section 2.2(b) hereof and Section 3.6(d) of the Intercreditor Agreement.
ARTICLE III.
OBLIGATIONS OF THE BORROWER
---------------------------
Section 3.1. INCREASED COSTS. Subject to the Fee Letter, the Borrower
shall pay to the Liquidity Provider from time to time such amounts as may be
necessary to compensate the Liquidity Provider for any increased costs incurred
by the Liquidity Provider which are attributable to its making or maintaining
any LIBOR Advances hereunder or its obligation to make any such Advances
hereunder, or any reduction in any amount receivable by the Liquidity Provider
under this Agreement or the Intercreditor Agreement in respect of any such
Advances or such obligation (such increases in costs and reductions in amounts
receivable being herein called "ADDITIONAL COSTS"), resulting from any change
after the date of this Agreement in U.S. federal, state, municipal, or foreign
laws or regulations (including Regulation D), or the adoption or making after
the date of this Agreement of any interpretations, directives, or requirements
applying to a class of banks including the Liquidity Provider under any U.S.
federal, state, municipal, or any foreign laws or regulations (whether or not
having the force of law) by any court, central bank or monetary authority
charged with the interpretation or administration thereof (a "REGULATORY
CHANGE"), which: (1) changes the basis of taxation of any amounts payable to the
Liquidity Provider under this Agreement in respect of any such Advances (other
than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit,
compulsory loan or similar requirements relating to any extensions of credit or
other assets of, or any deposits with other liabilities of, the Liquidity
Provider (including any such Advances or any deposits referred to in the
definition of LIBOR Rate or related definitions). The Liquidity Provider agrees
to use reasonable efforts (consistent with applicable legal and regulatory
restrictions) to change the jurisdiction of its Lending Office if making such
change would avoid the need for, or reduce the amount of, any amount payable
under this Section 3.1 that may thereafter accrue and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to
the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.1 as promptly as practicable after it
<PAGE>
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.1 of the effect of any Regulatory Change on its costs of making
or maintaining Advances or on amounts receivable by it in respect of Advances,
and of the additional amounts required to compensate the Liquidity Provider in
respect of any Additional Costs, shall be prima facie evidence of the amount
owed under this Section.
Section 3.2. CAPITAL ADEQUACY. Subject to the Fee Letter, if (1) the
adoption, after the date hereof, of any applicable governmental law, rule or
regulation regarding capital adequacy, (2) any change, after the date hereof, in
the interpretation or administration of any such law, rule or regulation by any
central bank or other governmental authority charged with the interpretation or
administration thereof or (3) compliance by the Liquidity Provider or any
corporation controlling the Liquidity Provider with any applicable guideline or
request of general applicability, issued after the date hereof, by any central
bank or other governmental authority (whether or not having the force of law)
that constitutes a change of the nature described in clause (2), has the effect
of requiring an increase in the amount of capital required to be maintained by
the Liquidity Provider or any corporation controlling the Liquidity Provider,
and such increase is based upon the Liquidity Provider's obligations hereunder
and other similar obligations, the Borrower shall pay to the Liquidity Provider
from time to time such additional amount or amounts as are necessary to
compensate the Liquidity Provider for such portion of such increase as shall be
reasonably allocable to the Liquidity Provider's obligations to the Borrower
hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent
with applicable legal and regulatory restrictions) to change the jurisdiction of
its Lending Office if making such change would avoid the need for, or reduce the
amount of, any amount payable under this Section that may thereafter accrue and
would not, in the reasonable judgment of the Liquidity Provider, be otherwise
materially disadvantageous to the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.2 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.2 of the effect of any increase in the amount of capital required
to be maintained by the bank and of the amount allocable to the Liquidity
Provider's obligations to the Borrower hereunder shall be prima facie evidence
of the amounts owed under this Section.
Section 3.3. PAYMENTS FREE OF DEDUCTIONS. All payments made by the
Borrower under this Agreement shall be made free and clear of, and without
reduction for or on account of, any present or future stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever now or hereafter imposed, levied,
collected, withheld or assessed, excluding Excluded Taxes (such non-excluded
taxes being referred to herein, collectively, as "Non-Excluded Taxes" and,
individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider under this
Agreement, the amounts so payable to the Liquidity Provider shall be increased
<PAGE>
to the extent necessary to yield to the Liquidity Provider (after payment of all
Non-Excluded Taxes) interest or any other such amounts payable under this
Agreement at the rates or in the amounts specified in this Agreement. The
Liquidity Provider agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of the Liquidity Provider, be
otherwise disadvantageous to the Liquidity Provider. From time to time upon the
reasonable request of the Borrower, the Liquidity Provider agrees to provide to
the Borrower two original Internal Revenue Service Forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that the Liquidity Provider is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement.
Section 3.4. PAYMENTS. The Borrower shall make or cause to be made
each payment to the Liquidity Provider under this Agreement so as to cause the
same to be received by the Liquidity Provider not later than 1:00 P.M. (New York
City time) on the day when due. The Borrower shall make all such payments in
lawful money of the United States of America, to the Liquidity Provider in
immediately available funds, by wire transfer to ABN AMRO Bank N.V., New York,
NY, ABA # 026009580, Account Name: ABN AMRO Bank, N.V. - Chicago Branch, Account
# 650-001-1789-41, Reference: Continental Airlines, Inc. Pass Through Trust
1997-3B .
Section 3.5. COMPUTATIONS. All computations of interest based on the
Base Rate shall be made on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the LIBOR Rate shall be made
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
Section 3.6. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and no additional
interest shall be due as a result (and if so made, shall be deemed to have been
made when due). If any payment in respect of interest on an Advance is so
deferred to the next succeeding Business Day, such deferral shall not delay the
commencement of the next Interest Period for such Advance or reduce the number
of days for which interest will be payable on such Advance on the next interest
payment date for such Advance.
Section 3.7. INTEREST.
3.7.1. Subject to Section 2.9, the Borrower shall pay, or
shall cause to be paid, without duplication, interest on (i) the
unpaid principal amount of each Advance from and including the date of
such Advance (or, in the case of an Applied Provider Advance, from and
including the date on which the amount thereof was withdrawn from the
Class B Cash Collateral Account to pay interest on the Class B
Certificates) to but excluding the date such principal amount shall be
paid in full (or, in the case of an Applied Provider Advance, the date
<PAGE>
on which the Class B Cash Collateral Account is fully replenished in
respect of such Advance) and (ii) any other amount due hereunder
(whether fees, commissions, expenses or other amounts or, to the
extent permitted by law, installments of interest on Advances or any
such other amount) which is not paid when due (whether at stated
maturity, by acceleration or otherwise) from and including the due
date thereof to but excluding the date such amount is paid in full, in
each such case, at a fluctuating interest rate per annum for each day
equal to the Applicable Liquidity Rate (as defined below) for such
Advance or such other amount as in effect for such day, but in no
event at a rate per annum greater than the maximum rate permitted by
applicable law; PROVIDED, HOWEVER, that, if at any time the otherwise
applicable interest rate as set forth in this Section 3.7 shall exceed
the maximum rate permitted by applicable law, then any subsequent
reduction in such interest rate will not reduce the rate of interest
payable pursuant to this Section 3.7 below the maximum rate permitted
by applicable law until the total amount of interest accrued equals
the amount of interest that would have accrued if such otherwise
applicable interest rate as set forth in this Section 3.7 had at all
times been in effect.
3.7.2. Except as provided in clause (e) below, each
Advance will be either a Base Rate Advance or a LIBOR Advance as
provided in this Section. Each Advance will be a Base Rate Advance for
the period from the date of its borrowing to (but excluding) the third
Business Day following the Liquidity Provider's receipt of the Notice
of Borrowing for such Advance. Thereafter, such Advance shall be a
LIBOR Advance; provided that the Borrower (at the direction of the
Controlling Party, so long as the Liquidity Provider is not the
Controlling Party) may (x) convert the Final Advance into a Base Rate
Advance on the last day of an Interest Period for such Advance by
giving the Liquidity Provider no less than four Business Days' prior
written notice of such election or (y) elect to maintain the Final
Advance as Base Rate Advance by not requesting a conversion of the
Final Advance to a LIBOR Advance under Clause (5) of the applicable
Notice of Borrowing.
3.7.3. Each LIBOR Advance shall bear interest during each
Interest Period at a rate per annum equal to the LIBOR Rate for such
Interest Period plus the Applicable Margin for such LIBOR Advance,
payable in arrears on the last day of such Interest Period and, in the
event of the payment of principal of such LIBOR Advance on a day other
than such last day, on the date of such payment (to the extent of
interest accrued on the amount of principal repaid).
3.7.4. Each Base Rate Advance shall bear interest at a
rate per annum equal to the Base Rate plus the Applicable Margin for
such Base Rate Advance, payable in arrears on each Regular
Distribution Date and, in the event of the payment of principal of
<PAGE>
such Base Rate Advance on a day other than a Regular Distribution
Date, on the date of such payment (to the extent of interest accrued
on the amount of principal repaid).
3.7.5. Each Unapplied Provider Advance (i) during the
period from and including the date of the making of such Unapplied
Provider Advance through but excluding the date of repayment thereof
or of conversion thereof into a Final Advance or Applied Provider
Advance (and for any additional periods of time during which such
Advance no longer constitutes an Applied Provider Advance but again
constitutes an Unapplied Provider Advance pursuant to Sections 2.6(a)
and (b) hereof), shall bear interest in an amount equal to the
Investment Earnings on amounts on deposit in the Class B Cash
Collateral Account for such period plus the Applicable Margin on the
amount of such Unapplied Provider Advance from time to time during
such period, payable in arrears on each Regular Distribution Date and
(ii) after conversion thereof into a Final Advance or Applied Provider
Advance (but only for such period of time during which such Advance
constitutes an Applied Provider Advance pursuant to Sections 2.6(a)
and (b) hereof), as the case may be, shall be a LIBOR Advance and
shall bear interest in accordance with clause (c) above.
3.7.6. Each amount not paid when due hereunder (whether
fees, commissions, expenses or other amounts or, to the extent
permitted by applicable law, installments of interest on Advances but
excluding Advances) shall bear interest at a rate per annum equal to
the Base Rate plus 2.00% until paid.
3.7.7. Each change in the Base Rate shall become effective
immediately. The rates of interest specified in this Section 3.7 with
respect to any Advance or other amount shall be referred to as the
"APPLICABLE LIQUIDITY RATE".
Section 3.8. REPLACEMENT OF BORROWER. From time to time and subject to
the successor Borrower's meeting the eligibility requirements set forth in
Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent
upon the effective date and time specified in a written and completed Notice of
Replacement Subordination Agent in substantially the form of Annex VI attached
hereto (a "NOTICE OF REPLACEMENT SUBORDINATION AGENT") delivered to the
Liquidity Provider by the then Borrower, the successor Borrower designated
therein shall be substituted for as the Borrower for all purposes hereunder.
Section 3.9. FUNDING LOSS INDEMNIFICATION. The Borrower shall pay to
the Liquidity Provider, upon the request of the Liquidity Provider, such amount
or amounts as shall be sufficient (in the reasonable opinion of the Liquidity
Provider) to compensate it for any loss, cost, or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired by the
Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of
anticipated profits) incurred as a result of:
(a) Any repayment of a LIBOR Advance on a date other than the last day
of the Interest Period for such Advance; or
<PAGE>
(b) Any failure by the Borrower to borrow a LIBOR Advance on the date
for borrowing specified in the relevant notice under Section 2.2.
Section 3.10. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Liquidity Provider (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for the Liquidity Provider (or its Lending Office) to maintain or
fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity
Provider, the outstanding principal amount of the LIBOR Advances shall be
converted to Base Rate Advances (a) immediately upon demand of the Liquidity
Provider, if such change or compliance with such request, in the judgment of the
Liquidity Provider, requires immediate repayment; or (b) at the expiration of
the last Interest Period to expire before the effective date of any such change
or request.
ARTICLE IV.
CONDITIONS PRECEDENT
--------------------
Section 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTION 2.1..
Section 2.1 of this Agreement shall become effective on and as of the first date
(the "EFFECTIVE DATE") on which the following conditions precedent have been
satisfied or waived:
4.1.1. The Liquidity Provider shall have received on or
before the Closing Date each of the following, and in the case of each
document delivered pursuant to paragraphs (i), (ii) and (iii), each in
form and substance satisfactory to the Liquidity Provider:
(i) This Agreement duly executed on behalf of the
Borrower;
(ii) The Intercreditor Agreement duly executed on
behalf of each of the parties thereto;
(iii) Fully executed copies of each of the Operative
Agreements executed and delivered on or before the Closing
Date (other than this Agreement and the Intercreditor
Agreement);
(iv) A copy of the Prospectus and specimen copies of
the Class B Certificates;
(v) An executed copy of each document, instrument,
certificate and opinion delivered on or before the Closing
Date pursuant to the Class B Trust Agreement, the
Intercreditor Agreement and the other Operative Agreements
(together with, in the case of each such opinion, other than
<PAGE>
the opinion of counsel for the Underwriters, a letter from
the counsel rendering such opinion to the effect that the
Liquidity Provider is entitled to rely on such opinion as of
its date as if it were addressed to the Liquidity Provider);
(vi) Evidence that there shall have been made and
shall be in full force and effect, all filings, recordings
and/or registrations, and there shall have been given or
taken any notice or other similar action as may be
reasonably necessary or, to the extent reasonably requested
by the Liquidity Provider, reasonably advisable, in order to
establish, perfect, protect and preserve the right, title
and interest, remedies, powers, privileges, liens and
security interests of, or for the benefit of, the Trustees,
the Borrower and the Liquidity Provider created by the
Operative Agreements executed and delivered on or prior to
the Closing Date;
(vii) An agreement from Continental, pursuant to
which (i) Continental agrees to provide copies of quarterly
financial statements and audited annual financial statements
to the Liquidity Provider, and such other information as the
Liquidity Provider shall reasonably request with respect to
the transactions contemplated by the Operative Agreements,
in each case, only to the extent that Continental is
obligated to provide such information pursuant to Section
8.2.1 of the Leases to the parties thereto and (ii)
Continental agrees to allow the Liquidity Provider to
inspect Continental's books and records regarding such
transactions, and to discuss such transactions with officers
and employees of Continental; and
(viii) Such other documents, instruments, opinions
and approvals as the Liquidity Provider shall have
reasonably requested.
4.1.2. The following statement shall be true on and as of
the Effective Date: no event has occurred and is continuing, or would
result from the entering into of this Agreement or the making of any
Advance, which constitutes a Liquidity Event of Default.
4.1.3. The Liquidity Provider shall have received payment
in full of all fees and other sums required to be paid to or for the
account of the Liquidity Provider on or prior to the Effective Date.
4.1.4. All conditions precedent to the issuance of the
Certificates under the Trust Agreements shall have been satisfied, all
conditions precedent to the effectiveness of the other Liquidity
Facilities shall have been satisfied, and all conditions precedent to
the purchase of the Certificates by the Underwriters under the
Underwriting Agreement shall have been satisfied (unless any of such
conditions precedent shall have been waived by the Underwriters).
<PAGE>
4.1.5. The Borrower shall have received a certificate,
dated the date hereof, signed by a duly authorized representative of
the Liquidity Provider, certifying that all conditions precedent to
the effectiveness of Section 2.1 have been satisfied or waived.
Section 4.2. CONDITIONS PRECEDENT TO BORROWING. The obligation of the
Liquidity Provider to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and, prior to the date of such Borrowing, the Borrower shall have delivered a
Notice of Borrowing which conforms to the terms and conditions of this Agreement
and has been completed as may be required by the relevant form of the Notice of
Borrowing for the type of Advances requested.
ARTICLE V.
COVENANTS
---------
Section 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity
Provider shall otherwise consent in writing:
5.1.1. PERFORMANCE OF THIS AND OTHER AGREEMENTS.
Punctually pay or cause to be paid all amounts payable by it under
this Agreement and the other Operative Agreements and observe and
perform in all material respects the conditions, covenants and
requirements applicable to it contained in this Agreement and the
other Operative Agreements.
5.1.2. REPORTING REQUIREMENTS. Furnish to the Liquidity
Provider with reasonable promptness, such other information and data
with respect to the transactions contemplated by the Operative
Agreements as from time to time may be reasonably requested by the
Liquidity Provider; and permit the Liquidity Provider, upon reasonable
notice, to inspect the Borrower's books and records with respect to
such transactions and to meet with officers and employees of the
Borrower to discuss such transactions.
5.1.3. CERTAIN OPERATIVE AGREEMENTS. Furnish to the
Liquidity Provider with reasonable promptness, such Operative
Agreements entered into after the date hereof as from time to time may
be reasonably requested by the Liquidity Provider.
Section 5.2. NEGATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will not appoint or permit or
suffer to be appointed any successor Borrower without the written consent of the
Liquidity Provider, which consent shall not be unreasonably withheld or delayed.
<PAGE>
ARTICLE VI.
LIQUIDITY EVENTS OF DEFAULT
---------------------------
Section 6.1. LIQUIDITY EVENTS OF DEFAULT. If (a) any Liquidity Event
of Default has occurred and is continuing and (b) there is a Performing Note
Deficiency, the Liquidity Provider may, in its discretion, deliver to the
Borrower a Termination Notice, the effect of which shall be to cause (i) this
Agreement to expire on the fifth Business Day after the date on which such
Termination Notice is received by the Borrower, (ii) the Borrower to promptly
request, and the Liquidity Provider to promptly make, a Final Advance in
accordance with Section 2.2(d) hereof and Section 3.6(i) of the Intercreditor
Agreement, (iii) all other outstanding Advances to be automatically converted
into Final Advances for purposes of determining the Applicable Liquidity Rate
for interest payable thereon, and (iv) subject to Sections 2.7 and 2.9 hereof,
all Advances (including, without limitation, any Provider Advance and Applied
Provider Advance), any accrued interest thereon and any other amounts
outstanding hereunder to become immediately due and payable to the Liquidity
Provider.
ARTICLE VII.
MISCELLANEOUS
-------------
Section 7.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Liquidity Provider, and, in the case of an amendment or of a waiver by the
Borrower, the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 7.2. NOTICES, ETC. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telecopier and mailed or delivered or sent by telecopier):
Borrower: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopy: (302) 651-8882
Liquidity Provider: ABN AMRO BANK N.V.
Aerospace Department
135 South LaSalle Street, #820
Chicago, IL 60674-9135
<PAGE>
Attention: Claudia Heldring, V.P.
Telephone: (312) 904-5031
Telecopy: (312) 606-8428
with a copy to:
ABN AMRO Bank N.V.
135 South LaSalle St., #625
Chicago, IL 60674-9135
Attention: Loan Operations
Telephone: (312) 904-2961
Telecopy: (312) 606-6893
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above, (ii) if given by mail, when deposited
in the mails addressed as specified above, and (iii) if given by other means,
when delivered at the address specified above, except that written notices to
the Liquidity Provider pursuant to the provisions of Articles II and III hereof
shall not be effective until received by the Liquidity Provider. A copy of all
notices delivered hereunder to either party shall in addition be delivered to
each of the parties to the Participation Agreements at their respective
addresses set forth therein.
Section 7.3. NO WAIVER; REMEDIES. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 7.4. FURTHER ASSURANCES. The Borrower agrees to do such
further acts and things and to execute and deliver to the Liquidity Provider
such additional assignments, agreements, powers and instruments as the Liquidity
Provider may reasonably require or deem advisable to carry into effect the
purposes of this Agreement and the other Operative Agreements or to better
assure and confirm unto the Liquidity Provider its rights, powers and remedies
hereunder and under the other Operative Agreements.
Section 7.5. INDEMNIFICATION; SURVIVAL OF CERTAIN PROVISIONS. The
Liquidity Provider shall be indemnified hereunder to the extent and in the
manner described in Section 9.1 of the Participation Agreements. In addition,
the Borrower agrees to indemnify, protect, defend and hold harmless the
Liquidity Provider from, against and in respect of, and shall pay on demand, all
Expenses of any kind or nature whatsoever (other than any Expenses of the nature
described in Sections 3.1, 3.2 or 7.7 hereof or in the Fee Letter (regardless of
whether indemnified against pursuant to said Sections or in such Fee Letter)),
that may be imposed, incurred by or asserted against any Liquidity Indemnitee,
in any way relating to, resulting from, or arising out of or in connection with
any action, suit or proceeding by any third party against such Liquidity
<PAGE>
Indemnitee and relating to this Agreement, the Fee Letter, the Intercreditor
Agreement or any Financing Agreement; PROVIDED, HOWEVER, that the Borrower shall
not be required to indemnify, protect, defend and hold harmless any Liquidity
Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent
such Expense is (i) attributable to the gross negligence or willful misconduct
of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary
and usual operating overhead expense, or (iii) attributable to the failure by
such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or
observe any agreement, covenant or condition on its part to be performed or
observed in this Agreement, the Intercreditor Agreement, the Fee Letter, the Tax
Letter or any other Operative Agreement to which it is a party. The indemnities
contained in such Section 9.1, and the provisions of Sections 3.1, 3.2, 3.3,
3.9, 7.5 and 7.7 hereof, shall survive the termination of this Agreement.
Section 7.6. LIABILITY OF THE LIQUIDITY PROVIDER.
7.6.1. Neither the Liquidity Provider nor any of its
officers, employees, directors or affiliates shall be liable or
responsible for: (i) the use which may be made of the Advances or any
acts or omissions of the Borrower or any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; or (iii) the making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other documents
which do not comply with the terms hereof; PROVIDED, HOWEVER, that the
Borrower shall have a claim against the Liquidity Provider, and the
Liquidity Provider shall be liable to the Borrower, to the extent of
any damages suffered by the Borrower which were the result of (A) the
Liquidity Provider's willful misconduct or negligence in determining
whether documents presented hereunder comply with the terms hereof, or
(B) any breach by the Liquidity Provider of any of the terms of this
Agreement, including, but not limited to, the Liquidity Provider's
failure to make lawful payment hereunder after the delivery to it by
the Borrower of a Notice of Borrowing strictly complying with the
terms and conditions hereof.
7.6.2. Neither the Liquidity Provider nor any of its
officers, employees, director or affiliates shall be liable or
responsible in any respect for (i) any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with this Agreement or any
Notice of Borrowing delivered hereunder, or (ii) any action, inaction
or omission which may be taken by it in good faith, absent willful
misconduct or negligence (in which event the extent of the Liquidity
Provider's potential liability to the Borrower shall be limited as set
forth in the immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing.
Section 7.7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay, or
cause to be paid (A) on the Effective Date and on such later date or dates on
<PAGE>
which the Liquidity Provider shall make demand, all reasonable out-of-pocket
costs and expenses (including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider) of the Liquidity
Provider in connection with the preparation, negotiation, execution, delivery,
filing and recording of this Agreement, any other Operative Agreement and any
other documents which may be delivered in connection with this Agreement and (B)
on demand, all reasonable costs and expenses (including reasonable counsel fees
and expenses) of the Liquidity Provider in connection with (i) the enforcement
of this Agreement or any other Operative Agreement, (ii) the modification or
amendment of, or supplement to, this Agreement or any other Operative Agreement
or such other documents which may be delivered in connection herewith or
therewith (whether or not the same shall become effective) or (iii) any action
or proceeding relating to any order, injunction, or other process or decree
restraining or seeking to restrain the Liquidity Provider from paying any amount
under this Agreement, the Intercreditor Agreement or any other Operative
Agreement or otherwise affecting the application of funds in the Cash Collateral
Accounts. In addition, the Borrower shall pay any and all recording, stamp and
other similar taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement, any other
Operative Agreement and such other documents, and agrees to save the Liquidity
Provider harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
Section 7.8. BINDING EFFECT; PARTICIPATIONS.
7.8.1. This Agreement shall be binding upon and inure to
the benefit of the Borrower and the Liquidity Provider and their
respective successors and assigns, except that neither the Liquidity
Provider (except as otherwise provided in this Section 7.8) nor
(except as contemplated by Section 3.8) the Borrower shall have the
right to assign its rights or obligations hereunder or any interest
herein without the prior written consent of the other party, subject
to the requirements of Section 7.8(b). The Liquidity Provider may
grant participations herein or in any of its rights hereunder
(including, without limitation, funded participations and
participations in rights to receive interest payments hereunder) and
under the other Operative Agreements to such Persons as the Liquidity
Provider may in its sole discretion select, subject to the
requirements of Section 7.8(b). No such participation by the Liquidity
Provider, however, will relieve the Liquidity Provider of its
obligations hereunder. In connection with any participation or any
proposed participation, the Liquidity Provider may disclose to the
participant or the proposed participant any information that the
Borrower is required to deliver or to disclose to the Liquidity
Provider pursuant to this Agreement. The Borrower acknowledges and
agrees that the Liquidity Provider's source of funds may derive in
part from its participants (other than Continental). Accordingly,
references in this Agreement and the other Operative Agreements to
determinations, reserve and capital adequacy requirements, increased
costs, reduced receipts, additional amounts due pursuant to Section
3.3(a) and the like as they pertain to the Liquidity Provider shall be
<PAGE>
deemed also to include those of each of its participants (subject, in
each case, to the maximum amount that would have been incurred by or
attributable to the Liquidity Provider directly if the Liquidity
Provider, rather than the participant, had held the interest
participated).
7.8.2. If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation in this Agreement to any bank or
other entity (each, a "TRANSFEREE"), then, concurrently with the
effectiveness of such participation, the Transferee shall (i)
represent to the Liquidity Provider (for the benefit of the Liquidity
Provider and the Borrower) either (A) that it is incorporated under
the laws of the United States or a state thereof or (B) that under
applicable law and treaties, no taxes will be required to be withheld
with respect to any payments to be made to such Transferee in respect
of this Agreement, (ii) furnish to the Liquidity Provider and the
Borrower either (x) a statement that it is incorporated under the laws
of the United States or a state thereof or (y) if it is not so
incorporated, two copies of a properly completed United States
Internal Revenue Service Form 4224 or Form 1001, as appropriate, or
other applicable form, certificate or document prescribed by the
Internal Revenue Service certifying, in each case, such Transferee's
entitlement to a complete exemption from United States federal
withholding tax in respect to any and all payments to be made
hereunder, and (iii) agree (for the benefit of the Liquidity Provider
and the Borrower) to provide the Liquidity Provider and the Borrower a
new Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent form
previously delivered by it and prior to the immediately following due
date of any payment by the Borrower hereunder, certifying in the case
of a Form 1001 or Form 4224 that such Transferee is entitled to a
complete exemption from United States federal withholding tax on
payments under this Agreement. Unless the Borrower has received forms
or other documents reasonably satisfactory to it (and required by
applicable law) indicating that payments hereunder are not subject to
United States federal withholding tax, the Borrower will withhold
taxes as required by law from such payments at the applicable
statutory rate.
7.8.3. Notwithstanding the other provisions of this
Section 7.8, the Liquidity Provider may assign and pledge all or any
portion of the Advances owing to it to any Federal Reserve Bank or the
United States Treasury as collateral security pursuant to Regulation A
of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank, provided that
any payment in respect of such assigned Advances made by the Borrower
to the Liquidity Provider in accordance with the terms of this
Agreement shall satisfy the Borrower's obligations hereunder in
respect of such assigned Advance to the extent of such payment. No
such assignment shall release the Liquidity Provider from its
obligations hereunder.
Section 7.9. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
<PAGE>
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 7.11. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF IMMUNITY.
7.11.1. Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other
Operative Agreement, or for recognition and enforcement of
any judgment in respect hereof or thereof, to the
nonexclusive general jurisdiction of the courts of the State
of New York, the courts of the United States of America for
the Southern District of New York, and the appellate courts
from any thereof;
(ii) consents that any such action or proceeding may
be brought in such courts, and waives any objection that it
may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy
thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to
each party hereto at its address set forth in Section 7.2
hereof, or at such other address of which the Liquidity
Provider shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the
right to effect service of process in any other manner
permitted by law or shall limit the right to sue in any
other jurisdiction.
7.11.2. THE BORROWER AND THE LIQUIDITY PROVIDER EACH
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT
OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including,
without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims. The Borrower and
<PAGE>
the Liquidity Provider each warrant and represent that it has reviewed
this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with
such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
7.11.3. The Liquidity Provider hereby waives any immunity
it may have from the jurisdiction of the courts of the United States
or of any State and waives any immunity any of its properties located
in the United States may have from attachment or execution upon a
judgement entered by any such court under the United States Foreign
Sovereign Immunities Act of 1976 or any similar successor legislation.
Section 7.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 7.13. ENTIRETY. This Agreement, the Intercreditor Agreement
and the other Operative Agreements to which the Liquidity Provider is a party
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings and agreements of
such parties.
Section 7.14. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY
PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER
NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duty
executed and delivered by their respective officers thereunto duly authorized as
of the date first set forth above.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as agent and
trustee for the Class B Trust, as
Borrower
By:_______________________________________
Name:
Title:
ABN AMRO BANK N.V., acting through its
Chicago Branch, as Liquidity Provider
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
<PAGE>
Annex I to
Revolving Credit Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO N.V., Chicago Branch
(the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit Agreement
(1997-3B) dated as of September 25, 1997, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(a) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the
making of an Interest Advance by the Liquidity Provider to be used for
the payment of the interest on the Class B Certificates which was
payable on __________ (the "DISTRIBUTION DATE") in accordance with the
terms and provisions of the Class B Trust Agreement and the Class B
Certificates, which Advance is requested to be made on
__________________.
(c) The amount of the Interest Advance requested hereby (i) is
$__________, to be applied in respect of the payment of the interest
which was due and payable on the Class B Certificates on the
Distribution Date, (ii) does not include any amount with respect to
the payment of principal of, or premium on, the Class B Certificates,
the Class A Certificates or the Class C Certificates, or interest on
the Class A Certificates or the Class C Certificates, (iii) was
computed in accordance with the provisions of the Class B
Certificates, the Class B Trust Agreement and the Intercreditor
Agreement (a copy of which computation is attached hereto as Schedule
I), (iv) does not exceed the Maximum Available Commitment on the date
hereof and (v) has not been and is not the subject of a prior or
contemporaneous Notice of Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will apply the same in accordance
with the terms of Section 3.6(b) of the Intercreditor Agreement (b) no
portion of such amount shall be applied by the Borrower for any other
purpose and (c) no portion of such amount until so applied shall be
commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Maximum Available Commitment by
an amount equal to the amount of the Interest Advance requested to be made
hereby as set forth in clause (i) of paragraph (3) of this Certificate and such
<PAGE>
reduction shall automatically result in corresponding reductions in the amounts
available to be borrowed pursuant to a subsequent Advance.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of _________ day of ________________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Interest Advance Notice of Borrowing]
<PAGE>
Annex II
Revolving Credit Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3B) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the
making of the Non-Extension Advance by the Liquidity Provider to be
used for the funding of the Class B Cash Collateral Account in
accordance with Section 3.6(d) of the Intercreditor Agreement, which
Advance is requested to be made on _____________.
(c) The amount of the Non-Extension Advance requested hereby (i)
is $__________, which equals the Maximum Available Commitment on the
date hereof and is to be applied in respect of the funding of the
Class B Cash Collateral Account in accordance with Section 3.6(d) of
the Intercreditor Agreement, (ii) does not include any amount with
respect to the payment of the principal of, or premium on, the Class B
Certificates, or principal of, or interest or premium on, the Class A
Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class B Certificates, the Class
B Trust Agreement and the Intercreditor Agreement (a copy of which
computation is attached hereto as Schedule I), and (iv) has not been
and is not the subject of a prior or contemporaneous Notice of
Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the
Class B Cash Collateral Account and apply the same in accordance with
the terms of Section 3.6(d) of the Intercreditor Agreement, (b) no
portion of such amount shall be applied by the Borrower for any other
purpose and (c) no portion of such amount until so applied shall be
commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Non-Extension Advance as requested by this
Notice of Borrowing shall automatically and irrevocably terminate the obligation
of the Liquidity Provider to make further Advances under the Liquidity
<PAGE>
Agreement; and (B) following the making by the Liquidity Provider of the
Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall
not be entitled to request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of _______ day of ___________________, ______.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Non-Extension Advance Notice of Borrowing]
<PAGE>
Annex III to
Revolving Credit Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3B) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the
making of the Downgrade Advance by the Liquidity Provider to be used
for the funding of the Class B Cash Collateral Account in accordance
with Section 3.6(c) of the Intercreditor Agreement by reason of the
downgrading of the short-term unsecured debt rating of the Liquidity
Provider issued by either Rating Agency below the Threshold Rating,
which Advance is requested to be made on ____________, _____.
(c) The amount of the Downgrade Advance requested hereby (i) is
$_______, which equals the Maximum Available Commitment on the date
hereof and is to be applied in respect of the funding of the Class B
Cash Collateral Account in accordance with Section 3.6(c) of the
Intercreditor Agreement, (ii) does not include any amount with respect
to the payment of the principal of, or premium on, the Class B
Certificates, or principal of, or interest or premium on, the Class A
Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class B Certificates, the Class
B Trust Agreement and the Intercreditor Agreement (a copy of which
computation is attached hereto as Schedule I), and (iv) has not been
and is not the subject of a prior or contemporaneous Notice of
Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the
Class B Cash Collateral Account and apply the same in accordance with
the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no
portion of such amount shall be applied by the Borrower for any other
purpose and (c) no portion of such amount until so applied shall be
commingled with other funds held by the Borrower.
<PAGE>
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Downgrade Advance as requested by this Notice
of Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Downgrade Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of _______ day of ___________________, ______.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Non-Extension Advance Notice of Borrowing]
<PAGE>
Annex IV to
Revolving Credit Agreement
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V., Chicago
Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement (1997-3B) dated as of September 25, 1997, between the Borrower and the
Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined or referenced),
that:
(a) The Borrower is the Subordination Agent under the
Intercreditor Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the
making of the Final Advance by the Liquidity Provider to be used for
the funding of the Class A Cash Collateral Account in accordance with
Section 3.6(i) of the Intercreditor Agreement by reason of the receipt
by the Borrower of a Termination Notice from the Liquidity Provider
with respect to the Liquidity Agreement, which Advance is requested to
be made on _________________, ____.
(c) The amount of the Final Advance requested hereby (i) is
$__________, which equals the Maximum Available Commitment on the date
hereof and is to be applied in respect of the funding of the Class B
Cash Collateral Account in accordance with Section 3.6(i) of the
Intercreditor Agreement, (ii) does not include any amount with respect
to the payment of principal of, or premium on, the Class B
Certificates, or principal of, or interest or premium on, the Class A
Certificates or the Class C Certificates, (iii) was computed in
accordance with the provisions of the Class B Certificates, the Class
B Trust Agreement and the Intercreditor Agreement (a copy of which
computation is attached hereto as Schedule I), and (iv) has not been
and is not the subject of a prior or contemporaneous Notice of
Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the
Class B Cash Collateral Account and apply the same in accordance with
the terms of Section 3.6(i) of the Intercreditor Agreement, (b) no
portion of such amount shall be applied by the Borrower for any other
purpose and (c) no portion of such amount until so applied shall be
commingled with other funds held by the Borrower.
<PAGE>
(e) The Borrower hereby requests that the Advance requested
hereby be a Base Rate Advance [and that such Base Rate Advance be
converted into a LIBOR Advance on the third Business Day following
your receipt of this notice].<F1>
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Final Advance as requested by this Notice of
Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Final Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
* * *
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ___ day of ________________, ____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
___________________
<F1>Bracketed language is optional.
<PAGE>
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Final Advance Notice of Borrowing]
<PAGE>
Annex V to
Revolving Credit Agreement
NOTICE OF TERMINATION
[Date]
Wilmington Trust Company,
as Subordination Agent, as Borrower
Rodney Square North
North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3B, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.1 of the Liquidity
Agreement, by reason of the occurrence of a Liquidity Event of Default and the
existence of a Performing Note Deficiency (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make Advances
(as defined therein) under such Liquidity Agreement to terminate on the fifth
Business Day after the date on which you receive this notice and (ii) you to
request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i)
of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a
consequence of your receipt of this notice.
<PAGE>
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE
LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
ABN AMRO BANK N.V., Chicago Branch, as
Liquidity Provider
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
cc: Wilmington Trust Company,
as Class A Trustee
<PAGE>
Annex VI to
Revolving Credit Agreement
NOTICE OF REPLACEMENT SUBORDINATION AGENT
[Date]
Attention:
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3B, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Name of Transferee)
all rights and obligations of the undersigned as Borrower under the Liquidity
Agreement referred to above. The transferee has succeeded the undersigned as
Subordination Agent under the Intercreditor Agreement referred to in the first
paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of
the Intercreditor Agreement.
By this transfer, all rights of the undersigned as Borrower under the
Liquidity Agreement are transferred to the transferee and the transferee shall
hereafter have the sole rights and obligations as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.We ask that this transfer
be effective as of _______________, ___.
WILMINGTON TRUST COMPANY, not in its
____________ individual capacity but
solely as Subordination Agent, as
Borrower
By:_______________________________________
Name:
Title:
================================================================================
REVOLVING CREDIT AGREEMENT
(1997-3C)
Dated as of September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Subordination Agent,
as agent and trustee for the
Continental Airlines Pass Through Trust 1997-3C
as Borrower
and
ABN AMRO BANK N.V., CHICAGO BRANCH
as Liquidity Provider
Relating to
Continental Airlines Pass Through Trust 1997-3C
7.121% Continental Airlines Pass Through Certificates,
Series 1997-3C
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Certain Defined Terms................................... 1
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.1. The Advances............................................ 6
Section 2.2. Making the Advances..................................... 7
Section 2.3. Fees.................................................... 9
Section 2.4. Adjustments or Termination of the Maximum
Commitment.............................................. 9
Section 2.5. Repayments of Interest Advances or the Final
Advance................................................. 9
Section 2.6. Repayments of Provider Advances......................... 10
Section 2.7. Payments to the Liquidity Provider Under the
Intercreditor Agreement................................. 11
Section 2.8. Book Entries............................................ 11
Section 2.9. Payments from Available Funds Only...................... 11
Section 2.10. Extension of the Expiry Date; Non-Extension
Advance................................................. 11
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.1. Increased Costs......................................... 12
Section 3.2. Capital Adequacy........................................ 13
Section 3.3. Payments Free of Deductions............................. 13
Section 3.4. Payments................................................ 14
Section 3.5. Computations............................................ 14
Section 3.6. Payment on Non-Business Days............................ 14
Section 3.7. Interest................................................ 14
Section 3.8. Replacement of Borrower................................. 16
Section 3.9. Funding Loss Indemnification............................ 16
Section 3.10. Illegality.............................................. 16
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1. Conditions Precedent to Effectiveness of Section
2.1..................................................... 17
Section 4.2. Conditions Precedent to Borrowing....................... 19
ARTICLE V
COVENANTS
Section 5.1. Affirmative Covenants of the Borrower................... 19
Section 5.2. Negative Covenants of the Borrower...................... 19
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
Section 6.1. Liquidity Events of Default............................. 20
ARTICLE VII
MISCELLANEOUS
Section 7.1. Amendments, Etc......................................... 20
Section 7.2. Notices, Etc............................................ 20
Section 7.3. No Waiver; Remedies..................................... 21
Section 7.4. Further Assurances...................................... 21
Section 7.5. Indemnification; Survival of Certain Provisions......... 21
Section 7.6. Liability of the Liquidity Provider..................... 22
Section 7.7. Costs, Expenses and Taxes............................... 23
Section 7.8. Binding Effect; Participations.......................... 23
Section 7.9. Severability............................................ 25
Section 7.10. GOVERNING LAW........................................... 25
Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial;
Waiver of Immunity...................................... 25
Section 7.12. Execution in Counterparts............................... 26
Section 7.13. Entirety................................................ 26
Section 7.14. Headings................................................ 26
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES........................................ 26
<PAGE>
TABLE OF CONTENTS
(Continued)
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Non-Extension Advance Notice of Borrowing
ANNEX III Downgrade Advance Notice of Borrowing
ANNEX IV Final Advance Notice of Borrowing
ANNEX V Notice of Termination
ANNEX VI Notice of Replacement Subordination Agent
</TABLE>
<PAGE>
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT dated as of September 25, 1997,
between WILMINGTON TRUST COMPANY, a Delaware corporation, not in its individual
capacity but solely as Subordination Agent under the Intercreditor Agreement
(each as defined below), as agent and trustee for the Class C Trust (as defined
below) (the "BORROWER"), and ABN AMRO BANK N.V., a bank organized under the laws
of The Netherlands, acting through its Chicago Branch ("ABN AMRO" or the
"LIQUIDITY PROVIDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Class C Trust Agreement (such term and all
other capitalized terms used in these recitals having the meanings set forth or
referred to in Section 1.1), the Class C Trust is issuing the Class C
Certificates; and
WHEREAS, the Borrower, in order to support the timely payment of a
portion of the interest on the Class C Certificates in accordance with their
terms, has requested the Liquidity Provider to enter into this Agreement,
providing in part for the Borrower to request in specified circumstances that
Advances be made hereunder.
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. CERTAIN DEFINED TERMS. (a) DEFINITIONS. As used in this
Agreement and unless otherwise expressly indicated, or unless the context
clearly requires otherwise, the following capitalized terms shall have the
following respective meanings for all purposes of this Agreement:
"ADDITIONAL COST" has the meaning assigned to such term in Section
3.1.
"ADVANCE" means an Interest Advance, a Final Advance, a Provider
Advance, an Applied Provider Advance or an Unpaid Advance, as the case may
be.
"APPLICABLE LIQUIDITY RATE" has the meaning assigned to such term in
Section 3.7(g).
"APPLICABLE MARGIN" means (w) with respect to any Unpaid Advance or
Applied Provider Advance, 2.00% or (x) with respect to any Unapplied
Provider Advance, .40%.
"APPLIED DOWNGRADE ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
<PAGE>
"APPLIED NON-EXTENSION ADVANCE" has the meaning assigned to such term
in Section 2.6(a).
"APPLIED PROVIDER ADVANCE" has the meaning assigned to such term in
Section 2.6(a).
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to (a) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected
by it, plus (b) one-quarter of one percent (1/4 of 1%).
"BASE RATE ADVANCE" means an Advance that bears interest at a rate
based upon the Base Rate.
"BORROWER" has the meaning assigned to such term in the recital of
parties to this Agreement.
"BORROWING" means the making of Advances requested by delivery of a
Notice of Borrowing.
"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 Houston,
Texas, New York, New York, Chicago, Illinois or, so long as any Class C
Certificate is outstanding, the city and state in which the Class C
Trustee, the Borrower or any Loan Trustee maintains its Corporate Trust
Office or receives or disburses funds, and, if the applicable Business Day
relates to any Advance or other amount bearing interest based on the LIBOR
Rate, on which dealings are carried on in the London interbank market.
"DOWNGRADE ADVANCE" means an Advance made pursuant to Section 2.2(c).
"EFFECTIVE DATE" has the meaning specified in Section 4.1. The
delivery of the certificate of the Liquidity Provider contemplated by
Section 4.1(e) shall be conclusive evidence that the Effective Date has
occurred.
"EXCLUDED TAXES" means (i) taxes imposed on the overall net income of
the Liquidity Provider or of its Lending Office by the jurisdiction where
such Liquidity Provider's principal office or such Lending Office is
located, and (ii) Excluded Withholding Taxes.
"EXCLUDED WITHHOLDING TAXES" means (i) withholding Taxes imposed by
the United States except to the extent that such United States withholding
<PAGE>
Taxes are imposed as a result of any change in applicable law after the
date hereof (excluding from change in applicable law for this purpose a
change in an applicable treaty or other change in law affecting the
applicability of a treaty), or in the case of a successor Liquidity
Provider (including a transferee of an Advance) or Lending Office, after
the date on which such successor Liquidity Provider obtains its interest or
on which the Lending Office is changed, and (ii) any withholding Taxes
imposed by the United States which are imposed or increased as a result of
the Liquidity Provider failing to deliver to the Borrower any certificate
or document (which certificate or document in the good faith judgment of
the Liquidity Provider it is legally entitled to provide) which is
reasonably requested by the Borrower to establish that payments under this
Agreement are exempt from (or entitled to a reduced rate of) withholding
Tax.
"EXPENSES" means liabilities, obligations, damages, settlements,
penalties, claims, actions, suits, costs, expenses, and disbursements
(including, without limitation, reasonable fees and disbursements of legal
counsel and costs of investigation), provided that Expenses shall not
include any Taxes.
"EXPIRY DATE" means September 24, 1998, initially, or any date to
which the Expiry Date is extended pursuant to Section 2.10.
"FINAL ADVANCE" means an Advance made pursuant to Section 2.2(d).
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated the
date hereof, among the Trustees, the Liquidity Provider, the liquidity
provider under each Liquidity Facility (other than this Agreement) and the
Subordination Agent, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"INTEREST ADVANCE" means an Advance made pursuant to Section 2.2(a).
"INTEREST PERIOD" means, with respect to any LIBOR Advance, each of
the following periods:
(i) the period beginning on the third Business Day following
either (x) the Liquidity Provider's receipt of the Notice of Borrowing for
such LIBOR Advance or (y) the withdrawal of funds from the Class C Cash
Collateral Account for the purpose of paying interest on the Class C
Certificates as contemplated by Section 2.6(a) hereof and, in either case,
ending on the next Regular Distribution Date; and
(ii) each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the next Regular
Distribution Date;
PROVIDED, HOWEVER, that if (x) the Final Advance shall have been made, or
(y) other outstanding Advances shall have been converted into the Final
Advance, then the Interest Periods shall be successive periods of one month
beginning on the third Business Day following the Liquidity Provider's
<PAGE>
receipt of the Notice of Borrowing for such Final Advance (in the case of
clause (x) above) or the Regular Distribution Date following such
conversion (in the case of clause (y) above).
"LENDING OFFICE" means the lending office of the Liquidity Provider
presently located at Chicago, Illinois, or such other lending office as the
Liquidity Provider from time to time shall notify the Borrower as its
lending office hereunder; provided that the Liquidity Provider shall not
change its Lending Office to a Lending Office outside the United States of
America except in accordance with Section 3.1, 3.2 or 3.3 hereof.
"LIBOR ADVANCE" means an Advance bearing interest at a rate based upon
the LIBOR Rate.
"LIBOR RATE" means, with respect to any Interest Period, the average
(rounded upward, if necessary, to the next higher 1/16 of 1%) of the rates
per annum at which deposits in dollars are offered to major banks in the
London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Advance to which such
Interest Period is to apply and for a period of time comparable to such
Interest Period.
"LIQUIDITY EVENT OF DEFAULT" means the occurrence of either (a) the
Acceleration of all of the Equipment Notes or (b) a Continental Bankruptcy
Event.
"LIQUIDITY INDEMNITEE" means (i) the Liquidity Provider, (ii) the
directors, officers, employees and agents of the Liquidity Provider, and
(iii) the successors and permitted assigns of the persons described in
clauses (i) and (ii), inclusive.
"LIQUIDITY PROVIDER" has the meaning assigned to such term in the
recital of parties to this Agreement.
"MAXIMUM AVAILABLE COMMITMENT" shall mean, subject to the proviso
contained in the third sentence of Section 2.2(a), at any time of
determination, (a) the Maximum Commitment at such time less (b) the
aggregate amount of each Interest Advance outstanding at such time;
provided that following a Provider Advance or a Final Advance, the Maximum
Available Commitment shall be zero.
"MAXIMUM COMMITMENT" means, for any day, the lesser of (x) $1,540,059
and (y) the Required Amount on such day.
"NON-EXTENSION ADVANCE" means an Advance made pursuant to Section
2.2(b).
"NOTICE OF BORROWING" has the meaning specified in Section 2.2(e).
"NOTICE OF REPLACEMENT SUBORDINATION AGENT" has the meaning specified
in Section 3.8.
<PAGE>
"PERFORMING NOTE DEFICIENCY" means any time that less than 65% of the
then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"PROSPECTUS" means the Prospectus dated July 23, 1997, as modified and
supplemented by the Prospectus Supplement dated September 12, 1997,
relating to the Certificates; and as such Prospectus may be further amended
or supplemented.
"PROVIDER ADVANCE" means a Downgrade Advance or a Non-Extension
Advance.
"REGULATORY CHANGE" has the meaning assigned to such term in Section
3.1.
"REPLENISHMENT AMOUNT" has the meaning assigned to such term in
Section 2.6(b).
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount
of interest, calculated at the rate per annum equal to the Stated Interest
Rate for the Class C Certificates, that would be payable on the Class C
Certificates on each of the six successive quarterly Regular Distribution
Dates immediately following such day or, if such day is a Regular
Distribution Date, on such day and the succeeding five quarterly Regular
Distribution Dates, in each case calculated on the basis of the Pool
Balance of the Class C Certificates on such day and without regard to
expected future payments of principal on the Class C Certificates.
"ROLLS ROYCE" means Rolls-Royce plc, a corporation organized under the
laws of England.
"TAX LETTER" means the letter dated the date hereof between the
Liquidity Provider and Rolls Royce pertaining to this Agreement.
"TERMINATION DATE" means the earliest to occur of the following: (i)
the Expiry Date; (ii) the date on which the Borrower delivers to the
Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that all of the Class C Certificates have been paid in
full (or provision has been made for such payment in accordance with the
Intercreditor Agreement and the Trust Agreements) or are otherwise no
longer entitled to the benefits of this Agreement; (iii) the date on which
the Borrower delivers to the Liquidity Provider a certificate, signed by a
Responsible Officer of the Borrower, certifying that a Replacement
Liquidity Facility has been substituted for this Agreement in full pursuant
to Section 3.6(e) of the Intercreditor Agreement; (iv) the fifth Business
Day following the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.1 hereof; and (v) the date on
which no Advance is or may (including by reason of reinstatement as herein
provided) become available for a Borrowing hereunder.
"TERMINATION NOTICE" means the Notice of Termination substantially in
the form of Annex V to this Agreement.
<PAGE>
"TRANSFEREE" has the meaning assigned to such term in Section 7.8(b).
"UNAPPLIED DOWNGRADE ADVANCE" means any Downgrade Advance other than
an Applied Downgrade Advance.
"UNAPPLIED PROVIDER ADVANCE" means any Provider Advance other than an
Applied Provider Advance.
"UNPAID ADVANCE" has the meaning assigned to such term in Section 2.5.
(b) TERMS DEFINED IN THE INTERCREDITOR AGREEMENT. For all purposes of
this Agreement, the following terms shall have the respective meanings assigned
to such terms in the Intercreditor Agreement:
"ACCELERATION," "CERTIFICATES", "CLASS A CASH COLLATERAL ACCOUNT",
"CLASS A CERTIFICATES", "CLASS A CERTIFICATEHOLDERS", "CLASS A TRUST",
"CLASS A TRUST AGREEMENT", "CLASS A TRUSTEE", "CLASS B CASH COLLATERAL
ACCOUNT", "CLASS B CERTIFICATES", "CLASS B CERTIFICATEHOLDERS", "CLASS
B TRUST", "CLASS B TRUST AGREEMENT", "CLASS B TRUSTEE", "CLASS C CASH
COLLATERAL ACCOUNT", "CLASS C CERTIFICATES", "CLASS C
CERTIFICATEHOLDERS", "CLASS C TRUST", "CLASS C TRUST AGREEMENT",
"CLASS C TRUSTEE", "CLOSING DATE", "CONTINENTAL", "CONTINENTAL
BANKRUPTCY EVENT", "CONTROLLING PARTY", "CORPORATE TRUST OFFICE",
"DELIVERY PERIOD EXPIRY DATE", "DISTRIBUTION DATE", "DOWNGRADED
FACILITY", "EQUIPMENT NOTES", "FEE LETTER", "FINANCING AGREEMENT",
"INDENTURE", "INVESTMENT EARNINGS", "LIQUIDITY FACILITY", "LOAN
TRUSTEE", "MOODY'S", "NON-EXTENDED FACILITY", "OPERATIVE AGREEMENTS",
"PERFORMING EQUIPMENT NOTE", "PERSON", "POOL BALANCE", "PURCHASE
AGREEMENT", "RATING AGENCY", "REGULAR DISTRIBUTION DATE", "REPLACEMENT
LIQUIDITY FACILITY", "RESPONSIBLE OFFICER", "SCHEDULED PAYMENT",
"SPECIAL PAYMENT", "STANDARD & POOR'S", "STATED INTEREST RATE",
"SUBORDINATION AGENT", "TAXES", "THRESHOLD RATING", "TRANSFER", "TRUST
AGREEMENTS", "TRUSTEE", "UNDERWRITERS", "UNDERWRITING AGREEMENT" and
"WRITTEN NOTICE".
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
----------------------------------
Section 2.1. THE ADVANCES. The Liquidity Provider hereby irrevocably
agrees, on the terms and conditions hereinafter set forth, to make Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless
the obligations of the Liquidity Provider shall be earlier terminated in
accordance with the terms of Section 2.4(b)) in an aggregate amount at any time
outstanding not to exceed the Maximum Commitment.
<PAGE>
Section 2.2. MAKING THE ADVANCES. Interest Advances shall be made in
one or more Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the form of Annex I
attached hereto, signed by a Responsible Officer of the Borrower, in an amount
not exceeding the Maximum Available Commitment at such time and shall be used
solely for the payment when due of the interest on the Class C Certificates at
the Stated Interest Rate therefor in accordance with Section 3.6(a) of the
Intercreditor Agreement. Each Interest Advance made hereunder shall
automatically reduce the Maximum Available Commitment and the amount available
to be borrowed hereunder by subsequent Advances by the amount of such Interest
Advance (subject to reinstatement as provided in the next sentence). Upon
repayment to the Liquidity Provider in full of the amount of any Interest
Advance made pursuant to this Section 2.2(a), together with accrued interest
thereon (as provided herein), the Maximum Available Commitment shall be
reinstated by the amount of such repaid Interest Advance, but not to exceed the
Maximum Commitment; PROVIDED, HOWEVER, that the Maximum Available Commitment
shall not be so reinstated at any time if (i) a Liquidity Event of Default shall
have occurred and be continuing and (ii) there is a Performing Note Deficiency.
2.2.1. A Non-Extension Advance shall be made in a single
Borrowing if this Agreement is not extended in accordance with Section
3.6(d) of the Intercreditor Agreement (unless a Replacement Liquidity
Facility to replace this Agreement shall have been previously
delivered to the Borrower in accordance with said Section 3.6(d)) by
delivery to the Liquidity Provider of a written and completed Notice
of Borrowing in substantially the form of Annex II attached hereto,
signed by a Responsible Officer of the Borrower, in an amount equal to
the Maximum Available Commitment at such time, and shall be used to
fund the Class C Cash Collateral Account in accordance with said
Section 3.6(d).
2.2.2. A Downgrade Advance shall be made in a single
Borrowing upon a downgrading of the Liquidity Provider's short-term
unsecured debt rating issued by either Rating Agency below the
Threshold Rating (as provided for in Section 3.6(c) of the
Intercreditor Agreement) unless a Replacement Liquidity Facility to
replace this Agreement shall have been previously delivered to the
Borrower in accordance with said Section 3.6(c), by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex III attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
C Cash Collateral Account in accordance with said Section 3.6(c).
2.2.3. A Final Advance shall be made in a single Borrowing
upon the receipt by the Borrower of a Termination Notice from the
Liquidity Provider pursuant to Section 6.1 hereof by delivery to the
Liquidity Provider of a written and completed Notice of Borrowing in
substantially the form of Annex IV attached hereto, signed by a
Responsible Officer of the Borrower, in an amount equal to the Maximum
Available Commitment at such time, and shall be used to fund the Class
C Cash Collateral Account (in accordance with Section 3.6(i) of the
Intercreditor Agreement).
<PAGE>
2.2.4. Each Borrowing shall be made on notice in writing (a
"NOTICE OF BORROWING") in substantially the form required by Section
2.2(a), 2.2(b), 2.2(c) or 2.2(d), as the case may be, given by the
Borrower to the Liquidity Provider. If a Notice of Borrowing is
delivered by the Borrower in respect of any Borrowing no later than
12:00 Noon (New York City time) on a Business Day, the Liquidity
Provider shall, upon satisfaction of the conditions precedent set
forth in Section 4.2 with respect to a requested Borrowing, before
12:00 Noon (New York City time) on the first Business Day next
following the day of receipt of such Notice of Borrowing or on such
later Business Day specified in such Notice of Borrowing, make
available to the Borrower, in accordance with its payment
instructions, in U.S. dollars and immediately available funds, the
amount of such Borrowing. If a Notice of Borrowing is delivered by the
Borrower in respect of any Borrowing after 12:00 Noon (New York City
time) on a Business Day, the Liquidity Provider shall, upon
satisfaction of the conditions precedent set forth in Section 4.2 with
respect to a requested Borrowing, before 12:00 Noon (New York City
time) on the second Business Day next following the day of receipt of
such Notice of Borrowing or on such later Business Day specified by
the Borrower in such Notice of Borrowing, make available to the
Borrower, in accordance with its payment instructions, in U.S. dollars
and in immediately available funds, the amount of such Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such
wire transfer instructions as the Borrower shall furnish from time to
time to the Liquidity Provider for such purpose. Each Notice of
Borrowing shall be irrevocable and binding on the Borrower.
2.2.5. Upon the making of any Advance requested pursuant to
a Notice of Borrowing, in accordance with the Borrower's payment
instructions, the Liquidity Provider shall be fully discharged of its
obligation hereunder with respect to such Notice of Borrowing, and the
Liquidity Provider shall not thereafter be obligated to make any
further Advances hereunder in respect of such Notice of Borrowing to
the Borrower or to any other Person. Following the making of any
Advance pursuant to Section 2.2(b), (c) or (d) hereof to fund the
Class C Cash Collateral Account, the Liquidity Provider shall have no
interest in or rights to the Class C Cash Collateral Account, such
Advance or any other amounts from time to time on deposit in the Class
C Cash Collateral Account; provided that the foregoing shall not
affect or impair the obligations of the Subordination Agent to make
the distributions contemplated by Section 3.6(e) or (f) of the
Intercreditor Agreement. By paying to the Borrower proceeds of
Advances requested by the Borrower in accordance with the provisions
of this Agreement, the Liquidity Provider makes no representation as
to, and assumes no responsibility for, the correctness or sufficiency
for any purpose of the amount of the Advances so made and requested.
Section 2.3. FEES. The Borrower agrees to pay to the Liquidity
Provider the fees set forth in the Fee Letter.
<PAGE>
Section 2.4. ADJUSTMENTS OR TERMINATION OF THE MAXIMUM COMMITMENT.
2.4.1. AUTOMATIC ADJUSTMENTS. Promptly following each date
on which the Required Amount is reduced as a result of a reduction in
the Pool Balance of the Class C Certificates or otherwise, clause (y)
of the definition of Maximum Commitment shall automatically be reduced
to an amount equal to the Required Amount (as calculated by the
Borrower). The Borrower shall give notice of any such automatic
reduction of the Maximum Commitment to the Liquidity Provider within
two Business Days thereof. The failure by the Borrower to furnish any
such notice shall not affect such automatic reduction of the Maximum
Commitment.
2.4.2. TERMINATION. Upon the making of any Provider Advance
or Final Advance hereunder or the occurrence of the Termination Date,
the obligation of the Liquidity Provider to make further Advances
hereunder shall automatically and irrevocably terminate, and the
Borrower shall not be entitled to request any further Borrowing
hereunder.
Section 2.5. REPAYMENTS OF INTEREST ADVANCES OR THE FINAL ADVANCE.
Subject to Sections 2.6, 2.7 and 2.9 hereof, the Borrower hereby agrees, without
notice of an Advance or demand for repayment from the Liquidity Provider (which
notice and demand are hereby waived by the Borrower), to pay, or to cause to be
paid, to the Liquidity Provider on each date on which the Liquidity Provider
shall make an Interest Advance or the Final Advance, an amount equal to (a) the
amount of such Advance (any such Advance, until repaid, is referred to herein as
an "UNPAID ADVANCE"), plus (b) interest on the amount of each such Unpaid
Advance as provided in Section 3.7 hereof; PROVIDED that if (i) the Liquidity
Provider shall make a Provider Advance at any time after making one or more
Interest Advances which shall not have been repaid in accordance with this
Section 2.5 or (ii) this Liquidity Facility shall become a Downgraded Facility
or Non-Extended Facility at any time when unreimbursed Interest Advances have
reduced the Maximum Available Commitment to zero, then such Interest Advances
shall cease to constitute Unpaid Advances and shall be deemed to have been
changed into an Applied Downgrade Advance or an Applied Non-Extension Advance,
as the case may be, for all purposes of this Agreement (including, without
limitation, for the purpose of determining when such Interest Advance is
required to be repaid to the Liquidity Provider in accordance with Section 2.6
and for the purposes of Section 2.6(b)). The Borrower and the Liquidity Provider
agree that the repayment in full of each Interest Advance and Final Advance on
the date such Advance is made is intended to be a contemporaneous exchange for
new value given to the Borrower by the Liquidity Provider.
Section 2.6. REPAYMENTS OF PROVIDER ADVANCES.
2.6.1. Amounts advanced hereunder in respect of a Provider
Advance shall be deposited in the Class C Cash Collateral Account,
invested and withdrawn from the Class C Cash Collateral Account as set
forth in Sections 3.6(c), (d) and (f) of the Intercreditor Agreement.
<PAGE>
The Borrower agrees to pay to the Liquidity Provider, on each Regular
Distribution Date, commencing on the first Regular Distribution Date
after the making of a Provider Advance, interest on the principal
amount of any such Provider Advance as provided in Section 3.7;
PROVIDED, HOWEVER, that amounts in respect of a Provider Advance
withdrawn from the Class C Cash Collateral Account for the purpose of
paying interest on the Class C Certificates in accordance with Section
3.6(f) of the Intercreditor Agreement (the amount of any such
withdrawal being (y) in the case of a Downgrade Advance, an "APPLIED
DOWNGRADE ADVANCE" and (z) in the case of a Non-Extension Advance, an
"APPLIED NON-EXTENSION ADVANCE" and, together with an Applied
Downgrade Advance, an "APPLIED PROVIDER ADVANCE") shall thereafter
(subject to Section 2.6(b)) be treated as an Interest Advance under
this Agreement for purposes of determining the Applicable Liquidity
Rate for interest payable thereon; PROVIDED FURTHER, HOWEVER, that if,
following the making of a Provider Advance, the Liquidity Provider
delivers a Termination Notice to the Borrower pursuant to Section 6.1
hereof, such Provider Advance shall thereafter be treated as a Final
Advance under this Agreement for purposes of determining the
Applicable Liquidity Rate for interest payable thereon. Subject to
Sections 2.7 and 2.9 hereof, immediately upon the withdrawal of any
amounts from the Class C Cash Collateral Account on account of a
reduction in the Required Amount, the Borrower shall repay to the
Liquidity Provider a portion of the Provider Advances in a principal
amount equal to the amount of such reduction, plus interest on the
principal amount prepaid as provided in Section 3.7 hereof.
2.6.2. At any time when an Applied Provider Advance (or any
portion thereof) is outstanding, upon the deposit in the Class C Cash
Collateral Account of any amount pursuant to clause "THIRD" of Section
2.4(b) of the Intercreditor Agreement, clause "THIRD" of Section 3.2
of the Intercreditor Agreement or clause "FOURTH" of Section 3.3 of
the Intercreditor Agreement (any such amount being a "REPLENISHMENT
AMOUNT") for the purpose of replenishing or increasing the balance
thereof up to the Required Amount at such time, (i) the aggregate
outstanding principal amount of all Applied Provider Advances (and of
Provider Advances treated as an Interest Advance for purposes of
determining the Applicable Liquidity Rate for interest payable
thereon) shall be automatically reduced by the amount of such
Replenishment Amount and (ii) the aggregate outstanding principal
amount of all Unapplied Provider Advances shall be automatically
increased by the amount of such Replenishment Amount.
2.6.3. Upon the provision of a Replacement Liquidity
Facility in replacement of this Agreement in accordance with Section
3.6(e) of the Intercreditor Agreement, amounts remaining on deposit in
the Class C Cash Collateral Account after giving effect to any Applied
Provider Advance on the date of such replacement shall be reimbursed
to the Liquidity Provider, but only to the extent such amounts are
necessary to repay in full to the Liquidity Provider all amounts owing
to it hereunder.
<PAGE>
Section 2.7. PAYMENTS TO THE LIQUIDITY PROVIDER UNDER THE
INTERCREDITOR AGREEMENT. In order to provide for payment or repayment to the
Liquidity Provider of any amounts hereunder, the Intercreditor Agreement
provides that amounts available and referred to in Articles II and III of the
Intercreditor Agreement, to the extent payable to the Liquidity Provider
pursuant to the terms of the Intercreditor Agreement (including, without
limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the
Liquidity Provider in accordance with the terms thereof. Amounts so paid to the
Liquidity Provider shall be applied by the Liquidity Provider to Liquidity
Obligations then due and payable in accordance with the Intercreditor Agreement
or, if not provided for in the Intercreditor Agreement, then in such manner as
the Liquidity Provider shall deem appropriate.
Section 2.8. BOOK ENTRIES. The Liquidity Provider shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower resulting from Advances made from time to time and
the amounts of principal and interest payable hereunder and paid from time to
time in respect thereof; PROVIDED, HOWEVER, that the failure by the Liquidity
Provider to maintain such account or accounts shall not affect the obligations
of the Borrower in respect of Advances.
Section 2.9. PAYMENTS FROM AVAILABLE FUNDS ONLY. All payments to be
made by the Borrower under this Agreement shall be made only from the amounts
that constitute Scheduled Payments, Special Payments or payments under Section
9.1 of the Participation Agreements and only to the extent that the Borrower
shall have sufficient income or proceeds therefrom to enable the Borrower to
make payments in accordance with the terms hereof after giving effect to the
priority of payments provisions set forth in the Intercreditor Agreement. The
Liquidity Provider agrees that it will look solely to such amounts to the extent
available for distribution to it as provided in the Intercreditor Agreement and
this Agreement and that the Borrower, in its individual capacity, is not
personally liable to it for any amounts payable or liability under this
Agreement except as expressly provided in this Agreement, the Intercreditor
Agreement or any Participation Agreement. Amounts on deposit in the Class C Cash
Collateral Account shall be available to the Borrower to make payments under
this Agreement only to the extent and for the purposes expressly contemplated in
Section 3.6(f) of the Intercreditor Agreement.
Section 2.10. EXTENSION OF THE EXPIRY DATE; NON-EXTENSION ADVANCE. No
earlier than the 60th day and no later than the 40th day prior to the then
effective Expiry Date (unless such Expiry Date is on or after the date that is
15 days after the Final Maturity Date for the Class C Certificates), the
Borrower shall request that the Liquidity Provider extend the Expiry Date for a
period of 364 days after the then effective Expiry Date (unless the obligations
of the Liquidity Provider are earlier terminated in accordance with the terms
hereof). The Liquidity Provider shall advise the Borrower, no earlier than 40
days and no later than 25 days prior to the then effective Expiry Date, whether,
in its sole discretion, it agrees to so extend the Expiry Date. If the Liquidity
Provider advises the Borrower on or before the 25th day prior to the Expiry Date
then in effect that such Expiry Date shall not be so extended, or fails to
irrevocably and unconditionally advise the Borrower on or before the 25th day
prior to the Expiry Date then in effect that such Expiry Date shall be so
extended (and, in each case, if the Liquidity Provider shall not have been
<PAGE>
replaced in accordance with Section 3.6(e) of the Intercreditor Agreement), the
Borrower shall be entitled on and after such 25th day (but prior to the then
effective Expiry Date) to request a Non-Extension Advance in accordance with
Section 2.2(b) hereof and Section 3.6(d) of the Intercreditor Agreement.
ARTICLE III
OBLIGATIONS OF THE BORROWER
---------------------------
Section 3.1. INCREASED COSTS. Subject to the Fee Letter, the Borrower
shall pay to the Liquidity Provider from time to time such amounts as may be
necessary to compensate the Liquidity Provider for any increased costs incurred
by the Liquidity Provider which are attributable to its making or maintaining
any LIBOR Advances hereunder or its obligation to make any such Advances
hereunder, or any reduction in any amount receivable by the Liquidity Provider
under this Agreement or the Intercreditor Agreement in respect of any such
Advances or such obligation (such increases in costs and reductions in amounts
receivable being herein called "ADDITIONAL COSTS"), resulting from any change
after the date of this Agreement in U.S. federal, state, municipal, or foreign
laws or regulations (including Regulation D), or the adoption or making after
the date of this Agreement of any interpretations, directives, or requirements
applying to a class of banks including the Liquidity Provider under any U.S.
federal, state, municipal, or any foreign laws or regulations (whether or not
having the force of law) by any court, central bank or monetary authority
charged with the interpretation or administration thereof (a "REGULATORY
CHANGE"), which: (1) changes the basis of taxation of any amounts payable to the
Liquidity Provider under this Agreement in respect of any such Advances (other
than Excluded Taxes); or (2) imposes or modifies any reserve, special deposit,
compulsory loan or similar requirements relating to any extensions of credit or
other assets of, or any deposits with other liabilities of, the Liquidity
Provider (including any such Advances or any deposits referred to in the
definition of LIBOR Rate or related definitions). The Liquidity Provider agrees
to use reasonable efforts (consistent with applicable legal and regulatory
restrictions) to change the jurisdiction of its Lending Office if making such
change would avoid the need for, or reduce the amount of, any amount payable
under this Section 3.1 that may thereafter accrue and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to
the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.1 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.1 of the effect of any Regulatory Change on its costs of making
or maintaining Advances or on amounts receivable by it in respect of Advances,
and of the additional amounts required to compensate the Liquidity Provider in
respect of any Additional Costs, shall be prima facie evidence of the amount
owed under this Section.
<PAGE>
Section 3.2. CAPITAL ADEQUACY. Subject to the Fee Letter, if (1) the
adoption, after the date hereof, of any applicable governmental law, rule or
regulation regarding capital adequacy, (2) any change, after the date hereof, in
the interpretation or administration of any such law, rule or regulation by any
central bank or other governmental authority charged with the interpretation or
administration thereof or (3) compliance by the Liquidity Provider or any
corporation controlling the Liquidity Provider with any applicable guideline or
request of general applicability, issued after the date hereof, by any central
bank or other governmental authority (whether or not having the force of law)
that constitutes a change of the nature described in clause (2), has the effect
of requiring an increase in the amount of capital required to be maintained by
the Liquidity Provider or any corporation controlling the Liquidity Provider,
and such increase is based upon the Liquidity Provider's obligations hereunder
and other similar obligations, the Borrower shall pay to the Liquidity Provider
from time to time such additional amount or amounts as are necessary to
compensate the Liquidity Provider for such portion of such increase as shall be
reasonably allocable to the Liquidity Provider's obligations to the Borrower
hereunder. The Liquidity Provider agrees to use reasonable efforts (consistent
with applicable legal and regulatory restrictions) to change the jurisdiction of
its Lending Office if making such change would avoid the need for, or reduce the
amount of, any amount payable under this Section that may thereafter accrue and
would not, in the reasonable judgment of the Liquidity Provider, be otherwise
materially disadvantageous to the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.2 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.2 of the effect of any increase in the amount of capital required
to be maintained by the bank and of the amount allocable to the Liquidity
Provider's obligations to the Borrower hereunder shall be prima facie evidence
of the amounts owed under this Section.
Section 3.3. PAYMENTS FREE OF DEDUCTIONS. All payments made by the
Borrower under this Agreement shall be made free and clear of, and without
reduction for or on account of, any present or future stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever now or hereafter imposed, levied,
collected, withheld or assessed, excluding Excluded Taxes (such non-excluded
taxes being referred to herein, collectively, as "Non-Excluded Taxes" and,
individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider under this
Agreement, the amounts so payable to the Liquidity Provider shall be increased
to the extent necessary to yield to the Liquidity Provider (after payment of all
Non-Excluded Taxes) interest or any other such amounts payable under this
Agreement at the rates or in the amounts specified in this Agreement. The
Liquidity Provider agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if making such change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the reasonable judgment of the Liquidity Provider, be
otherwise disadvantageous to the Liquidity Provider. From time to time upon the
<PAGE>
reasonable request of the Borrower, the Liquidity Provider agrees to provide to
the Borrower two original Internal Revenue Service Forms 1001 or 4224, as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that the Liquidity Provider is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement.
Section 3.4. PAYMENTS. The Borrower shall make or cause to be made
each payment to the Liquidity Provider under this Agreement so as to cause the
same to be received by the Liquidity Provider not later than 1:00 P.M. (New York
City time) on the day when due. The Borrower shall make all such payments in
lawful money of the United States of America, to the Liquidity Provider in
immediately available funds, by wire transfer to ABN AMRO Bank N.V., New York,
NY, ABA # 026009580, Account Name: ABN AMRO Bank, N.V. - Chicago Branch, Account
# 650-001-1789-41, Reference: Continental Airlines, Inc. Pass Through Trust
1997-3C.
Section 3.5. COMPUTATIONS. All computations of interest based on the
Base Rate shall be made on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the LIBOR Rate shall be made
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
Section 3.6. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and no additional
interest shall be due as a result (and if so made, shall be deemed to have been
made when due). If any payment in respect of interest on an Advance is so
deferred to the next succeeding Business Day, such deferral shall not delay the
commencement of the next Interest Period for such Advance or reduce the number
of days for which interest will be payable on such Advance on the next interest
payment date for such Advance.
Section 3.7. INTEREST. Subject to Section 2.9, the Borrower shall pay,
or shall cause to be paid, without duplication, interest on (i) the unpaid
principal amount of each Advance from and including the date of such Advance
(or, in the case of an Applied Provider Advance, from and including the date on
which the amount thereof was withdrawn from the Class C Cash Collateral Account
to pay interest on the Class C Certificates) to but excluding the date such
principal amount shall be paid in full (or, in the case of an Applied Provider
Advance, the date on which the Class C Cash Collateral Account is fully
replenished in respect of such Advance) and (ii) any other amount due hereunder
(whether fees, commissions, expenses or other amounts or, to the extent
permitted by law, installments of interest on Advances or any such other amount)
which is not paid when due (whether at stated maturity, by acceleration or
otherwise) from and including the due date thereof to but excluding the date
such amount is paid in full, in each such case, at a fluctuating interest rate
per annum for each day equal to the Applicable Liquidity Rate (as defined below)
for such Advance or such other amount as in effect for such day, but in no event
at a rate per annum greater than the maximum rate permitted by applicable law;
PROVIDED, HOWEVER, that, if at any time the otherwise applicable interest rate
as set forth in this Section 3.7 shall exceed the maximum rate permitted by
applicable law, then any subsequent reduction in such interest rate will not
<PAGE>
reduce the rate of interest payable pursuant to this Section 3.7 below the
maximum rate permitted by applicable law until the total amount of interest
accrued equals the amount of interest that would have accrued if such otherwise
applicable interest rate as set forth in this Section 3.7 had at all times been
in effect.
Except as provided in clause (e) below, each Advance will be either a
Base Rate Advance or a LIBOR Advance as provided in this Section. Each Advance
will be a Base Rate Advance for the period from the date of its borrowing to
(but excluding) the third Business Day following the Liquidity Provider's
receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance
shall be a LIBOR Advance; provided that the Borrower (at the direction of the
Controlling Party, so long as the Liquidity Provider is not the Controlling
Party) may (x) convert the Final Advance into a Base Rate Advance on the last
day of an Interest Period for such Advance by giving the Liquidity Provider no
less than four Business Days' prior written notice of such election or (y) elect
to maintain the Final Advance as Base Rate Advance by not requesting a
conversion of the Final Advance to a LIBOR Advance under Clause (5) of the
applicable Notice of Borrowing.
Each LIBOR Advance shall bear interest during each Interest Period at
a rate per annum equal to the LIBOR Rate for such Interest Period plus the
Applicable Margin for such LIBOR Advance, payable in arrears on the last day of
such Interest Period and, in the event of the payment of principal of such LIBOR
Advance on a day other than such last day, on the date of such payment (to the
extent of interest accrued on the amount of principal repaid).
Each Base Rate Advance shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable
in arrears on each Regular Distribution Date and, in the event of the payment of
principal of such Base Rate Advance on a day other than a Regular Distribution
Date, on the date of such payment (to the extent of interest accrued on the
amount of principal repaid).
Each Unapplied Provider Advance (i) during the period from and
including the date of the making of such Unapplied Provider Advance through but
excluding the date of repayment thereof or of conversion thereof into a Final
Advance or Applied Provider Advance (and for any additional periods of time
during which such Advance no longer constitutes an Applied Provider Advance but
again constitutes an Unapplied Provider Advance pursuant to Sections 2.6(a) and
(b) hereof), shall bear interest in an amount equal to the Investment Earnings
on amounts on deposit in the Class C Cash Collateral Account for such period
plus the Applicable Margin on the amount of such Unapplied Provider Advance from
time to time during such period, payable in arrears on each Regular Distribution
Date and (ii) after conversion thereof into a Final Advance or Applied Provider
Advance (but only for such period of time during which such Advance constitutes
an Applied Provider Advance pursuant to Sections 2.6(a) and (b) hereof), as the
case may be, shall be a LIBOR Advance and shall bear interest in accordance with
clause (c) above.
Each amount not paid when due hereunder (whether fees, commissions,
expenses or other amounts or, to the extent permitted by applicable law,
<PAGE>
installments of interest on Advances but excluding Advances) shall bear interest
at a rate per annum equal to the Base Rate plus 2.00% until paid.
Each change in the Base Rate shall become effective immediately. The
rates of interest specified in this Section 3.7 with respect to any Advance or
other amount shall be referred to as the "APPLICABLE LIQUIDITY RATE".
Section 3.8. REPLACEMENT OF BORROWER. From time to time and subject to
the successor Borrower's meeting the eligibility requirements set forth in
Section 6.9 of the Intercreditor Agreement applicable to the Subordination Agent
upon the effective date and time specified in a written and completed Notice of
Replacement Subordination Agent in substantially the form of Annex VI attached
hereto (a "NOTICE OF REPLACEMENT SUBORDINATION AGENT") delivered to the
Liquidity Provider by the then Borrower, the successor Borrower designated
therein shall be substituted for as the Borrower for all purposes hereunder.
Section 3.9. FUNDING LOSS INDEMNIFICATION. The Borrower shall pay to
the Liquidity Provider, upon the request of the Liquidity Provider, such amount
or amounts as shall be sufficient (in the reasonable opinion of the Liquidity
Provider) to compensate it for any loss, cost, or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired by the
Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of
anticipated profits) incurred as a result of:
(a) Any repayment of a LIBOR Advance on a date other than the last day
of the Interest Period for such Advance; or
(b) Any failure by the Borrower to borrow a LIBOR Advance on the date
for borrowing specified in the relevant notice under Section 2.2.
Section 3.10. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Liquidity Provider (or its Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for the Liquidity Provider (or its Lending Office) to maintain or
fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity
Provider, the outstanding principal amount of the LIBOR Advances shall be
converted to Base Rate Advances (a) immediately upon demand of the Liquidity
Provider, if such change or compliance with such request, in the judgment of the
Liquidity Provider, requires immediate repayment; or (b) at the expiration of
the last Interest Period to expire before the effective date of any such change
or request.
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
Section 4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTION 2.1.
Section 2.1 of this Agreement shall become effective on and as of the first date
(the "EFFECTIVE DATE") on which the following conditions precedent have been
satisfied or waived:
4.1.1. The Liquidity Provider shall have received on or
before the Closing Date each of the following, and in the case of each
document delivered pursuant to paragraphs (i), (ii) and (iii), each in
form and substance satisfactory to the Liquidity Provider:
(i) This Agreement duly executed on behalf of the
Borrower;
(ii) The Intercreditor Agreement duly executed on
behalf of each of the parties thereto;
(iii) Fully executed copies of each of the Operative
Agreements executed and delivered on or before the Closing Date
(other than this Agreement and the Intercreditor Agreement);
(iv) A copy of the Prospectus and specimen copies of
the Class C Certificates;
(v) An executed copy of each document, instrument,
certificate and opinion delivered on or before the Closing Date
pursuant to the Class C Trust Agreement, the Intercreditor
Agreement and the other Operative Agreements (together with, in
the case of each such opinion, other than the opinion of counsel
for the Underwriters, a letter from the counsel rendering such
opinion to the effect that the Liquidity Provider is entitled to
rely on such opinion as of its date as if it were addressed to
the Liquidity Provider);
(v) Evidence that there shall have been made and shall
be in full force and effect, all filings, recordings and/or
registrations, and there shall have been given or taken any
notice or other similar action as may be reasonably necessary or,
to the extent reasonably requested by the Liquidity Provider,
reasonably advisable, in order to establish, perfect, protect and
preserve the right, title and interest, remedies, powers,
privileges, liens and security interests of, or for the benefit
of, the Trustees, the Borrower and the Liquidity Provider created
by the Operative Agreements executed and delivered on or prior to
the Closing Date;
<PAGE>
(vi) An agreement from Continental, pursuant to which
(i) Continental agrees to provide copies of quarterly financial
statements and audited annual financial statements to the
Liquidity Provider, and such other information as the Liquidity
Provider shall reasonably request with respect to the
transactions contemplated by the Operative Agreements, in each
case, only to the extent that Continental is obligated to provide
such information pursuant to Section 8.2.1 of the Leases to the
parties thereto and (ii) Continental agrees to allow the
Liquidity Provider to inspect Continental's books and records
regarding such transactions, and to discuss such transactions
with officers and employees of Continental; and
(vii) Such other documents, instruments, opinions and
approvals as the Liquidity Provider shall have reasonably
requested.
4.1.2. The following statement shall be true on and as of
the Effective Date: no event has occurred and is continuing, or would
result from the entering into of this Agreement or the making of any
Advance, which constitutes a Liquidity Event of Default.
4.1.3. The Liquidity Provider shall have received payment in
full of all fees and other sums required to be paid to or for the
account of the Liquidity Provider on or prior to the Effective Date.
4.1.4. All conditions precedent to the issuance of the
Certificates under the Trust Agreements shall have been satisfied, all
conditions precedent to the effectiveness of the other Liquidity
Facilities shall have been satisfied, and all conditions precedent to
the purchase of the Certificates by the Underwriters under the
Underwriting Agreement shall have been satisfied (unless any of such
conditions precedent shall have been waived by the Underwriters).
4.1.5. The Borrower shall have received a certificate, dated
the date hereof, signed by a duly authorized representative of the
Liquidity Provider, certifying that all conditions precedent to the
effectiveness of Section 2.1 have been satisfied or waived.
Section 4.2. CONDITIONS PRECEDENT TO BORROWING. The obligation of the
Liquidity Provider to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and, prior to the date of such Borrowing, the Borrower shall have delivered a
Notice of Borrowing which conforms to the terms and conditions of this Agreement
and has been completed as may be required by the relevant form of the Notice of
Borrowing for the type of Advances requested.
<PAGE>
ARTICLE V
COVENANTS
---------
Section 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity
Provider shall otherwise consent in writing:
5.1.1. PERFORMANCE OF THIS AND OTHER AGREEMENTS. Punctually
pay or cause to be paid all amounts payable by it under this Agreement
and the other Operative Agreements and observe and perform in all
material respects the conditions, covenants and requirements
applicable to it contained in this Agreement and the other Operative
Agreements.
5.1.2. REPORTING REQUIREMENTS. Furnish to the Liquidity
Provider with reasonable promptness, such other information and data
with respect to the transactions contemplated by the Operative
Agreements as from time to time may be reasonably requested by the
Liquidity Provider; and permit the Liquidity Provider, upon reasonable
notice, to inspect the Borrower's books and records with respect to
such transactions and to meet with officers and employees of the
Borrower to discuss such transactions.
5.1.3 CERTAIN OPERATIVE AGREEMENTS. Furnish to the Liquidity
Provider with reasonable promptness, such Operative Agreements entered
into after the date hereof as from time to time may be reasonably
requested by the Liquidity Provider.
Section 5.2. NEGATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will not appoint or permit or
suffer to be appointed any successor Borrower without the written consent of the
Liquidity Provider, which consent shall not be unreasonably withheld or delayed.
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT
---------------------------
Section 6.1. LIQUIDITY EVENTS OF DEFAULT. If (a) any Liquidity Event
of Default has occurred and is continuing and (b) there is a Performing Note
Deficiency, the Liquidity Provider may, in its discretion, deliver to the
Borrower a Termination Notice, the effect of which shall be to cause (i) this
Agreement to expire on the fifth Business Day after the date on which such
Termination Notice is received by the Borrower, (ii) the Borrower to promptly
request, and the Liquidity Provider to promptly make, a Final Advance in
accordance with Section 2.2(d) hereof and Section 3.6(i) of the Intercreditor
Agreement, (iii) all other outstanding Advances to be automatically converted
<PAGE>
into Final Advances for purposes of determining the Applicable Liquidity Rate
for interest payable thereon, and (iv) subject to Sections 2.7 and 2.9 hereof,
all Advances (including, without limitation, any Provider Advance and Applied
Provider Advance), any accrued interest thereon and any other amounts
outstanding hereunder to become immediately due and payable to the Liquidity
Provider.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Liquidity Provider, and, in the case of an amendment or of a waiver by the
Borrower, the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 7.2. NOTICES, ETC. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telecopier and mailed or delivered or sent by telecopier):
Borrower: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Telephone: (302) 651-1000
Telecopy: (302) 651-8882
Liquidity Provider: ABN AMRO BANK N.V.
Aerospace Department
135 South LaSalle Street, #820
Chicago, IL 60674-9135
Attention: Claudia Heldring, V.P.
Telephone: (312) 904-5031
Telecopy: (312) 606-8428
<PAGE>
with a copy to:
ABN AMRO Bank N.V.
135 South LaSalle St., #625
Chicago, IL 60674-9135
Attention: Loan Operations
Telephone: (312) 904-2961
Telecopy: (312) 606-6893
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above, (ii) if given by mail, when deposited
in the mails addressed as specified above, and (iii) if given by other means,
when delivered at the address specified above, except that written notices to
the Liquidity Provider pursuant to the provisions of Articles II and III hereof
shall not be effective until received by the Liquidity Provider. A copy of all
notices delivered hereunder to either party shall in addition be delivered to
each of the parties to the Participation Agreements at their respective
addresses set forth therein.
Section 7.3. NO WAIVER; REMEDIES. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 7.4. FURTHER ASSURANCES. The Borrower agrees to do such
further acts and things and to execute and deliver to the Liquidity Provider
such additional assignments, agreements, powers and instruments as the Liquidity
Provider may reasonably require or deem advisable to carry into effect the
purposes of this Agreement and the other Operative Agreements or to better
assure and confirm unto the Liquidity Provider its rights, powers and remedies
hereunder and under the other Operative Agreements.
Section 7.5. INDEMNIFICATION; SURVIVAL OF CERTAIN PROVISIONS. The
Liquidity Provider shall be indemnified hereunder to the extent and in the
manner described in Section 9.1 of the Participation Agreements. In addition,
the Borrower agrees to indemnify, protect, defend and hold harmless the
Liquidity Provider from, against and in respect of, and shall pay on demand, all
Expenses of any kind or nature whatsoever (other than any Expenses of the nature
described in Sections 3.1, 3.2 or 7.7 hereof or in the Fee Letter (regardless of
whether indemnified against pursuant to said Sections or in such Fee Letter)),
that may be imposed, incurred by or asserted against any Liquidity Indemnitee,
in any way relating to, resulting from, or arising out of or in connection with
any action, suit or proceeding by any third party against such Liquidity
Indemnitee and relating to this Agreement, the Fee Letter, the Intercreditor
Agreement or any Financing Agreement; PROVIDED, HOWEVER, that the Borrower shall
not be required to indemnify, protect, defend and hold harmless any Liquidity
Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent
such Expense is (i) attributable to the gross negligence or willful misconduct
<PAGE>
of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary
and usual operating overhead expense, or (iii) attributable to the failure by
such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or
observe any agreement, covenant or condition on its part to be performed or
observed in this Agreement, the Intercreditor Agreement, the Fee Letter, the Tax
Letter or any other Operative Agreement to which it is a party. The indemnities
contained in such Section 9.1, and the provisions of Sections 3.1, 3.2, 3.3,
3.9, 7.5 and 7.7 hereof, shall survive the termination of this Agreement.
Section 7.6. LIABILITY OF THE LIQUIDITY PROVIDER.OVIDER
7.6.1. Neither the Liquidity Provider nor any of its
officers, employees, directors or affiliates shall be liable or
responsible for: (i) the use which may be made of the Advances or any
acts or omissions of the Borrower or any beneficiary or transferee in
connection therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; or (iii) the making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other documents
which do not comply with the terms hereof; PROVIDED, HOWEVER, that the
Borrower shall have a claim against the Liquidity Provider, and the
Liquidity Provider shall be liable to the Borrower, to the extent of
any damages suffered by the Borrower which were the result of (A) the
Liquidity Provider's willful misconduct or negligence in determining
whether documents presented hereunder comply with the terms hereof, or
(B) any breach by the Liquidity Provider of any of the terms of this
Agreement, including, but not limited to, the Liquidity Provider's
failure to make lawful payment hereunder after the delivery to it by
the Borrower of a Notice of Borrowing strictly complying with the
terms and conditions hereof.
7.6.2. Neither the Liquidity Provider nor any of its
officers, employees, director or affiliates shall be liable or
responsible in any respect for (i) any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with this Agreement or any
Notice of Borrowing delivered hereunder, or (ii) any action, inaction
or omission which may be taken by it in good faith, absent willful
misconduct or negligence (in which event the extent of the Liquidity
Provider's potential liability to the Borrower shall be limited as set
forth in the immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing.
Section 7.7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay, or
cause to be paid (A) on the Effective Date and on such later date or dates on
which the Liquidity Provider shall make demand, all reasonable out-of-pocket
costs and expenses (including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider) of the Liquidity
Provider in connection with the preparation, negotiation, execution, delivery,
filing and recording of this Agreement, any other Operative Agreement and any
<PAGE>
other documents which may be delivered in connection with this Agreement and (B)
on demand, all reasonable costs and expenses (including reasonable counsel fees
and expenses) of the Liquidity Provider in connection with (i) the enforcement
of this Agreement or any other Operative Agreement, (ii) the modification or
amendment of, or supplement to, this Agreement or any other Operative Agreement
or such other documents which may be delivered in connection herewith or
therewith (whether or not the same shall become effective) or (iii) any action
or proceeding relating to any order, injunction, or other process or decree
restraining or seeking to restrain the Liquidity Provider from paying any amount
under this Agreement, the Intercreditor Agreement or any other Operative
Agreement or otherwise affecting the application of funds in the Cash Collateral
Accounts. In addition, the Borrower shall pay any and all recording, stamp and
other similar taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing and recording of this Agreement, any other
Operative Agreement and such other documents, and agrees to save the Liquidity
Provider harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
Section 7.8. BINDING EFFECT; PARTICIPATIONS.
7.8.1. This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Liquidity Provider and their
respective successors and assigns, except that neither the Liquidity
Provider (except as otherwise provided in this Section 7.8) nor
(except as contemplated by Section 3.8) the Borrower shall have the
right to assign its rights or obligations hereunder or any interest
herein without the prior written consent of the other party, subject
to the requirements of Section 7.8(b). The Liquidity Provider may
grant participations herein or in any of its rights hereunder
(including, without limitation, funded participations and
participations in rights to receive interest payments hereunder) and
under the other Operative Agreements to such Persons as the Liquidity
Provider may in its sole discretion select, subject to the
requirements of Section 7.8(b). No such participation by the Liquidity
Provider, however, will relieve the Liquidity Provider of its
obligations hereunder. In connection with any participation or any
proposed participation, the Liquidity Provider may disclose to the
participant or the proposed participant any information that the
Borrower is required to deliver or to disclose to the Liquidity
Provider pursuant to this Agreement. The Borrower acknowledges and
agrees that the Liquidity Provider's source of funds may derive in
part from its participants (other than Continental). Accordingly,
references in this Agreement and the other Operative Agreements to
determinations, reserve and capital adequacy requirements, increased
costs, reduced receipts, additional amounts due pursuant to Section
3.3(a) and the like as they pertain to the Liquidity Provider shall be
deemed also to include those of each of its participants (subject, in
each case, to the maximum amount that would have been incurred by or
attributable to the Liquidity Provider directly if the Liquidity
Provider, rather than the participant, had held the interest
participated).
7.8.2. If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation in this Agreement to any bank or
<PAGE>
other entity (each, a "TRANSFEREE"), then, concurrently with the
effectiveness of such participation, the Transferee shall (i)
represent to the Liquidity Provider (for the benefit of the Liquidity
Provider and the Borrower) either (A) that it is incorporated under
the laws of the United States or a state thereof or (B) that under
applicable law and treaties, no taxes will be required to be withheld
with respect to any payments to be made to such Transferee in respect
of this Agreement, (ii) furnish to the Liquidity Provider and the
Borrower either (x) a statement that it is incorporated under the laws
of the United States or a state thereof or (y) if it is not so
incorporated, two copies of a properly completed United States
Internal Revenue Service Form 4224 or Form 1001, as appropriate, or
other applicable form, certificate or document prescribed by the
Internal Revenue Service certifying, in each case, such Transferee's
entitlement to a complete exemption from United States federal
withholding tax in respect to any and all payments to be made
hereunder, and (iii) agree (for the benefit of the Liquidity Provider
and the Borrower) to provide the Liquidity Provider and the Borrower a
new Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent form
previously delivered by it and prior to the immediately following due
date of any payment by the Borrower hereunder, certifying in the case
of a Form 1001 or Form 4224 that such Transferee is entitled to a
complete exemption from United States federal withholding tax on
payments under this Agreement. Unless the Borrower has received forms
or other documents reasonably satisfactory to it (and required by
applicable law) indicating that payments hereunder are not subject to
United States federal withholding tax, the Borrower will withhold
taxes as required by law from such payments at the applicable
statutory rate.
7.8.3. Notwithstanding the other provisions of this Section
7.8, the Liquidity Provider may assign and pledge all or any portion
of the Advances owing to it to any Federal Reserve Bank or the United
States Treasury as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating
Circular issued by such Federal Reserve Bank, provided that any
payment in respect of such assigned Advances made by the Borrower to
the Liquidity Provider in accordance with the terms of this Agreement
shall satisfy the Borrower's obligations hereunder in respect of such
assigned Advance to the extent of such payment. No such assignment
shall release the Liquidity Provider from its obligations hereunder.
Section 7.9. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
<PAGE>
Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 7.11. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF IMMUNITY.
7.11.1. Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal
action or proceeding relating to this Agreement or any other
Operative Agreement, or for recognition and enforcement of any
judgment in respect hereof or thereof, to the nonexclusive
general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District
of New York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be
brought in such courts, and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same;
(iii) agrees that service of process in any such action
or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to each party hereto at its address
set forth in Section 7.2 hereof, or at such other address of
which the Liquidity Provider shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right
to effect service of process in any other manner permitted by law
or shall limit the right to sue in any other jurisdiction.
7.11.2. THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without
limitation, contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. The Borrower and the
Liquidity Provider each warrant and represent that it has reviewed
this waiver with its legal counsel, and that it knowingly and
voluntarily waives its jury trial rights following consultation with
such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
<PAGE>
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
7.11.3. The Liquidity Provider hereby waives any immunity it
may have from the jurisdiction of the courts of the United States or
of any State and waives any immunity any of its properties located in
the United States may have from attachment or execution upon a
judgement entered by any such court under the United States Foreign
Sovereign Immunities Act of 1976 or any similar successor legislation.
Section 7.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 7.13. ENTIRETY. This Agreement, the Intercreditor Agreement
and the other Operative Agreements to which the Liquidity Provider is a party
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings and agreements of
such parties.
Section 7.14. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY
PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER
NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first set forth above.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as agent and
trustee for the Class C Trust, as
Borrower
By:_______________________________________
Name:
Title:
ABN AMRO BANK N.V., acting through its
Chicago Branch, as Liquidity Provider
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
<PAGE>
Annex I to
Revolving Credit Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO N.V., Chicago Branch
(the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit Agreement
(1997-3C) dated as of September 25, 1997, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of an Interest Advance by the Liquidity Provider to be used for the payment of
the interest on the Class C Certificates which was payable on _______________
(the "DISTRIBUTION DATE") in accordance with the terms and provisions of the
Class C Trust Agreement and the Class C Certificates, which Advance is requested
to be made on _________________.
(c) The amount of the Interest Advance requested hereby (i) is
$_____________ , to be applied in respect of the payment of the interest which
was due and payable on the Class C Certificates on the Distribution Date, (ii)
does not include any amount with respect to the payment of principal of, or
premium on, the Class C Certificates, the Class B Certificates or the Class A
Certificates, or interest on the Class B Certificates or the Class A
Certificates, (iii) was computed in accordance with the provisions of the Class
C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a
copy of which computation is attached hereto as Schedule I), (iv) does not
exceed the Maximum Available Commitment on the date hereof and (v) has not been
and is not the subject of a prior or contemporaneous Notice of Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will apply the same in accordance with the
terms of Section 3.6(b) of the Intercreditor Agreement (b) no portion of such
amount shall be applied by the Borrower for any other purpose and (c) no portion
of such amount until so applied shall be commingled with other funds held by the
Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Maximum Available Commitment by
an amount equal to the amount of the Interest Advance requested to be made
hereby as set forth in clause (i) of paragraph (3) of this Certificate and such
reduction shall automatically result in corresponding reductions in the amounts
available to be borrowed pursuant to a subsequent Advance.
* * *
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ______ day of____________, _____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Interest Advance Notice of Borrowing]
<PAGE>
Annex II
Revolving Credit Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3C) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Non-Extension Advance by the Liquidity Provider to be used for the
funding of the Class C Cash Collateral Account in accordance with Section 3.6(d)
of the Intercreditor Agreement, which Advance is requested to be made on .
(c) The amount of the Non-Extension Advance requested hereby (i) is
$__________, which equals the Maximum Available Commitment on the date hereof
and is to be applied in respect of the funding of the Class C Cash Collateral
Account in accordance with Section 3.6(d) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of the principal of, or
premium on, the Class C Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class A Certificates, (iii) was computed in
accordance with the provisions of the Class C Certificates, the Class C Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class C Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(d) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Non-Extension Advance as requested by this
Notice of Borrowing shall automatically and irrevocably terminate the obligation
of the Liquidity Provider to make further Advances under the Liquidity
Agreement; and (B) following the making by the Liquidity Provider of the
Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall
not be entitled to request any further Advances under the Liquidity Agreement.
* * *
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the day of ______ day of _____________, _____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Non-Extension Advance Notice of Borrowing]
<PAGE>
Annex III to
Revolving Credit Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
subordination agent (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V.,
Chicago Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving
Credit Agreement (1997-3C) dated as of September 25, 1997, between the Borrower
and the Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein
and not otherwise defined herein being used herein as therein defined or
referenced), that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Downgrade Advance by the Liquidity Provider to be used for the funding of
the Class C Cash Collateral Account in accordance with Section 3.6(c) of the
Intercreditor Agreement by reason of the downgrading of the short-term unsecured
debt rating of the Liquidity Provider issued by either Rating Agency below the
Threshold Rating, which Advance is requested to be made on ____________, _____.
(c) The amount of the Downgrade Advance requested hereby (i) is
$_______, which equals the Maximum Available Commitment on the date hereof and
is to be applied in respect of the funding of the Class C Cash Collateral
Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of the principal of, or
premium on, the Class C Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class A Certificates, (iii) was computed in
accordance with the provisions of the Class C Certificates, the Class C Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class C Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Downgrade Advance as requested by this Notice
of Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Downgrade Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ___ day of _____________, _____.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with
Downgrade Advance Notice of Borrowing]
<PAGE>
Annex IV to
Revolving Credit Agreement
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to ABN AMRO BANK N.V., Chicago
Branch (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement (1997-3C) dated as of September 25, 1997, between the Borrower and the
Liquidity Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined or referenced),
that:
(a) The Borrower is the Subordination Agent under the Intercreditor
Agreement.
(b) The Borrower is delivering this Notice of Borrowing for the making
of the Final Advance by the Liquidity Provider to be used for the funding of the
Class A Cash Collateral Account in accordance with Section 3.6(i) of the
Intercreditor Agreement by reason of the receipt by the Borrower of a
Termination Notice from the Liquidity Provider with respect to the Liquidity
Agreement, which Advance is requested to be made on ______________, ___.
(c) The amount of the Final Advance requested hereby (i) is
$__________, which equals the Maximum Available Commitment on the date hereof
and is to be applied in respect of the funding of the Class C Cash Collateral
Account in accordance with Section 3.6(i) of the Intercreditor Agreement, (ii)
does not include any amount with respect to the payment of principal of, or
premium on, the Class C Certificates, or principal of, or interest or premium
on, the Class B Certificates or the Class A Certificates, (iii) was computed in
accordance with the provisions of the Class C Certificates, the Class C Trust
Agreement and the Intercreditor Agreement (a copy of which computation is
attached hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing.
(d) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Class C Cash
Collateral Account and apply the same in accordance with the terms of Section
3.6(i) of the Intercreditor Agreement, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such amount
until so applied shall be commingled with other funds held by the Borrower.
(e) The Borrower hereby requests that the Advance requested hereby be
a Base Rate Advance [and that such Base Rate Advance be converted into a LIBOR
Advance on the third Business Day following your receipt of this notice].<F1>
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Final Advance as requested by this Notice of
___________________
<F1>Bracketed language is optional.
<PAGE>
Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Final Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
* * *
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ___ day of ______________, __________.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Final Advance Notice of Borrowing]
<PAGE>
Annex V to
Revolving Credit Agreement
NOTICE OF TERMINATION
[Date]
Wilmington Trust Company,
as Subordination Agent, as Borrower
Rodney Square North
1100 North Market Square
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3C, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.1 of the Liquidity
Agreement, by reason of the occurrence of a Liquidity Event of Default and the
existence of a Performing Note Deficiency (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make Advances
(as defined therein) under such Liquidity Agreement to terminate on the fifth
Business Day after the date on which you receive this notice and (ii) you to
request a Final Advance under the Liquidity Agreement pursuant to Section 3.6(i)
of the Intercreditor Agreement (as defined in the Liquidity Agreement) as a
consequence of your receipt of this notice.
<PAGE>
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE
LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
Very truly yours,
ABN AMRO BANK N.V., Chicago Branch, as
Liquidity Provider
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
cc: Wilmington Trust Company,
<PAGE>
Annex VI to
Revolving Credit Agreement
NOTICE OF REPLACEMENT SUBORDINATION AGENT
[Date]
Attention:
Revolving Credit Agreement dated as of September 25, 1997, between
Wilmington Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines Pass Through Trust, 1997-3C, as Borrower, and ABN AMRO BANK
N.V., Chicago Branch (the "Liquidity Agreement")
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Name of Transferee)
all rights and obligations of the undersigned as Borrower under the Liquidity
Agreement referred to above. The transferee has succeeded the undersigned as
Subordination Agent under the Intercreditor Agreement referred to in the first
paragraph of the Liquidity Agreement, pursuant to the terms of Section 8.1 of
the Intercreditor Agreement.
By this transfer, all rights of the undersigned as Borrower under the
Liquidity Agreement are transferred to the transferee and the transferee shall
hereafter have the sole rights and obligations as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.
<PAGE>
We ask that this transfer be effective as of _______________, ___.
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Subordination Agent, as Borrower
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT 4.4
FORM OF PASS THROUGH TRUST AGREEMENT
<PAGE>
- --------------------------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of September 25, 1997
between
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
ARTICLE I - DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions............................................ 2
Section 1.02. Compliance Certificates and Opinions................... 11
Section 1.03. Form of Documents Delivered to Trustee................. 12
Section 1.04. Directions of Certificateholders....................... 12
ARTICLE II - ORIGINAL ISSUANCE OF CERTIFICATES:
ACQUISITION OF TRUST PROPERTY
Section 2.01. Amount Unlimited; Issuable in Series................... 13
Section 2.02. Acquisition of Equipment Notes......................... 15
Section 2.03. Acceptance by Trustee.................................. 17
Section 2.04. Limitation of Powers................................... 17
ARTICLE III - THE CERTIFICATES
Section 3.01. Form, Denomination and Execution of Certificates....... 18
Section 3.02. Authentication of Certificates......................... 18
Section 3.03. Temporary Certificates................................. 19
Section 3.04. Transfer and Exchange.................................. 19
Section 3.05. Book-Entry and Definitive Certificates................. 20
Section 3.06. Mutilated, Destroyed, Lost or Stolen Certificates...... 22
Section 3.07. Persons Deemed Owners.................................. 22
Section 3.08. Cancellation........................................... 22
Section 3.09. Limitation of Liability for Payments................... 23
ARTICLE IV - DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account....... 23
Section 4.02. Distributions from Certificate Account and Special
Payments Account....................................... 24
Section 4.03. Statements to Certificateholders....................... 25
Section 4.04. Investment of Special Payment Moneys................... 26
ARTICLE V - THE COMPANY
Section 5.01. Maintenance of Corporate Existence..................... 27
Section 5.02. Consolidation, Merger, Etc............................. 27
ARTICLE VI - DEFAULT
Section 6.01. Events of Default...................................... 28
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
Section 6.02. Incidents of Sale of Equipment Notes................... 29
Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May
Bring Suit............................................. 30
Section 6.04. Control by Certificateholders.......................... 30
Section 6.05. Waiver of Past Defaults................................ 30
Section 6.06. Right of Certificateholders to Receive Payments Not to
Be Impaired............................................ 31
Section 6.07. Certificateholders May Not Bring Suit Except Under
Certain Conditions..................................... 31
Section 6.08. Remedies Cumulative.................................... 32
Section 6.09. Undertaking for Costs.................................. 32
ARTICLE VII - THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities.................... 32
Section 7.02. Notice of Defaults..................................... 33
Section 7.03. Certain Rights of Trustee.............................. 33
Section 7.04. Not Responsible for Recitals or Issuance of
Certificates........................................... 35
Section 7.05. May Hold Certificates.................................. 35
Section 7.06. Money Held in Trust.................................... 35
Section 7.07. Compensation and Reimbursement......................... 35
Section 7.08. Corporate Trustee Required; Eligibility................ 36
Section 7.09. Resignation and Removal; Appointment of Successor...... 36
Section 7.10. Acceptance of Appointment by Successor................. 38
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business............................................... 39
Section 7.12. Maintenance of Agencies................................ 39
Section 7.13. Money for Certificate Payments to Be Held in Trust..... 40
Section 7.14. Registration of Equipment Notes in Trustee's Name...... 40
Section 7.15. Representations and Warranties of Trustee.............. 41
Section 7.16. Withholding Taxes; Information Reporting............... 42
Section 7.17. Trustee's Liens........................................ 42
Section 7.18. Preferential Collection of Claims...................... 42
ARTICLE VIII - CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders....................... 42
Section 8.02. Preservation of Information; Communications to
Certificateholders..................................... 43
Section 8.03. Reports by Trustee..................................... 43
Section 8.04. Reports by the Company................................. 43
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE IX - SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders..................................... 44
Section 9.02. Supplemental Agreements with Consent of
Certificateholders..................................... 45
Section 9.03. Documents Affecting Immunity or Indemnity.............. 46
Section 9.04. Execution of Supplemental Agreements................... 47
Section 9.05. Effect of Supplemental Agreements...................... 47
Section 9.06. Conformity with Trust Indenture Act.................... 47
Section 9.07. Reference in Certificates to Supplemental Agreements... 47
ARTICLE X - AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS
Section 10.01. Amendments and Supplements to Indenture and Other
Note Documents......................................... 47
ARTICLE XI - TERMINATION OF TRUSTS
Section 11.01. Termination of the Trusts.............................. 48
ARTICLE XII - MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders............. 49
Section 12.02. Liabilities of Certificateholders...................... 50
Section 12.03. Registration of Equipment Notes in Name of
Subordination Agent.................................... 50
Section 12.04. Notices................................................ 50
Section 12.05. Governing Law.......................................... 51
Section 12.06. Severability of Provisions............................. 51
Section 12.07. Trust Indenture Act Controls........................... 51
Section 12.08. Effect of Headings and Table of Contents............... 51
Section 12.09. Successors and Assigns................................. 52
Section 12.10. Benefits of Agreement.................................. 52
Section 12.11. Legal Holidays......................................... 52
Section 12.12. Counterparts........................................... 52
Section 12.13. Communication by Certificateholders with Other
Certificateholders..................................... 52
Section 12.14. Intention of Parties................................... 52
EXHIBITS
Exhibit A Form of Certificate
</TABLE>
<PAGE>
Reconciliation and tie between Continental Airlines Pass Through Trust
Agreement, dated as of September 25, 1997 and the Trust Indenture Act of 1939.
This reconciliation does not constitute part of the Pass Through Trust
Agreement.
<TABLE>
<CAPTION>
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
--------------- -----------------
<S> <C>
310(a)(1) 7.07
(a)(2) 7.07
312(a) 3.05; 8.01; 8.02
313(a) 7.07
314(a) 8.04(a) - (c)
(a)(4) 8.04(d)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.01(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(d)
317(a)(1) 6.03
(b) 7.13
318(a) 12.05
</TABLE>
<PAGE>
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of September 25, 1997 (the
"BASIC AGREEMENT"), between CONTINENTAL AIRLINES, INC., a Delaware corporation
(the "COMPANY"), and WILMINGTON TRUST COMPANY, a Delaware trust company, as
Trustee, is made with respect to the formation from time to time of separate
Continental Airlines Pass Through Trusts, and the issuance from time to time of
separate series of Pass Through Certificates representing fractional undivided
interests in the respective Trusts.
WITNESSETH:
WHEREAS, from time to time, the Company and the Trustee may enter into
a Trust Supplement (this and certain other defined terms used herein are defined
in Section 1.01) pursuant to which the Trustee shall declare the creation of a
separate Trust for the benefit of the Holders of the series of Certificates to
be issued in respect of such Trust, and the initial Holders of the Certificates
of such series, as the grantors of such Trust, by their respective acceptances
of the Certificates of such series, shall join in the creation of such Trust
with the Trustee;
WHEREAS, all Certificates to be issued in respect of each separate
Trust will be issued as a separate series pursuant to this Agreement, will
evidence fractional undivided interests in such Trust and will have no rights,
benefits or interests in respect of any other separate Trust or the property
held therein, subject, however, to the provisions of any Intercreditor Agreement
to which one or more Trusts may be a party;
WHEREAS, from time to time, pursuant to the terms and conditions of
this Agreement with respect to each separate Trust formed hereunder, the Trustee
on behalf of such Trust shall purchase one or more issues of Equipment Notes
having the same interest rate as, and final maturity dates not later than the
final Regular Distribution Date of, the series of Certificates issued in respect
of such Trust and, subject to the terms of any related Intercreditor Agreement,
shall hold such Equipment Notes in trust for the benefit of the
Certificateholders of such Trust;
WHEREAS, to facilitate the sale of Equipment Notes to, and the
purchase of Equipment Notes by, the Trustee on behalf of each Trust created from
time to time pursuant to this Agreement, the Company as the "ISSUER", as such
term is defined in and solely for purposes of the Securities Act of 1933, as
amended, of the Certificates to be issued in respect of each Trust and as the
"OBLIGOR", as such term is defined in and solely for purposes of the Trust
Indenture Act of 1939, as amended, has duly authorized the execution and
delivery of this Basic Agreement and each Trust Supplement with respect to all
such Certificates and is undertaking to perform certain administrative and
ministerial duties hereunder and is also undertaking to pay the fees and
expenses of the Trustee; and
WHEREAS, this Basic Agreement, as supplemented from time to time, is
subject to the provisions of the Trust Indenture Act of 1939, as amended, and
shall, to the extent applicable, be governed by such provisions;
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. DEFINITIONS. For all purposes of this Basic Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article I have the
meanings assigned to them in this Article I, and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or by the rules
promulgated under the Trust Indenture Act, have the meanings assigned to
them therein;
(3) all references in this Basic Agreement to designated "ARTICLES",
"SECTIONS", "SUBSECTIONS" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this Basic
Agreement;
(4) the words "HEREIN", "HEREOF" and "HEREUNDER" and other words of
similar import refer to this Basic Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision;
(5) unless the context otherwise requires, whenever the words
"INCLUDING", "INCLUDE" or "INCLUDES" are used herein, it shall be deemed to
be followed by the phrase "WITHOUT LIMITATION"; and
(6) the term "THIS AGREEMENT" (as distinguished from "THIS BASIC
AGREEMENT") refers, unless the context otherwise requires, to this Basic
Agreement as supplemented by the Trust Supplement creating a particular
Trust and establishing the series of Certificates issued or to be issued in
respect thereof, with reference to such Trust and such series of
Certificates, as this Basic Agreement as so supplemented may be further
supplemented with respect to such Trust and such series of Certificates.
ACT: Has the meaning, with respect to any Certificateholder, specified
in Section 1.04(a).
AFFILIATE: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person; PROVIDED, HOWEVER, that
neither America West Airlines, Inc. nor any of its subsidiaries shall be
deemed to be an "AFFILIATE" of the Company for purposes of this Agreement.
For the purposes of this definition, "CONTROL", when used with respect to
any specified Person, means the power, directly or indirectly, to direct
<PAGE>
the management and policies of such Person, whether through the ownership
of voting securities or by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
AIRCRAFT: Means one or more aircraft, including engines therefor,
owned by or leased to the Company and securing one or more Equipment Notes.
AUTHORIZED AGENT: Means, with respect to the Certificates of any
series, any Paying Agent or Registrar for the Certificates of such series.
BASIC AGREEMENT: Means this Pass Through Trust Agreement, as the same
may from time to time be supplemented, amended or modified, but does not
include any Trust Supplement.
BOOK-ENTRY CERTIFICATES: Means, with respect to the Certificates of
any series, a beneficial interest in the Certificates of such series,
ownership and transfers of which shall be made through book entries as
described in Section 3.05.
BUSINESS DAY: Means, with respect to the Certificates of any series,
any day other than a Saturday, a Sunday or a day on which commercial banks
are required or authorized to close in Houston, Texas, New York, New York,
or, so long as any Certificate of such series is outstanding, the city and
state in which the Trustee or any related Loan Trustee maintains its
Corporate Trust Office or receives and disburses funds.
CERTIFICATE: Means any one of the certificates executed and
authenticated by the Trustee, substantially in the form of Exhibit A
hereto.
CERTIFICATE ACCOUNT: Means, with respect to the Certificates of any
series, the account or accounts created and maintained for such series
pursuant to Section 4.01(a) and the related Trust Supplement.
CERTIFICATEHOLDER OR HOLDER: Means, with respect to the Certificates
of any series, the Person in whose name a Certificate of such series is
registered in the Register for Certificates of such series.
CERTIFICATE OWNER: Means, with respect to the Certificates of any
series, for purposes of Section 3.05, the Person who owns a Book-Entry
Certificate of such series.
CLEARING AGENCY: Means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
CLEARING AGENCY PARTICIPANT: Means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects, directly or indirectly, book-entry transfers and pledges of
securities deposited with the Clearing Agency.
<PAGE>
COMPANY: Means Continental Airlines, Inc., a Delaware corporation, or
its successor in interest pursuant to Section 5.02, or (only in the context
of provisions hereof, if any, when such reference is required for purposes
of compliance with the Trust Indenture Act) any other "obligor" (within the
meaning of the Trust Indenture Act) with respect to the Certificates of any
series.
CONTROLLING PARTY: Means the Person entitled to act as such pursuant
to the terms of any Intercreditor Agreement.
CORPORATE TRUST OFFICE: Means, with respect to the Trustee or any Loan
Trustee, the office of such trustee in the city at which at any particular
time its corporate trust business shall be principally administered.
CUT-OFF DATE: Means, with respect to the Certificates of any series,
the date designated as such in the Trust Supplement establishing such
series.
DEFINITIVE CERTIFICATES: Has the meaning, with respect to the
Certificates of any series, specified in Section 3.05.
DIRECTION: Has the meaning specified in Section 1.04(a).
EQUIPMENT NOTES: Means, with respect to the Certificates of any
series, all of the equipment notes issued under the Indentures related to
such series of Certificates.
ERISA: Means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor federal statute.
ESCROW ACCOUNT: Has the meaning, with respect to the Certificates of
any series, specified in Section 2.02(b).
ESCROWED FUNDS: Has the meaning, with respect to any Trust, specified
in Section 2.02(b).
EVENT OF DEFAULT: Means, in respect of any Trust, an Indenture Event
of Default under any Indenture pursuant to which Equipment Notes held by
such Trust were issued.
FRACTIONAL UNDIVIDED INTEREST: Means the fractional undivided interest
in a Trust that is evidenced by a Certificate relating to such Trust.
INDENTURE: Means, with respect to any Trust, each of the one or more
separate trust indenture and security agreements or trust indenture and
mortgages or similar documents described in, or on a schedule attached to,
the Trust Supplement and an indenture having substantially the same terms
and conditions which relates to a Substitute Aircraft, as each such
indenture may be amended or supplemented in accordance with its respective
terms; and "INDENTURES" means all of such agreements.
<PAGE>
INDENTURE EVENT OF DEFAULT: Means, with respect to any Indenture, any
Indenture Event of Default (as such term is defined in such Indenture).
INITIAL REGULAR DISTRIBUTION DATE: Means, with respect to the
Certificates of any series, the first Regular Distribution Date on which a
Scheduled Payment is to be made.
INTERCREDITOR AGREEMENT: Means any agreement by and among the Trustee,
as trustee hereunder with respect to one or more Trusts, one or more
Liquidity Providers and a Subordination Agent providing, among other
things, for the distribution of payments made in respect of Equipment Notes
held by such Trusts.
ISSUANCE DATE: Means, with respect to the Certificates of any series,
the date of the issuance of such Certificates.
LEASE: Means any lease between an Owner Trustee, as the lessor, and
the Company, as the lessee, referred to in the related Indenture, as such
lease may be amended, supplemented or otherwise modified in accordance with
its terms; and "LEASES" means all such Leases.
LETTER OF REPRESENTATIONS: Means, with respect to the Certificates of
any series, an agreement among the Company, the Trustee and the initial
Clearing Agency.
LIQUIDITY FACILITY: Means, with respect to the Certificates of any
series, any revolving credit agreement, letter of credit or similar
facility relating to the Certificates of such series between a bank or
other financial institution and a Subordination Agent, as amended,
replaced, supplemented or otherwise modified from time to time in
accordance with its terms and the terms of any Intercreditor Agreement.
LIQUIDITY PROVIDER: Means, with respect to the Certificates of any
series, a bank or other financial institution that agrees to provide a
Liquidity Facility for the benefit of the holders of Certificates of such
series.
LOAN TRUSTEE: Means, with respect to any Equipment Note or the
Indenture applicable thereto, the bank or trust company designated as loan
or indenture trustee under such Indenture, and any successor to such Loan
Trustee as such trustee; and "LOAN TRUSTEES" means all of the Loan Trustees
under the Indentures.
NOTE DOCUMENTS: Means, with respect to the Certificates of any series,
the Equipment Notes with respect to such Certificates and, with respect to
such Equipment Notes, the related Indenture, Note Purchase Agreement and,
if the related Aircraft is leased to the Company, the related Lease and the
related Owner Trustee's Purchase Agreement.
NOTE PURCHASE AGREEMENT: Means, with respect to the Certificates of
any series, any note purchase, refunding, participation or similar
<PAGE>
agreement providing for, among other things, the purchase of Equipment
Notes by the Trustee on behalf of the relevant Trust; and "NOTE PURCHASE
AGREEMENTS" means all such agreements.
OFFICER'S CERTIFICATE: Means a certificate signed, (a) in the case of
the Company, by the Chairman or Vice Chairman of the Board of Directors,
the President, any Vice President or the Treasurer of the Company, signing
alone, or (b) in the case of the Trustee or an Owner Trustee or a Loan
Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such
Loan Trustee, as the case may be.
OPINION OF COUNSEL: Means a written opinion of legal counsel who (a)
in the case of counsel for the Company may be (i)a senior attorney of the
Company one of whose principal duties is furnishing advice as to legal
matters, (ii) Hughes Hubbard & Reed LLP or (iii) such other counsel
designated by the Company and reasonably acceptable to the Trustee and (b)
in the case of any Owner Trustee or any Loan Trustee, may be such counsel
as may be designated by any of them whether or not such counsel is an
employee of any of them, and who shall be reasonably acceptable to the
Trustee.
OTHER AGREEMENTS: Has the meaning specified in Section 6.01(b).
OUTSTANDING: When used with respect to Certificates of any series,
means, as of the date of determination, all Certificates of such series
theretofore authenticated and delivered under this Agreement, except:
(i) Certificates of such series theretofore cancelled by the
Registrar or delivered to the Trustee or the Registrar for
cancellation;
(ii) All of the Certificates of such series if money in the full
amount required to make the final distribution with respect to such
series pursuant to Section 11.01 hereof has been theretofore deposited
with the Trustee in trust for the Holders of the Certificates of such
series as provided in Section 4.01 pending distribution of such money
to such Certificateholders pursuant to payment of such final
distribution payment; and
(iii) Certificates of such series in exchange for or in lieu of
which other Certificates of such series have been authenticated and
delivered pursuant to this Agreement.
OWNER PARTICIPANT: Means, with respect to any Equipment Note, the
"Owner Participant", if any, as referred to in the Indenture pursuant to
which such Equipment Note is issued and any permitted successor or assign
of such Owner Participant; and "OWNER PARTICIPANTS" at any time of
determination means all of the Owner Participants thus referred to in the
Indentures.
OWNER TRUSTEE: Means, with respect to any Equipment Note, the "Owner
Trustee", if any, as referred to in the Indenture pursuant to which such
<PAGE>
Equipment Note is issued, not in its individual capacity but solely as
trustee; and "OWNER TRUSTEES" means all of the Owner Trustees party to any
of the related Indentures.
OWNER TRUSTEE'S PURCHASE AGREEMENT: Has the meaning, with respect to
the Certificates of any series if the related Aircraft is leased to the
Company, specified therefor in the related Lease.
PAYING AGENT: Means, with respect to the Certificates of any series,
the paying agent maintained and appointed for the Certificates of such
series pursuant to Section 7.12.
PERMITTED INVESTMENTS: Means obligations of the United States of
America or agencies or instrumentalities thereof for the payment of which
the full faith and credit of the United States of America is pledged,
maturing in not more than 60 days after the date of acquisition thereof or
such lesser time as is required for the distribution of any Special
Payments on a Special Distribution Date.
PERSON: Means any person, including any individual, corporation,
limited liability company, partnership, joint venture, association,
joint-stock company, trust, trustee, unincorporated organization, or
government or any agency or political subdivision thereof.
POOL BALANCE: Means, with respect to the Certificates of any series as
of any date, (i) the original aggregate face amount of the Certificates of
any series less (ii) the aggregate amount of all payments made in respect
of such Certificates other than payments made in respect of interest or
premium thereon or reimbursement of any costs or expenses incurred in
connection therewith. The Pool Balance as of any Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes or other Trust Property held in the Trust and the
distribution thereof to be made on such Distribution Date.
POOL FACTOR: Means, with respect to any series of Certificates as of
any date, the quotient (rounded to the seventh decimal place) computed by
dividing (i) the Pool Balance of such series as at such date by (ii) the
original aggregate face amount of the Certificates of such series. The Pool
Factor as of any Distribution Date shall be computed after giving effect to
the payment of principal, if any, on the Equipment Notes or other Trust
Property held in the Trust and the distribution thereof to be made on such
Distribution Date.
POSTPONED NOTES: Means, with respect to any Trust or the related
series of Certificates, the Equipment Notes to be held in such Trust as to
which a Postponement Notice shall have been delivered pursuant to Section
2.02(b).
POSTPONEMENT NOTICE: Means, with respect to any Trust or the related
series of Certificates, an Officer's Certificate of the Company signed by
an officer of the Company (1) requesting that the Trustee temporarily
postpone purchase of the related Equipment Notes to a date later than the
<PAGE>
Issuance Date of such series of Certificates, (2) identifying the amount of
the purchase price of each such Equipment Note and the aggregate purchase
price for all such Equipment Notes, (3) setting forth the reasons for such
postponement and (4) with respect to each such Equipment Note, either (a)
setting or resetting a new Transfer Date (which shall be on or prior to the
applicable Cut-off Date) for payment by the Trustee of such purchase price
and issuance of the related Equipment Note (subject to subsequent change
from time to time in accordance with the relevant Note Purchase Agreement),
or (b) indicating that such new Transfer Date (which shall be on or prior
to the applicable Cut-off Date) will be set by subsequent written notice
not less than one Business Day prior to such new Transfer Date (subject to
subsequent change from time to time in accordance with the relevant Note
Purchase Agreement).
<PAGE>
POTENTIAL PURCHASER: Has the meaning, with respect to any
Certificateholder, specified in Section 6.01(b).
PTC EVENT OF DEFAULT: Means, with respect to the Certificates of any
series, any failure to pay within ten Business Days of the due date
thereof: (i) the outstanding Pool Balance of such series of Certificates on
the date specified in any Trust Supplement for such payment or (ii)
interest due on the Certificates of such series on any Distribution Date
(unless the related Subordination Agent shall have made an Interest Drawing
or Drawings (as defined in the related Intercreditor Agreement), or a
withdrawal or withdrawals pursuant to a cash collateral account under such
Intercreditor Agreement, with respect thereto in an aggregate amount
sufficient to pay such interest and shall have distributed such amount to
the Trustee).
PURCHASING CERTIFICATEHOLDER: Has the meaning, with respect to any
Certificateholder, specified in Section 6.01(b).
RECORD DATE: Means, with respect to any Trust or the related series of
Certificates, (i) for Scheduled Payments to be distributed on any Regular
Distribution Date, other than the final distribution with respect to such
series, the 15th day (whether or not a Business Day) preceding such Regular
Distribution Date, and (ii) for Special Payments to be distributed on any
Special Distribution Date, other than the final distribution with respect
to such series, the 15th day (whether or not a Business Day) preceding such
Special Distribution Date.
REGISTER and REGISTRAR: Means, each with respect to the Certificates
of any series, the register maintained and the registrar appointed pursuant
to Sections 3.04 and 7.12.
REGULAR DISTRIBUTION DATE: Means, with respect to distributions of
Scheduled Payments in respect of any series of Certificates, each date
designated as such in this Agreement, until payment of all the Scheduled
Payments to be made under the Equipment Notes held in the Trust have been
made.
<PAGE>
REQUEST: Means a request by the Company setting forth the subject
matter of the request accompanied by an Officer's Certificate and an
Opinion of Counsel as provided in Section 1.02 of this Basic Agreement.
RESPONSIBLE OFFICER: Means, with respect to any Trustee, any Loan
Trustee and any Owner Trustee, any officer in the Corporate Trust
Department of the Trustee, Loan Trustee or Owner Trustee or any other
officer customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject.
RESPONSIBLE PARTY: Means, with respect to the Certificates of any
series, the person designated as such in the related Trust Supplement.
SCHEDULED PAYMENT: Means, with respect to any Equipment Note, (i) any
payment of principal or interest on such Equipment Note (other than any
such payment which is not in fact received by the Trustee or any
Subordination Agent within five days of the date on which such payment is
scheduled to be made) or (ii) any payment of interest on the Certificates
of any series with funds drawn under the Liquidity Facility for such
series, which payment represents the installment of principal on such
Equipment Note at the stated maturity of such installment, the payment of
regularly scheduled interest accrued on the unpaid principal amount of such
Equipment Note, or both; PROVIDED, HOWEVER, that any payment of principal,
premium, if any, or interest resulting from the redemption or purchase of
any Equipment Note shall not constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from time to
time constituted or created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties on such
date.
SELLING CERTIFICATEHOLDER: Has the meaning, with respect to any
Certificateholder, specified in Section 6.01(b).
SPECIAL DISTRIBUTION DATE: Means, with respect to the Certificates of
any series, each date on which a Special Payment is to be distributed as
specified in this Agreement.
SPECIAL PAYMENT: Means (i) any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, any Equipment Note or Trust
Indenture Estate (as defined in each Indenture), (ii) the amounts required
to be distributed pursuant to the last paragraph of Section 2.02(b) or
(iii) the amounts required to be distributed pursuant to the penultimate
paragraph of Section 2.02(b).
<PAGE>
SPECIAL PAYMENTS ACCOUNT: Means, with respect to the Certificates of
any series, the account or accounts created and maintained for such series
pursuant to Section 4.01(b) and the related Trust Supplement.
SPECIFIED INVESTMENTS: Means, with respect to any Trust, unless
otherwise specified in the related Trust Supplement, (i) obligations of, or
guaranteed by, the United States Government or agencies thereof, (ii) open
market commercial paper of any corporation incorporated under the laws of
the United States of America or any state thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or its
equivalent by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., (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 $100,000,000 which banks or their holding companies have a rating
of A or its equivalent by Moody's Investors Service, Inc. or Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.;
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) above or any subsidiary thereof
and (v) repurchase agreements with any financial institution having
combined capital and surplus of at least $100,000,000 with any of the
obligations described in clauses (i) through (iv) above 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.
SUBORDINATION AGENT: Has the meaning specified therefor in any
Intercreditor Agreement.
SUBSTITUTE AIRCRAFT: Means, with respect to any Trust, any Aircraft of
a type specified in this Agreement and, at the election of the Company,
substituted prior to the applicable Cut-off Date, if any, pursuant to the
terms of this Agreement.
TRANSFER DATE: Has the meaning assigned to that term or any of the
terms "Delivery Date", "Funding Date" or "Closing Date" in a Note Purchase
Agreement, and in any event refers to any such date as it may be changed
from time to time in accordance with the terms of such Note Purchase
Agreement.
TRIGGERING EVENT: Has the meaning specified therefor in any
Intercreditor Agreement.
TRUST: Means, with respect to the Certificates of any series, the
trust under this Agreement.
TRUSTEE: Means Wilmington Trust Company, or its successor in interest,
and any successor or other trustee appointed as provided herein.
<PAGE>
TRUST INDENTURE ACT: Except as otherwise provided in Section 9.06,
means, with respect to any particular Trust, the United States Trust
Indenture Act of 1939, as in force at the date as of which the related
Trust Supplement was executed.
TRUST PROPERTY: Means, with respect to any Trust, (i) subject to any
related Intercreditor Agreement, the Equipment Notes held as the property
of such Trust, all monies at any time paid thereon and all monies due and
to become due thereunder, (ii) funds from time to time deposited in the
related Escrow Account, the related Certificate Account and the related
Special Payments Account and, subject to the related Intercreditor
Agreement, any proceeds from the sale by the Trustee pursuant to Article VI
hereof of any such Equipment Note, (iii) all rights of such Trust and the
Trustee, on behalf of the Trust, under any Intercreditor Agreement,
including, without limitation, all monies receivable in respect of such
rights, and (iv) all monies receivable under any Liquidity Facility for
such Trust.
TRUST SUPPLEMENT: Means an agreement supplemental hereto pursuant to
which (i) a separate Trust is created for the benefit of the Holders of the
Certificates of a series, (ii) the issuance of the Certificates of such
series representing fractional undivided interests in such Trust is
authorized and (iii) the terms of the Certificates of such series are
established.
Section 1.02. COMPLIANCE CERTIFICATES AND OPINIONS. Upon any
application or request by the Company, any Owner Trustee or any Loan Trustee to
the Trustee to take any action under any provision of this Basic Agreement or,
in respect of the Certificates of any series, this Agreement, the Company, such
Owner Trustee or such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Basic Agreement
or this Agreement relating to the proposed action have been complied with and
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Basic Agreement or this
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Basic Agreement or, in respect of the
Certificates of any series, this Agreement (other than a certificate provided
pursuant to Section 8.04(d)) or any Trust Supplement shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Basic Agreement or this Agreement relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
<PAGE>
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
Section 1.03. FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Basic Agreement or, in respect of the Certificates of any
series, this Agreement, they may, but need not, be consolidated and form one
instrument.
Section 1.04. DIRECTIONS OF CERTIFICATEHOLDERS. (a) Any direction,
consent, request, demand, authorization, notice, waiver or other action provided
by this Agreement in respect of the Certificates of any series to be given or
taken by Certificateholders (a "DIRECTION") may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such
Certificateholders in person or by an agent or proxy duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
when it is hereby expressly required pursuant to this Agreement, to the Company
or any Loan Trustee. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "ACT" of
the Certificateholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent or
proxy shall be sufficient for any purpose of this Trust Agreement and conclusive
in favor of the Trustee, the Company and the related Loan Trustee, if made in
the manner provided in this Section 1.04.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer, and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
<PAGE>
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates of any series Outstanding have
given any Direction under this Agreement, Certificates owned by the Company or
any Affiliate thereof shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates which the
Trustee knows to be so owned shall be so disregarded. Notwithstanding the
foregoing, (i) if any such Person owns 100% of the Certificates of any series
Outstanding, such Certificates shall not be so disregarded, and (ii) if any
amount of Certificates of any series so owned by any such Person have been
pledged in good faith, such Certificates shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Certificates and that the pledgee is not the Company or any
Affiliate thereof.
(d) The Company may, at its option, by delivery of an Officer's
Certificate to the Trustee, set a record date to determine the
Certificateholders in respect of the Certificates of any series, entitled to
give any Direction. Notwithstanding Section 316(c) of the Trust Indenture Act,
such record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to the first
solicitation of Certificateholders of the applicable series in connection
therewith. If such a record date is fixed, such Direction may be given before or
after such record date, but only the Certificateholders of record of the
applicable series at the close of business on such record date shall be deemed
to be Certificateholders for the purposes of determining whether
Certificateholders of the requisite proportion of Outstanding Certificates of
such series have authorized or agreed or consented to such Direction, and for
that purpose the Outstanding Certificates shall be computed as of such record
date; provided, however, that no such Direction by the Certificateholders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Agreement not later than one year after such
record date.
(e) Any Direction by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c), Certificates of
any series owned by or pledged to any Person shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Certificates of such
series.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES:
ACQUISITION OF TRUST PROPERTY
Section 2.01. AMOUNT UNLIMITED; ISSUABLE IN SERIES. (a) The aggregate
principal amount of Certificates which may be authenticated and delivered under
this Basic Agreement is unlimited. The Certificates may be issued from time to
time in one or more series and shall be designated generally as the "PASS
<PAGE>
THROUGH CERTIFICATES", with such further designations added or incorporated in
such title for the Certificates of each series as specified in the related Trust
Supplement. Each Certificate shall bear upon its face the designation so
selected for the series to which it belongs. All Certificates of the same series
shall be substantially identical except that the Certificates of a series may
differ as to denomination and as may otherwise be provided in the Trust
Supplement establishing the Certificates of such series. Each series of
Certificates issued pursuant to this Agreement will evidence fractional
undivided interests in the related Trust and, except as may be contained in any
Intercreditor Agreement, will have no rights, benefits or interests in respect
of any other Trust or the Trust Property held therein. All Certificates of the
same series shall be in all respects equally and ratably entitled to the
benefits of this Agreement without preference, priority or distinction on
account of the actual time or times of authentication and delivery, all in
accordance with the terms and provisions of this Agreement.
(b) The following matters shall be established with respect to the
Certificates of each series issued hereunder by a Trust Supplement executed and
delivered by and among the Company and the Trustee:
(1) the formation of the Trust as to which the Certificates of such
series represent fractional undivided interests and its designation (which
designation shall distinguish such Trust from each other Trust created
under this Basic Agreement and a Trust Supplement);
(2) the specific title of the Certificates of such series (which title
shall distinguish the Certificates of such series from each other series of
Certificates created under this Basic Agreement and a Trust Supplement);
(3) any limit upon the aggregate principal amount of the Certificates
of such series which may be authenticated and delivered (which limit shall
not pertain to Certificates authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other Certificates of
the series pursuant to Sections 3.03, 3.04 and 3.06);
(4) the Cut-off Date with respect to the Certificates of such series;
(5) the Regular Distribution Dates applicable to the Certificates of
such series;
(6) the Special Distribution Dates applicable to the Certificates of
such series;
(7) if other than as provided in Section 7.12(b), the Registrar or the
Paying Agent for the Certificates of such series, including any
Co-Registrar or additional Paying Agent;
(8) if other than as provided in Section 3.02, the denominations in
which the Certificates of such series shall be issuable;
(9) if other than United States dollars, the currency or currencies
(including currency units) in which the Certificates of such series shall
be denominated;
<PAGE>
(10) the specific form of the Certificates of such series (including
the interest rate applicable thereto) and whether or not Certificates of
such series are to be issued as Book-Entry Certificates and, if such
Certificates are to be Book-Entry Certificates, the form of Letter of
Representations, if any (or, in the case of any Certificates denominated in
a currency other than United States dollars and if other than as provided
in Section 3.05, whether and the circumstances under which beneficial
owners of interests in such Certificates in permanent global form may
exchange such interests for Certificates of such series and of like tenor
of any authorized form and denomination);
(11) a description of the Equipment Notes to be acquired and held in
the related Trust and of the related Aircraft and Note Documents;
(12) provisions with respect to the terms for which the definitions
set forth in Article I hereof or the terms of Section 11.01 hereof require
further specification in the related Trust Supplement;
(13) any restrictions (including legends) in respect of ERISA;
(14) whether such series will be subject to an Intercreditor Agreement
and, if so, the specific designation of such Intercreditor Agreement;
(15) whether such series will have the benefit of a Liquidity Facility
and, if so, the specific designation of such Liquidity Facility;
(16) whether there will be a deposit agreement or other comparable
arrangement prior to the delivery of one or more Aircraft and, if so, any
terms appropriate thereto; and
(17) any other terms of the Certificates of such series (which terms
shall not be inconsistent with the provisions of the Trust Indenture Act),
including any terms of the Certificates of such series which may be
required or advisable under United States laws or regulations or advisable
in connection with the marketing of Certificates of the series.
(c) At any time and from time to time after the execution and delivery
of this Basic Agreement and a Trust Supplement forming a Trust and establishing
the terms of Certificates of a series, Certificates of such series shall be
executed, authenticated and delivered by the Trustee to the Person or Persons
specified by the Company upon request of the Company and upon satisfaction or
waiver of any conditions precedent set forth in such Trust Supplement.
Section 2.02. ACQUISITION OF EQUIPMENT NOTES. (a) Unless otherwise
specified in the related Trust Supplement, on or prior to the Issuance Date of
the Certificates of a series, the Trustee shall execute and deliver the related
Note Purchase Agreements in the form delivered to the Trustee by the Company and
shall, subject to the respective terms thereof, perform its obligations under
such Note Purchase Agreements. The Trustee shall issue and sell such
Certificates, in authorized denominations and in such Fractional Undivided
Interests, so as to result in the receipt of consideration in an amount equal to
the aggregate purchase price of the Equipment Notes contemplated to be purchased
by the Trustee under the related Note Purchase Agreements and, concurrently
<PAGE>
therewith, the Trustee shall purchase, pursuant to the terms and conditions of
the Note Purchase Agreements, such Equipment Notes at a purchase price equal to
the amount of such consideration so received. Except as provided in Sections
3.03, 3.04 and 3.06 hereof, the Trustee shall not execute, authenticate or
deliver Certificates of such series in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are subject to the
provisions of Subsection (b) below.
(b) If on or prior to the Issuance Date with respect to a series of
Certificates the Company shall deliver to the Trustee a Postponement Notice
relating to one or more Postponed Notes, the Trustee shall postpone the purchase
of such Postponed Notes and shall deposit into an escrow account (as to such
Trust, the "ESCROW ACCOUNT") to be maintained as part of the related Trust an
amount equal to the purchase price of such Postponed Notes (the "ESCROWED
FUNDS"). The portion of the Escrowed Funds so deposited with respect to any
particular Postponed Notes shall be invested by the Trustee at the written
direction and risk of, and for the benefit of, the Responsible Party in
Specified Investments (i) maturing no later than any scheduled Transfer Date
relating to such Postponed Notes or (ii) if no such Transfer Date has been
scheduled, maturing on the next Business Day, or (iii) if the Company has given
notice to the Trustee that such Postponed Notes will not be issued, maturing on
the next applicable Special Distribution Date, if such investments are
reasonably available for purchase. The Trustee shall make withdrawals from the
Escrow Account only as provided in this Agreement. Upon request of the Company
on one or more occasions and the satisfaction or waiver of the closing
conditions specified in the applicable Note Purchase Agreements on or prior to
the related Cut-off Date, the Trustee shall purchase the applicable Postponed
Notes with the Escrowed Funds withdrawn from the Escrow Account. The purchase
price shall equal the principal amount of such Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments (other than any earnings thereon) shall be reinvested by the Trustee
at the written direction and risk of, and for the benefit of, the Responsible
Party in Specified Investments maturing as provided in the preceding paragraph.
Any earnings on Specified Investments received from time to time by
the Trustee shall be promptly distributed to the Responsible Party. The
Responsible Party shall pay to the Trustee for deposit to the relevant Escrow
Account an amount equal to any losses on such Specified Investments as incurred.
On the Initial Regular Distribution Date in respect of the Certificates of any
series, the Responsible Party will pay (in immediately available funds) to the
Trustee an amount equal to the interest that would have accrued on any Postponed
Notes with respect to such Certificates, if any, purchased after the Issuance
Date if such Postponed Notes had been purchased on the Issuance Date, from the
Issuance Date to, but not including, the date of the purchase of such Postponed
Notes by the Trustee.
<PAGE>
If, in respect of the Certificates of any series, the Company notifies
the Trustee prior to the Cut-off Date that any Postponed Notes will not be
issued on or prior to the Cut-off Date for any reason, on the next Special
Distribution Date for such Certificates occurring not less than 15 days
following the date of such notice, (i) the Responsible Party shall pay to the
Trustee for deposit in the related Special Payments Account, in immediately
available funds, an amount equal to the interest that would have accrued on the
Postponed Notes designated in such notice at a rate equal to the interest rate
applicable to such Certificates from the Issuance Date to, but not including,
such Special Distribution Date and (ii) the Trustee shall transfer an amount
equal to that amount of Escrowed Funds that would have been used to purchase the
Postponed Notes designated in such notice and the amount paid by the Responsible
Party pursuant to the immediately preceding clause (i) to the related Special
Payments Account for distribution as a Special Payment in accordance with the
provisions hereof.
If, on such Cut-off Date, an amount equal to less than all of the
Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the next such
Special Distribution Date occurring not less than 15 days following such Cut-off
Date (i) the Responsible Party shall pay to the Trustee for deposit in such
Special Payments Account, in immediately available funds, an amount equal to the
interest that would have accrued on such Postponed Notes contemplated to be
purchased with such unused Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) but not so purchased at a rate equal to
the interest rate applicable to such Certificates from the Issuance Date to, but
not including, such Special Distribution Date and (ii) the Trustee shall
transfer such unused Escrowed Funds and the amount paid by the Responsible Party
pursuant to the immediately preceding clause (i) to such Special Payments
Account for distribution as a Special Payment in accordance with the provisions
hereof.
Section 2.03. ACCEPTANCE BY TRUSTEE. The Trustee, upon the execution
and delivery of a Trust Supplement creating a Trust and establishing a series of
Certificates, shall acknowledge its acceptance of all right, title and interest
in and to the Trust Property to be acquired pursuant to Section 2.02 hereof and
the related Note Purchase Agreements and shall declare that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Certificateholders of such series, upon the trusts herein and in such
Trust Supplement set forth. By the acceptance of each Certificate of such series
issued to it under this Agreement, each initial Holder of such series as grantor
of such Trust shall thereby join in the creation and declaration of such Trust.
Section 2.04. LIMITATION OF POWERS. Each Trust shall be constituted
solely for the purpose of making the investment in the Equipment Notes provided
for in the related Trust Supplement, and, except as set forth herein, the
Trustee shall not be authorized or empowered to acquire any other investments or
engage in any other activities and, in particular, the Trustee shall not be
authorized or empowered to do anything that would cause such Trust to fail to
qualify as a "grantor trust" for federal income tax purposes (including, as
subject to this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or otherwise, or taking
any action with respect to any such Aircraft once acquired).
<PAGE>
ARTICLE III
THE CERTIFICATES
Section 3.01. FORM, DENOMINATION AND EXECUTION OF CERTIFICATES. The
Certificates of each series shall be issued in fully registered form without
coupons and shall be substantially in the form attached hereto as Exhibit A,
with such omissions, variations and insertions as are permitted by this
Agreement, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange on which such Certificates may be
listed or to conform to any usage in respect thereof, or as may, consistently
herewith, be determined by the Trustee or the officers executing such
Certificates, as evidenced by the Trustee's or respective officers' execution of
the Certificates.
Except as provided in Section 3.05, the definitive Certificates of
such series shall be typed, printed, lithographed or engraved or produced by any
combination of these methods or may be produced in any other manner permitted by
the rules of any securities exchange on which the Certificates may be listed,
all as determined by the officers executing such Certificates, as evidenced by
their execution of such Certificates.
Except as otherwise provided in the related Trust Supplement, the
Certificates of each series shall be issued in minimum denominations of $1,000
or integral multiples thereof except that one Certificate of such series may be
issued in a different denomination.
The Certificates of such series shall be executed on behalf of the
Trustee by manual or facsimile signature of a Responsible Officer of the
Trustee. Certificates of any series bearing the manual or facsimile signature of
an individual who was, at the time when such signature was affixed, authorized
to sign on behalf of the Trustee shall be valid and binding obligations of the
Trustee, notwithstanding that such individual has ceased to be so authorized
prior to the authentication and delivery of such Certificates or did not hold
such office at the date of such Certificates.
Section 3.02. AUTHENTICATION OF CERTIFICATES. (a) On the Issuance
Date, the Trustee shall duly execute, authenticate and deliver Certificates of
each series in authorized denominations equalling in the aggregate the aggregate
principal amount of the Equipment Notes that may be purchased by the Trustee
pursuant to the related Note Purchase Agreements, and evidencing the entire
ownership of the related Trust. Thereafter, the Trustee shall duly execute,
authenticate and deliver the Certificates of such series as herein provided.
(b) No Certificate of any series shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit A hereto executed by the Trustee by manual signature, and such
certificate of authentication upon any Certificate shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates of any series shall be dated the date of
their authentication.
<PAGE>
Section 3.03. TEMPORARY CERTIFICATES. Until definitive Certificates
are ready for delivery, the Trustee shall execute, authenticate and deliver
temporary Certificates of each series. Temporary Certificates of each series
shall be substantially in the form of definitive Certificates of such series but
may have insertions, substitutions, omissions and other variations determined to
be appropriate by the officers executing the temporary Certificates of such
series, as evidenced by their execution of such temporary Certificates. If
temporary Certificates of any series are issued, the Trustee will cause
definitive Certificates of such series to be prepared without unreasonable
delay. After the preparation of definitive Certificates of such series, the
temporary Certificates shall be exchangeable for definitive Certificates upon
surrender of such temporary Certificates at the office or agency of the Trustee
designated for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute, authenticate and deliver in exchange
therefor a like face amount of definitive Certificates of like series, in
authorized denominations and of a like Fractional Undivided Interest. Until so
exchanged, such temporary Certificates shall be entitled to the same benefits
under this Agreement as definitive Certificates.
Section 3.04. TRANSFER AND EXCHANGE. The Trustee shall cause to be
kept at the office or agency to be maintained by it in accordance with the
provisions of Section 7.12 a register (the "REGISTER") for each series of
Certificates in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of Certificates of
such series and of transfers and exchanges of such Certificates as herein
provided. The Trustee shall initially be the registrar (the "REGISTRAR") for the
purpose of registering such Certificates of each series and transfers and
exchanges of such Certificates as herein provided.
All Certificates issued upon any registration of transfer or exchange
of Certificates of any series shall be valid obligations of the applicable
Trust, evidencing the same interest therein, and entitled to the same benefits
under this Agreement, as the Certificates of such series surrendered upon such
registration of transfer or exchange.
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office or such other office or agency, the Trustee shall
execute, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of like series, in authorized
denominations of a like aggregate Fractional Undivided Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of like series, in authorized denominations and of a like
aggregate Fractional Undivided Interest, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange, the Trustee shall execute, authenticate and deliver
the Certificates that the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar duly executed by
the Certificateholder thereof or its attorney duly authorized in writing.
<PAGE>
No service charge shall be made to a Certificateholder for any
registration of transfer or exchange of Certificates, but the Trustee shall
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates. All
Certificates surrendered for registration of transfer or exchange shall be
cancelled and subsequently destroyed by the Trustee.
Section 3.05. BOOK-ENTRY AND DEFINITIVE CERTIFICATES. (a) The
Certificates of any series may be issued in the form of one or more typewritten
Certificates representing the Book-Entry Certificates of such series, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Company. In such case, the Certificates of such series
delivered to The Depository Trust Company shall initially be registered on the
Register in the name of CEDE & Co., the nominee of the initial Clearing Agency,
and no Certificate Owner will receive a definitive certificate representing such
Certificate Owner's interest in the Certificates of such series, except as
provided above and in Subsection (d) below. As to the Certificates of any
series, unless and until definitive, fully registered Certificates (the
"DEFINITIVE CERTIFICATES") have been issued pursuant to Subsection (d) below:
(i) the provisions of this Section 3.05 shall be in full force and
effect;
(ii) the Company, the Paying Agent, the Registrar and the Trustee may
deal with the Clearing Agency Participants for all purposes (including the
making of distributions on the Certificates) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 3.05 conflict
with any other provisions of this Agreement (other than the provisions of
any Trust Supplement expressly amending this Section 3.05 as permitted by
this Basic Agreement), the provisions of this Section 3.05 shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
Participants; and until Definitive Certificates are issued pursuant to
Subsection (d) below, the Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit
distributions of principal, interest and premium, if any, on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Certificateholders of such series
holding Certificates of such series evidencing a specified percentage of
the Fractional Undivided Interests in the related Trust, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Clearing Agency
Participants owning or representing, respectively, such required percentage
of the beneficial interest in Certificates of such series and has delivered
such instructions to the Trustee. The Trustee shall have no obligation to
determine whether the Clearing Agency has in fact received any such
instructions.
<PAGE>
(b) Whenever notice or other communication to the Certificateholders
of such series is required under this Agreement, unless and until Definitive
Certificates shall have been issued pursuant to Subsection (d) below, the
Trustee shall give all such notices and communications specified herein to be
given to Certificateholders of such series to the Clearing Agency.
(c) Unless and until Definitive Certificates of a series are issued
pursuant to Subsection (d) below, on the Record Date prior to each applicable
Regular Distribution Date and Special Distribution Date, the Trustee will
request from the Clearing Agency a securities position listing setting forth the
names of all Clearing Agency Participants reflected on the Clearing Agency's
books as holding interests in the Certificates on such Record Date.
(d) If with respect to the Certificates of any series (i) the Company
advises the Trustee in writing that the Clearing Agency is no longer willing or
able to discharge properly its responsibilities and the Trustee or the Company
is unable to locate a qualified successor, (ii) the Company, at its option,
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency or (iii) after the occurrence of an Event of
Default, Certificate Owners of Book-Entry Certificates of such series evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in the related Trust, by Act of such Certificate Owners delivered to the Company
and the Trustee, advise the Company, the Trustee and the Clearing Agency through
the Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency Participants is no longer in the
best interests of the Certificate Owners of such series, then the Trustee shall
notify all Certificate Owners of such series, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive
Certificates. Upon surrender to the Trustee of all the Certificates of such
series held by the Clearing Agency, accompanied by registration instructions
from the Clearing Agency Participants for registration of Definitive
Certificates in the names of Certificate Owners of such series, the Trustee
shall issue and deliver the Definitive Certificates of such series in accordance
with the instructions of the Clearing Agency. Neither the Company, the
Registrar, the Paying Agent nor the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such registration instructions. Upon the issuance of
Definitive Certificates of such series, the Trustee shall recognize the Person
in whose name the Definitive Certificates are registered in the Register as
Certificateholders hereunder. Neither the Company nor the Trustee shall be
liable if the Trustee or the Company is unable to locate a qualified successor
Clearing Agency.
(e) Except as otherwise provided in the related Trust Supplement, the
Trustee shall enter into the applicable Letter of Representations with respect
to such series of Certificates and fulfill its responsibilities thereunder.
(f) The provisions of this Section 3.05 may be made inapplicable to
any series or may be amended with respect to any series in the related Trust
Supplement.
Section 3.06. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate is surrendered to the Registrar, or the Registrar
<PAGE>
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such destroyed, lost or stolen Certificate has been acquired by a BONA FIDE
purchaser, and PROVIDED, HOWEVER, that the requirements of Section 8-405 of the
Uniform Commercial Code in effect in any applicable jurisdiction are met, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates of like series, in authorized denominations and of like Fractional
Undivided Interest and bearing a number not contemporaneously outstanding.
In connection with the issuance of any new Certificate under this
Section 3.06, the Trustee shall require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 3.06 shall
constitute conclusive evidence of the appropriate Fractional Undivided Interest
in the related Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.
The provisions of this Section 3.06 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.07. PERSONS DEEMED OWNERS. Prior to due presentment of a
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent may treat the Person in whose name any Certificate is registered
(as of the day of determination) as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent
shall be affected by any notice to the contrary.
Section 3.08. CANCELLATION. All Certificates surrendered for payment
or transfer or exchange shall, if surrendered to the Trustee or any agent of the
Trustee other than the Registrar, be delivered to the Registrar for cancellation
and shall promptly be cancelled by it. No Certificates shall be authenticated in
lieu of or in exchange for any Certificates cancelled as provided in this
Section 3.08, except as expressly permitted by this Agreement. All cancelled
Certificates held by the Registrar shall be destroyed and a certification of
their destruction delivered to the Trustee.
Section 3.09. LIMITATION OF LIABILITY FOR PAYMENTS. All payments and
distributions made to Certificateholders of any series in respect of the
Certificates of such series shall be made only from the Trust Property of the
related Trust and only to the extent that the Trustee shall have sufficient
income or proceeds from such Trust Property to make such payments in accordance
with the terms of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to the income and
proceeds from the Trust Property of the related Trust for any payment or
distribution due to such Certificateholder pursuant to the terms of this
<PAGE>
Agreement and that it will not have any recourse to the Company, the Trustee,
the Loan Trustees, the Owner Trustees or the Owner Participants, except as
otherwise expressly provided herein or in the related Intercreditor Agreement.
The Company is a party to this Agreement solely for purposes of
meeting the requirements of the Trust Indenture Act, and therefore shall not
have any right, obligation or liability hereunder (except as otherwise expressly
provided herein).
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. CERTIFICATE ACCOUNT AND SPECIAL PAYMENTS ACCOUNT. (a)
The Trustee shall establish and maintain on behalf of the Certificateholders of
each series a Certificate Account as one or more non-interest-bearing accounts.
The Trustee shall hold such Certificate Account in trust for the benefit of the
Certificateholders of such series, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a Scheduled
Payment is made to the Trustee (under an Intercreditor Agreement, if applicable)
with respect to the Certificates of such series, the Trustee, upon receipt
thereof, shall immediately deposit the aggregate amount of such Scheduled
Payment in such Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders of each series a Special Payments Account as one or more
accounts, which shall be non-interest bearing except as provided in Section
4.04. The Trustee shall hold the Special Payments Account in trust for the
benefit of the Certificateholders of such series and shall make or permit
withdrawals therefrom only as provided in this Agreement. On each day when one
or more Special Payments are made to the Trustee (under an Intercreditor
Agreement, if applicable) with respect to the Certificates of such series, the
Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of
such Special Payments in such Special Payments Account.
(c) The Trustee shall present (or, if applicable, cause the
Subordination Agent to present) to the related Loan Trustee of each Equipment
Note such Equipment Note on the date of its stated final maturity or, in the
case of any Equipment Note which is to be redeemed in whole pursuant to the
related Indenture, on the applicable redemption date under such Indenture.
Section 4.02. DISTRIBUTIONS FROM CERTIFICATE ACCOUNT AND SPECIAL
PAYMENTS ACCOUNT. (a) On each Regular Distribution Date with respect to a series
of Certificates or as soon thereafter as the Trustee has confirmed receipt of
the payment of all or any part of the Scheduled Payments due on the Equipment
Notes held (subject to the Intercreditor Agreement) in the related Trust on such
date, the Trustee shall distribute out of the applicable Certificate Account the
entire amount deposited therein pursuant to Section 4.01(a). There shall be so
distributed to each Certificateholder of record of such series on the Record
Date with respect to such Regular Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
<PAGE>
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder) of the total amount in the
applicable Certificate Account, except that, with respect to Certificates
registered on the Record Date in the name of a Clearing Agency (or its nominee),
such distribution shall be made by wire transfer in immediately available funds
to the account designated by such Clearing Agency (or such nominee).
(b) On each Special Distribution Date with respect to any Special
Payment with respect to a series of Certificates or as soon thereafter as the
Trustee has confirmed receipt of any Special Payments due on the Equipment Notes
held (subject to the Intercreditor Agreement) in the related Trust or realized
upon the sale of such Equipment Notes, the Trustee shall distribute out of the
applicable Special Payments Account the entire amount of such applicable Special
Payment deposited therein pursuant to Section 4.01(b). There shall be so
distributed to each Certificateholder of record of such series on the Record
Date with respect to such Special Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the related Trust held by such Certificateholder) of the total amount in the
applicable Special Payments Account on account of such Special Payment, except
that, with respect to Certificates registered on the Record Date in the name of
a Clearing Agency (or its nominee), such distribution shall be made by wire
transfer in immediately available funds to the account designated by such
Clearing Agency (or such nominee).
(c) The Trustee shall, at the expense of the Company, cause notice of
each Special Payment with respect to a series of Certificates to be mailed to
each Certificateholder of such series at his address as it appears in the
Register. In the event of redemption or purchase of Equipment Notes held in the
related Trust, such notice shall be mailed not less than 15 days prior to the
Special Distribution Date for the Special Payment resulting from such redemption
or purchase, which Special Distribution Date shall be the date of such
redemption or purchase. In the event that the Trustee receives a notice from the
Company that Postponed Notes will not be purchased by the Trustee pursuant to
Section 2.02, such notice of Special Payment shall be mailed as soon as
practicable after receipt of such notice from the Company and shall state the
Special Distribution Date for such Special Payment, which shall occur 15 days
after the date of such notice of Special Payment or (if such 15th day is not
practicable) as soon as practicable thereafter. In the event that any Special
Payment is to be made pursuant to the last paragraph of Section 2.02(b) hereof,
there shall be mailed on the Cut-off Date (or, if such mailing on the Cut-off
Date is not practicable, as soon as practicable after the Cut-off Date), notice
of such Special Payment stating the Special Distribution Date for such Special
Payment, which shall occur 15 days after the date of such notice of such Special
Payment (or, if such 15th day is not practicable, as soon as practicable
thereafter). In the case of any other Special Payments, such notice shall be
mailed as soon as practicable after the Trustee has confirmed that it has
received funds for such Special Payment, stating the Special Distribution Date
for such Special Payment which shall occur not less than 15 days after the date
of such notice and as soon as practicable thereafter. Notices mailed by the
Trustee shall set forth:
<PAGE>
(i) the Special Distribution Date and the Record Date therefor (except
as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment (taking into account any
payment to be made by the Company pursuant to Section 2.02(b)) for each
$1,000 face amount Certificate and the amount thereof constituting
principal, premium, if any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a Regular
Distribution Date for the Certificates of such series, the total amount to
be received on such date for each $1,000 face amount Certificate.
If the amount of premium, if any, payable upon the redemption or purchase of an
Equipment Note has not been calculated at the time that the Trustee mails notice
of a Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in any Trust is
cancelled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder of the related series at
its address as it appears on the Register.
Section 4.03. STATEMENTS TO CERTIFICATEHOLDERS. (a) On each Regular
Distribution Date and Special Distribution Date, the Trustee will include with
each distribution of a Scheduled Payment or Special Payment, as the case may be,
to Certificateholders of the related series a statement setting forth the
information provided below. Such statement shall set forth (per $1,000 aggregate
principal amount of Certificate as to (i) and (ii) below) the following
information:
(i) the amount of such distribution hereunder allocable to principal
and the amount allocable to premium, if any;
(ii) the amount of such distribution hereunder allocable to interest;
and
(iii) the Pool Balance and the Pool Factor of the related Trust.
With respect to the Certificates registered in the name of a Clearing
Agency or its nominee, on the Record Date prior to each Distribution Date, the
Trustee will request from the Clearing Agency a securities position listing
setting forth the names of all the Clearing Agency Participants reflected on the
Clearing Agency's books as holding interests in the Certificates on such Record
Date. On each Distribution Date, the applicable Trustee will mail to each such
Clearing Agency Participant the statement described above and will make
available additional copies as requested by such Clearing Agency Participant for
forwarding to holders of interests in the Certificates.
<PAGE>
(b) Within a reasonable period of time after the end of each calendar
year but not later than the latest date permitted by law, the Trustee shall
furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) above with respect to the
related Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar year, for the
applicable portion of such year, and such other items as are readily available
to the Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholder's preparation of its federal
income tax returns. With respect to Certificates registered in the name of a
Clearing Agency or its nominee, such statement and such other items shall be
prepared on the basis of information supplied to the Trustee by the Clearing
Agency Participants and shall be delivered by the Trustee to such Clearing
Agency Participants to be available for forwarding by such Clearing Agency
Participants to the holders of interests in the Certificates in the manner
described in Section 4.03(a).
Section 4.04. INVESTMENT OF SPECIAL PAYMENT MONEYS. Any money received
by the Trustee pursuant to Section 4.01(b) representing a Special Payment which
is not distributed on the date received shall, to the extent practicable, be
invested in Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made pursuant to this
Section 4.04 shall be in such Permitted Investments having maturities not later
than the date that such moneys are required to be used to make the payment
required under Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity. The Trustee
shall have no liability with respect to any investment made pursuant to this
Section 4.04, other than by reason of the willful misconduct or negligence of
the Trustee. All income and earnings from such investments shall be distributed
on such Special Distribution Date as part of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. MAINTENANCE OF CORPORATE EXISTENCE. The Company, at its
own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
PROVIDED, HOWEVER, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
Section 5.02. CONSOLIDATION, MERGER, ETC. The Company shall not
consolidate with or merge into any other corporation or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
<PAGE>
be (i) organized and validly existing under the laws of the United States
of America or any state thereof or the District of Columbia, (ii) a
"citizen of the United States" as defined in 49 U.S.C. ss. 40102(a)(15), as
amended, and (iii) a United States certificated air carrier, if and so long
as such status is a condition of entitlement to the benefits of Section
1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C. ss. 1110),
with respect to the Leases or the Aircraft owned by the Company;
(b) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
execute and deliver to the Trustee applicable to the Certificates of each
series a duly authorized, valid, binding and enforceable agreement in form
and substance reasonably satisfactory to the Trustee containing an
assumption by such successor corporation or Person of the due and punctual
performance and observance of each covenant and condition of the Note
Documents and of this Agreement applicable to the Certificates of each
series to be performed or observed by the Company; and
(c) the Company shall have delivered to the Trustee an Officer's
Certificate of the Company and an Opinion of Counsel of the Company
reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, conveyance, transfer or lease and the assumption
agreement mentioned in clause (b) above comply with this Section 5.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of the Company as an entirety in accordance
with this Section 5.02, the successor corporation or Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Agreement applicable
to the Certificates of each series with the same effect as if such successor
corporation or Person had been named as the Company herein. No such conveyance,
transfer or lease of substantially all of the assets of the Company as an
entirety shall have the effect of releasing any successor corporation or Person
which shall have become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Note Document applicable to
the Certificates of such series to which it is a party.
ARTICLE VI
DEFAULT
Section 6.01. EVENTS OF DEFAULT. (a) EXERCISE OF REMEDIES. Upon the
occurrence and during the continuation of any Indenture Event of Default under
any Indenture, the Trustee may (i) to the extent it is the Controlling Party at
such time (as determined pursuant to the related Intercreditor Agreement),
direct the exercise of remedies as provided in such related Intercreditor
Agreement and (ii) if there is no related Intercreditor Agreement, direct the
exercise of remedies or take other action as provided in the relevant Indenture
<PAGE>
to the extent that it may do so as the holder of the Equipment Notes issued
under such Indenture and held in the related Trust.
(b) PURCHASE RIGHTS OF CERTIFICATEHOLDERS. At any time after the
occurrence and during the continuation of a Triggering Event, each
Certificateholder of Certificates of certain series (each, a "POTENTIAL
PURCHASER" and, collectively, the "POTENTIAL PURCHASERS") will have certain
rights to purchase the Certificates of one or more other series, all as set
forth in the Trust Supplement applicable to the Certificates held by such
Potential Purchaser. The purchase price with respect to the Certificates of any
series shall be equal to the Pool Balance of the Certificates of such series,
together with accrued and unpaid interest thereon to the date of such purchase,
without premium, but including any other amounts then due and payable to the
Certificateholders of such series under this Agreement, any related
Intercreditor Agreement or any other Note Document or on or in respect of the
Certificates of such series; PROVIDED, HOWEVER, that if such purchase occurs
after a Record Date, such purchase price shall be reduced by the amount to be
distributed hereunder on the related Distribution Date (which deducted amounts
shall remain distributable to, and may be retained by, the Certificateholder as
of such Record Date); PROVIDED, FURTHER, that no such purchase of Certificates
of such series shall be effective unless the purchasing Certificateholder (each,
a "PURCHASING CERTIFICATEHOLDER" and, collectively, the "PURCHASING
CERTIFICATEHOLDERS") shall certify to the Trustee that contemporaneously with
such purchase, one or more Purchasing Certificateholders are purchasing,
pursuant to the terms of this Agreement and the other Agreements, if any,
relating to the Certificates of a series that are subject to the same
Intercreditor Agreement (such other Agreements, the "OTHER AGREEMENTS"), the
Certificates of each such series that the Trust Supplement applicable to the
Certificates held by the Purchasing Certificateholder specifies may be purchased
by such Purchasing Certificateholder. Each payment of the purchase price of the
Certificates of any series shall be made to an account or accounts designated by
the Trustee and each such purchase shall be subject to the terms of this Section
6.01. By acceptance of its Certificate, each Certificateholder (each, a "SELLING
CERTIFICATEHOLDER" and, collectively, the "SELLING CERTIFICATEHOLDERS") of a
series that is subject to purchase by Potential Purchasers, all as set forth in
the Trust Supplement applicable to the Certificates held by the Selling
Certificateholders, agrees that, at any time after the occurrence and during the
continuance of a Triggering Event, it will, upon payment of the purchase price
specified herein by one or more Purchasing Certificateholders, forthwith sell,
assign, transfer and convey to such Purchasing Certificateholder (without
recourse, representation or warranty of any kind except for its own acts), all
of the right, title, interest and obligation of such Selling Certificateholder
in this Agreement, any related Intercreditor Agreement, the related Liquidity
Facility, the related Note Documents and all Certificates of such series held by
such Selling Certificateholder (excluding all right, title and interest under
any of the foregoing to the extent such right, title or interest is with respect
to an obligation not then due and payable as respects any action or inaction or
state of affairs occurring prior to such sale) and the Purchasing
Certificateholder shall assume all of such Selling Certificateholder's
obligations under this Agreement, any related Intercreditor Agreement, the
related Liquidity Facility and the related Note Documents. The Certificates of
such series will be deemed to be purchased on the date payment of the purchase
price is made notwithstanding the failure of any Selling Certificateholder to
deliver any Certificates of such series and, upon such a purchase, (i) the only
rights of the Selling Certificateholders will be to deliver the Certificates to
the Purchasing Certificateholder and receive the purchase price for such
<PAGE>
Certificates of such series and (ii) if the Purchasing Certificateholder shall
so request, such Selling Certificateholder will comply with all of the
provisions of Section 3.04 hereof to enable new Certificates of such series to
be issued to the Purchasing Certificateholder in such denominations as it shall
request. All charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the Purchasing Certificateholder.
Section 6.02. INCIDENTS OF SALE OF EQUIPMENT NOTES. Upon any sale of
all or any part of the Equipment Notes held in the Trust made either under the
power of sale given under this Agreement or otherwise for the enforcement of
this Agreement, the following shall be applicable:
(1) CERTIFICATEHOLDERS AND TRUSTEE MAY PURCHASE EQUIPMENT NOTES. Any
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase any of the Equipment Notes held
in the Trust, and upon compliance with the terms of sale, may hold, retain,
possess and dispose of such Equipment Notes in their own absolute right
without further accountability.
(2) RECEIPT OF TRUSTEE SHALL DISCHARGE PURCHASER. The receipt of the
Trustee making such sale shall be a sufficient discharge to any purchaser
for his purchase money, and, after paying such purchase money and receiving
such receipt, such purchaser or its personal representative or assigns
shall not be obliged to see to the application of such purchase money, or
be in any way answerable for any loss, misapplication or non-application
thereof.
(3) APPLICATION OF MONEYS RECEIVED UPON SALE. Any moneys collected by
the Trustee upon any sale made either under the power of sale given by this
Agreement or otherwise for the enforcement of this Agreement shall be
applied as provided in Section 4.02.
Section 6.03. JUDICIAL PROCEEDINGS INSTITUTED BY TRUSTEE; TRUSTEE MAY
BRING SUIT. If there shall be a failure to make payment of the principal of,
premium, if any, or interest on any Equipment Note held in the related Trust, or
if there shall be any failure to pay Rent (as defined in the relevant Lease)
under any Lease when due and payable, then the Trustee, in its own name and as
trustee of an express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of any related Intercreditor
Agreement and any related Note Documents (subject to rights of the applicable
Owner Trustee or Owner Participant to cure any such failure to pay principal of,
premium, if any, or interest on any Equipment Note or to pay Rent under any
Lease in accordance with the applicable Indenture), shall be entitled and
empowered to institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on such Equipment
Notes or under such Lease and may prosecute any such claim or proceeding to
judgment or final decree with respect to the whole amount of any such sums so
due and unpaid.
Section 6.04. CONTROL BY CERTIFICATEHOLDERS. Subject to Section 6.03
and any related Intercreditor Agreement, the Certificateholders holding
<PAGE>
Certificates of a series evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the related Trust shall have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee with respect to such Trust or pursuant to the terms of
such Intercreditor Agreement, or exercising any trust or power conferred on the
Trustee under this Agreement or such Intercreditor Agreement, including any
right of the Trustee as Controlling Party under such Intercreditor Agreement or
as holder of the Equipment Notes held in the related Trust; PROVIDED, HOWEVER,
that
(1) such Direction shall not in the opinion of the Trustee be in
conflict with any rule of law or with this Agreement and would not involve
the Trustee in personal liability or expense,
(2) the Trustee shall not determine that the action so directed would
be unjustly prejudicial to the Certificateholders of such series not taking
part in such Direction, and
(3) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such Direction.
Section 6.05. WAIVER OF PAST DEFAULTS. Subject to any related
Intercreditor Agreement, the Certificateholders holding Certificates of a series
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust (i) may on behalf of all of the Certificateholders
waive any past Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to instruct the
applicable Loan Trustee to waive any past Indenture Event of Default under any
related Indenture and its consequences, and thereby annul any Direction given by
such Certificateholders or the Trustee to such Loan Trustee with respect
thereto, except a default:
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates of a series, or
(2) in the payment of the principal of (premium, if any) or interest
on the Equipment Notes held in the related Trust, or
(3) in respect of a covenant or provision hereof which under Article
IX hereof cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate of a series affected
thereby.
Upon any such waiver, such default shall cease to exist with respect to the
Certificates of such series and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose and any direction given by the
Trustee on behalf of the Certificateholders of such series to the relevant Loan
Trustee shall be annulled with respect thereto; but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment
Notes issued under the relevant Indenture to waive the corresponding Indenture
Event of Default.
<PAGE>
Section 6.06. RIGHT OF CERTIFICATEHOLDERS TO RECEIVE PAYMENTS NOT TO
BE IMPAIRED. Anything in this Agreement to the contrary notwithstanding,
including, without limitation, Section 6.07 hereof, but subject to any related
Intercreditor Agreement, the right of any Certificateholder to receive
distributions of payments required pursuant to Section 4.02 hereof on the
applicable Certificates when due, or to institute suit for the enforcement of
any such payment on or after the applicable Regular Distribution Date or Special
Distribution Date, shall not be impaired or affected without the consent of such
Certificateholder.
Section 6.07. CERTIFICATEHOLDERS MAY NOT BRING SUIT EXCEPT UNDER
CERTAIN CONDITIONS. A Certificateholder of any series shall not have the right
to institute any suit, action or proceeding at law or in equity or otherwise
with respect to this Agreement, for the appointment of a receiver or for the
enforcement of any other remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given written notice
to the Trustee of a continuing Event of Default;
(2) Certificateholders holding Certificates of such series evidencing
Fractional Undivided Interests aggregating not less than 25% of the related
Trust shall have requested the Trustee in writing to institute such action,
suit or proceeding and shall have offered to the Trustee indemnity as
provided in Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute any such
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by Certificateholders
holding Certificates of such series evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the related
Trust.
It is understood and intended that no one or more of the
Certificateholders of any series shall have any right in any manner whatsoever
hereunder or under the related Trust Supplement or under the Certificates of
such series to (i) surrender, impair, waive, affect, disturb or prejudice any
property in the Trust Property of the related Trust, or the lien of any related
Indenture on any property subject thereto, or the rights of the
Certificateholders of such series or the holders of the related Equipment Notes,
(ii) obtain or seek to obtain priority over or preference with respect to any
other such Certificateholder of such series or (iii) enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all the Certificateholders of such series subject to the
provisions of this Agreement.
Section 6.08. REMEDIES CUMULATIVE. Every remedy given hereunder to the
Trustee or to any of the Certificateholders of any series shall not be exclusive
of any other remedy or remedies, and every such remedy shall be cumulative and
in addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
<PAGE>
Section 6.09. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Agreement, or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, a court may require
any party litigant in such suit to file an undertaking to pay the costs of such
suit, and may assess costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; PROVIDED, HOWEVER, that neither
this Section 6.09 nor the Trust Indenture Act shall be deemed to authorize any
court to require such an undertaking or to make such an assessment in any suit
instituted by the Company.
ARTICLE VII
THE TRUSTEE
Section 7.01. CERTAIN DUTIES AND RESPONSIBILITIES. (a) Except during
the continuance of an Event of Default in respect of a Trust, the Trustee
undertakes to perform such duties in respect of such Trust as are specifically
set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement against the Trustee.
(b) In case an Event of Default in respect of a Trust has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Agreement in respect of such Trust, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a)of this Section 7.01; and
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 7.01.
Section 7.02. NOTICE OF DEFAULTS. As promptly as practicable after,
and in any event within 90 days after, the occurrence of any default (as such
term is defined below) hereunder known to the Trustee, the Trustee shall
transmit by mail to the Company, any related Owner Trustees, any related Owner
Participants, the related Loan Trustees and the Certificateholders holding
Certificates of the related series in accordance with Section 313(c) of the
Trust Indenture Act, notice of such default hereunder known to the Trustee,
unless such default shall have been cured or waived; PROVIDED, HOWEVER, that,
except in the case of a default in the payment of the principal, premium, if
any, or interest on any Equipment Note, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
<PAGE>
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith shall determine that the withholding of such notice is in
the interests of the Certificateholders of the related series. For the purpose
of this Section 7.02 in respect of any Trust, the term "DEFAULT" means any event
that is, or after notice or lapse of time or both would become, an Event of
Default in respect of that Trust.
Section 7.03. CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of
Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request;
(c) whenever in the administration of this Agreement or any
Intercreditor Agreement, the Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein specifically
prescribed) may, in the absence of bad faith on its part, rely upon an
Officer's Certificate of the Company, any related Owner Trustee or any
related Loan Trustee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Intercreditor
Agreement at the Direction of any of the Certificateholders pursuant to
this Agreement or any Intercreditor Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security or
indemnity against the cost, expenses and liabilities which might be
incurred by it in compliance with such Direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under this
Agreement or any Intercreditor Agreement or perform any duties under this
Agreement or any Intercreditor Agreement either directly or by or through
agents or attorneys, and the Trustee shall not be responsible for any
<PAGE>
misconduct or negligence on the part of any agent or attorney appointed
with due care by it under this Agreement or any Intercreditor Agreement;
(h) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the Direction
of the Certificateholders holding Certificates of any series evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the related Trust relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement or any Intercreditor Agreement; and
(i) the Trustee shall not be required to expend or risk its own funds
in the performance of any of its duties under this Agreement, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
CERTIFICATES. The recitals contained herein and in the Certificates of each
series, except the certificates of authentication, shall not be taken as the
statements of the Trustee, and the Trustee assumes no responsibility for their
correctness. Subject to Section 7.15, the Trustee makes no representations as to
the validity or sufficiency of this Basic Agreement, any Equipment Notes, any
Intercreditor Agreement, the Certificates of any series, any Trust Supplement or
any Note Documents, except that the Trustee hereby represents and warrants that
this Basic Agreement has been, and each Trust Supplement, each Certificate, each
Note Purchase Agreement and each Intercreditor Agreement of, or relating to,
each series will be executed and delivered by one of its officers who is duly
authorized to execute and deliver such document on its behalf.
Section 7.05. MAY HOLD CERTIFICATES. The Trustee, any Paying Agent,
Registrar or any of their Affiliates or any other agent, in their respective
individual or any other capacity, may become the owner or pledgee of
Certificates and, subject to Sections 310(b) and 311 of the Trust Indenture Act,
if applicable, may otherwise deal with the Company, any Owner Trustees or the
Loan Trustees with the same rights it would have if it were not Trustee, Paying
Agent, Registrar or such other agent.
Section 7.06. MONEY HELD IN TRUST. Money held by the Trustee or the
Paying Agent in trust under this Agreement need not be segregated from other
funds except to the extent required herein or by law and neither the Trustee nor
the Paying Agent shall have any liability for interest upon any such moneys
except as provided for herein.
Section 7.07. COMPENSATION AND REIMBURSEMENT. The Company agrees:
(1) to pay, or cause to be paid, to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); and
<PAGE>
(2) except as otherwise expressly provided herein or in any Trust
Supplement, to reimburse, or cause to be reimbursed, the Trustee upon its
request for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Basic Agreement, any Trust Supplement or any Intercreditor
Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence, willful
misconduct or bad faith or as may be incurred due to the Trustee's breach
of its representations and warranties set forth in Section 7.15; and
(3) to indemnify, or cause to be indemnified, the Trustee with respect
to the Certificates of any series, pursuant to the particular sections of
the Note Purchase Agreements specified in the related Trust Supplement.
The Trustee shall be entitled to reimbursement from, and shall have a
lien prior to the Certificates of each series upon, all property and funds held
or collected by the Trustee in its capacity as Trustee with respect to such
series or the related Trust for any tax incurred without negligence, bad faith
or willful misconduct, on its part, arising out of or in connection with the
acceptance or administration of such Trust (other than any tax attributable to
the Trustee's compensation for serving as such), including any costs and
expenses incurred in contesting the imposition of any such tax. The Trustee
shall notify the Company of any claim for any tax for which it may seek
reimbursement. If the Trustee reimburses itself from the Trust Property of such
Trust for any such tax, it will mail a brief report within 30 days setting forth
the amount of such tax and the circumstances thereof to all Certificateholders
of such series as their names and addresses appear in the Register.
Section 7.08. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY. Each Trust
shall at all times have a Trustee which shall be eligible to act as a trustee
under Section 310(a) of the Trust Indenture Act and shall have a combined
capital and surplus of at least $75,000,000 (or 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). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 7.08 the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.08 to act as Trustee of any
Trust, the Trustee shall resign immediately as Trustee of such Trust in the
manner and with the effect specified in Section 7.09.
Section 7.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a)
No resignation or removal of the Trustee and no appointment of a successor
<PAGE>
Trustee of any Trust pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as Trustee of any or all Trusts
by giving prior written notice thereof to the Company, the Authorized Agents,
the related Owner Trustees and the related Loan Trustees. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Company,
the related Owner Trustees and the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Direction of the
Certificateholders of the related series holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in such Trust delivered to the Trustee and to the Company, the related Owner
Trustees and the related Loan Trustees.
(d) If at any time in respect of any Trust:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act, if applicable, after written request therefor by the Company
or by any Certificateholder who has been a BONA FIDE Certificateholder for
at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent, or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder of the related series who has been a BONA FIDE
Certificateholder for at least six months may, on behalf of itself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee of such Trust.
(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax (as defined below) in respect of any Trust which
has been or is likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign as Trustee of
such Trust hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The Company shall
promptly appoint a successor Trustee of such Trust in a jurisdiction where there
are no Avoidable Taxes. As used herein, an "AVOIDABLE TAX" in respect of such
Trust means a state or local tax: (i) upon (w) such Trust, (x) such Trust
Property, (y) Certificateholders of such Trust or (z) the Trustee for which the
Trustee is entitled to seek reimbursement from the Trust Property of such Trust,
and (ii) which would be avoided if the Trustee were located in another state, or
jurisdiction within a state, within the United States of America. A tax shall
<PAGE>
not be an Avoidable Tax in respect of any Trust if the Company or any Owner
Trustee shall agree to pay, and shall pay, such tax.
(f) If the Trustee shall resign, be removed or become incapable of
acting as Trustee of any Trust or if a vacancy shall occur in the office of the
Trustee of any Trust for any cause, the Company shall promptly appoint a
successor Trustee of such Trust. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a successor
Trustee of such Trust shall be appointed by Direction of the Certificateholders
of the related series holding Certificates of such series evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in such
Trust delivered to the Company, the related Owner Trustees, the related Loan
Trustee and the retiring Trustee, then the successor Trustee of such Trust so
appointed shall, with the approval of the Company of such appointment, which
approval shall not be unreasonably withheld, forthwith upon its acceptance of
such appointment, become the successor Trustee of such Trust and supersede the
successor Trustee of such Trust appointed as provided above. If no successor
Trustee shall have been so appointed as provided above and accepted appointment
in the manner hereinafter provided, the resigning Trustee or any
Certificateholder who has been a BONA FIDE Certificateholder of the related
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee of such Trust.
(g) The successor Trustee of a Trust shall give notice of the
resignation and removal of the Trustee and appointment of the successor Trustee
by mailing written notice of such event by first-class mail, postage prepaid, to
the Certificateholders of the related series as their names and addresses appear
in the Register. Each notice shall include the name of such successor Trustee
and the address of its Corporate Trust Office.
Section 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor
Trustee appointed hereunder shall execute and deliver to the Company and to the
retiring Trustee with respect to any or all Trusts an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
with respect to such Trusts shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on request of
the Company or the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all such rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all Trust Property held by such retiring
Trustee in respect of such Trusts hereunder, subject nevertheless to its lien,
if any, provided for in Section 7.07. Upon request of any such successor
Trustee, the Company, the retiring Trustee and such successor Trustee shall
execute and deliver any and all instruments containing such provisions as shall
be necessary or desirable to transfer and confirm to, and for more fully and
certainly vesting in, such successor Trustee all such rights, powers and trusts.
If a successor Trustee is appointed with respect to one or more (but
not all) Trusts, the Company, the predecessor Trustee and each successor Trustee
with respect to any Trust shall execute and deliver a supplemental agreement
hereto which shall contain such provisions as shall be deemed necessary or
<PAGE>
desirable to confirm that all the rights, powers, trusts and duties of the
predecessor Trustee with respect to the Trusts as to which the predecessor
Trustee is not retiring shall continue to be vested in the predecessor Trustee,
and shall add to or change any of the provisions of this Basic Agreement and the
applicable Trust Supplements as shall be necessary to provide for or facilitate
the administration of the Trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental agreement shall
constitute such Trustees as co-Trustees of the same Trust and that each such
Trustee shall be Trustee of separate Trusts.
No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article VII.
Section 7.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder;
PROVIDED, HOWEVER, that such corporation shall be otherwise qualified and
eligible under this Article VII, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any
Certificates shall have been executed or authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion or consolidation
to such authenticating Trustee may adopt such execution or authentication and
deliver the Certificates so executed or authenticated with the same effect as if
such successor Trustee had itself executed or authenticated such Certificates.
Section 7.12. MAINTENANCE OF AGENCIES. (a) With respect to each series
of Certificates, there shall at all times be maintained an office or agency in
the location set forth in Section 12.04 where Certificates of such series may be
presented or surrendered for registration of transfer or for exchange, and for
payment thereof, and where notices and demands, to or upon the Trustee in
respect of such Certificates or this Agreement may be served; PROVIDED, HOWEVER,
that, if it shall be necessary that the Trustee maintain an office or agency in
another location with respect to the Certificates of any series (E.G., the
Certificates of such series shall be represented by Definitive Certificates and
shall be listed on a national securities exchange), the Trustee will make all
reasonable efforts to establish such an office or agency. Written notice of the
location of each such other office or agency and of any change of location
thereof shall be given by the Trustee to the Company, any Owner Trustees, the
Loan Trustees (in the case of any Owner Trustee or Loan Trustee, at its address
specified in the Note Documents or such other address as may be notified to the
Trustee) and the Certificateholders of such series. In the event that no such
office or agency shall be maintained or no such notice of location or of change
of location shall be given, presentations and demands may be made and notices
may be served at the Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent
hereunder with respect to the Certificates of each series. Each such Authorized
Agent shall be a bank or trust company, shall be a corporation organized and
doing business under the laws of the United States or any state, with a combined
capital and surplus of at least $75,000,000, or a corporation having a combined
<PAGE>
capital and surplus in excess of $5,000,000, the obligations of which are
guaranteed by a corporation organized and doing business under the laws of the
United States or any state, with a combined capital and surplus of at least
$75,000,000, and shall be authorized under such laws to exercise corporate trust
powers, subject to supervision by federal or state authorities. The Trustee
shall initially be the Paying Agent and, as provided in Section 3.04, Registrar
hereunder with respect to the Certificates of each series. Each Registrar shall
furnish to the Trustee, at stated intervals of not more than six months, and at
such other times as the Trustee may request in writing, a copy of the Register
maintained by such Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent, if such
successor corporation is otherwise eligible under this Section 7.12, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company, any related Owner Trustees
and the related Loan Trustees. The Company may, and at the request of the
Trustee shall, at any time terminate the agency of any Authorized Agent by
giving written notice of termination to such Authorized Agent and to the
Trustee. Upon the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible under this
Section 7.12 (when, in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed), the Company shall
promptly appoint one or more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the Authorized Agent
which has resigned or whose agency has been terminated or who shall have ceased
to be eligible under this Section 7.12. The Company shall give written notice of
any such appointment made by it to the Trustee, any related Owner Trustees and
the related Loan Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders of the related series as their names
and addresses appear on the Register for such series.
(e) The Company agrees to pay, or cause to be paid, from time to time
to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses.
Section 7.13. MONEY FOR CERTIFICATE PAYMENTS TO BE HELD IN TRUST. All
moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section 7.13. Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect to which such
money was deposited.
<PAGE>
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.14. REGISTRATION OF EQUIPMENT NOTES IN TRUSTEE'S NAME.
Subject to the provisions of any Intercreditor Agreement, the Trustee agrees
that all Equipment Notes to be purchased by any Trust and Permitted Investments,
if any, shall be issued in the name of the Trustee as trustee for the applicable
Trust or its nominee and held by the Trustee in trust for the benefit of the
Certificateholders of such series, or, if not so held, the Trustee or its
nominee shall be reflected as the owner of such Equipment Notes or Permitted
Investments, as the case may be, in the register of the issuer of such Equipment
Notes or Permitted Investments, as the case may be.
Section 7.15. REPRESENTATIONS AND WARRANTIES OF TRUSTEE67. The Trustee
hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation organized and
validly existing in good standing under the laws of the State of Delaware;
(b) the Trustee has full power, authority and legal right to execute,
deliver and perform this Agreement, any Intercreditor Agreement and the
Note Purchase Agreements and has taken all necessary action to authorize
the execution, delivery and performance by it of this Agreement, any
Intercreditor Agreement and the Note Purchase Agreements;
(c) the execution, delivery and performance by the Trustee of this
Agreement, any Intercreditor Agreement and the Note Purchase Agreements (i)
will not violate any provision of any United States federal law or the law
of the state of the United States where it is located governing the banking
and trust powers of the Trustee or any order, writ, judgment, or decree of
any court, arbitrator or governmental authority applicable to the Trustee
or any of its assets, (ii) will not violate any provision of the articles
of association or by-laws of the Trustee, and (iii) will not violate any
provision of, or constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of any lien on any
properties included in the Trust Property pursuant to the provisions of any
mortgage, indenture, contract, agreement or other undertaking to which it
is a party, which violation, default or lien could reasonably be expected
to have an adverse effect on the Trustee's performance or ability to
perform its duties hereunder or thereunder or on the transactions
contemplated herein or therein;
(d) the execution, delivery and performance by the Trustee of this
Agreement, any Intercreditor Agreement and the Note Purchase Agreements
will not require the authorization, consent, or approval of, the giving of
notice to, the filing or registration with, or the taking of any other
<PAGE>
action in respect of, any governmental authority or agency of the United
States or the state of the United States where it is located regulating the
banking and corporate trust activities of the Trustee; and
(e) this Agreement, any Intercreditor Agreement and the Note Purchase
Agreements have been duly executed and delivered by the Trustee and constitute
the legal, valid and binding agreements of the Trustee, enforceable against it
in accordance with their respective terms; PROVIDED, HOWEVER, that
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and (ii) general principles of equity.
Section 7.16. WITHHOLDING TAXES; INFORMATION REPORTING. As to the
Certificates of any series, the Trustee, as trustee of the related grantor trust
created by this Agreement, shall exclude and withhold from each distribution of
principal, premium, if any, and interest and other amounts due under this
Agreement or under the Certificates of such series any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Certificates of such series, to withhold such amounts
and timely pay the same to the appropriate authority in the name of and on
behalf of the Certificateholders of such series, that it will file any necessary
withholding tax returns or statements when due, and that, as promptly as
possible after the payment thereof, it will deliver to each such
Certificateholder of such series appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such
Certificateholders may reasonably request from time to time. The Trustee agrees
to file any other information reports as it may be required to file under United
States law.
Section 7.17. TRUSTEE'S LIENS. The Trustee in its individual capacity
agrees that it will, in respect of each Trust created by this Agreement, at its
own cost and expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance,
security interest or claim ("TRUSTEE'S LIENS") on or with respect to the Trust
Property of such Trust which is attributable to the Trustee either (i) in its
individual capacity and which is unrelated to the transactions contemplated by
this Agreement or the related Note Documents or (ii) as Trustee hereunder or in
its individual capacity and which arises out of acts or omissions which are not
contemplated by this Agreement.
Section 7.18. PREFERENTIAL COLLECTION OF CLAIMS. The Trustee shall
comply with Section 311(a) of the Trust Indenture Act, excluding any creditor
relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee
shall resign or be removed as Trustee, it shall be subject to Section 311(a) of
the Trust Indenture Act to the extent provided therein.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. THE COMPANY TO FURNISH TRUSTEE WITH NAMES AND ADDRESSES
OF CERTIFICATEHOLDERS. The Company will furnish to the Trustee within 15 days
<PAGE>
after each Record Date with respect to a Scheduled Payment, and at such other
times as the Trustee may request in writing within 30 days after receipt by the
Company of any such request, a list, in such form as the Trustee may reasonably
require, of all information in the possession or control of the Company as to
the names and addresses of the Certificateholders of each series, in each case
as of a date not more than 15 days prior to the time such list is furnished;
provided, HOWEVER, that so long as the Trustee is the sole Registrar for such
series, no such list need be furnished; and PROVIDED FURTHER, HOWEVER, that no
such list need be furnished for so long as a copy of the Register is being
furnished to the Trustee pursuant to Section 7.12.
Section 8.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
CERTIFICATEHOLDERS. The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Certificateholders of each
series contained in the most recent list furnished to the Trustee as provided in
Section 7.12 or Section 8.01, as the case may be, and the names and addresses of
Certificateholders of each series received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a
new list so furnished.
Section 8.03. REPORTS BY TRUSTEE. Within 60 days after May 15 of each
year commencing with the first full year following the issuance of any series of
Certificates, the Trustee shall transmit to the Certificateholders of such
series, as provided in Section 313(c) of the Trust Indenture Act, a brief report
dated as of such May 15, if required by Section 313(a) of the Trust Indenture
Act.
Section 8.04. REPORTS BY THE COMPANY. The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the SEC, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Company is required to file with the SEC
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934, as amended; or, if the Company is not required to file information,
documents or reports pursuant to either of such sections, then to file with
the Trustee and the SEC, in accordance with rules and regulations
prescribed by the SEC, such of the supplementary and periodic information,
documents and reports which may be required pursuant to section 13 of the
Securities Exchange Act of 1934, as amended, in respect of a security
listed and registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with the Trustee and the SEC, in accordance with the rules
and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants of the Company provided for in this Agreement, as
may be required by such rules and regulations, including, in the case of
annual reports, if required by such rules and regulations, certificates or
opinions of independent public accountants, conforming to the requirements
of Section 1.02;
<PAGE>
(c) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such summaries
of any information, documents and reports required to be filed by the
Company pursuant to subsections (a) and (b) of this Section 8.04 as may be
required by rules and regulations prescribed by the SEC; and
(d) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his knowledge of the
Company's compliance with all conditions and covenants under this Agreement
(it being understood that for purposes of this paragraph (d), such
compliance shall be determined without regard to any period of grace or
requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF
CERTIFICATEHOLDERS. Without the consent of the Certificateholders, the Company
may (but will not be required to), and the Trustee (subject to Section 9.03)
shall, at the Company's request, at any time and from time to time, enter into
one or more agreements supplemental hereto or, if applicable, to an
Intercreditor Agreement or a Liquidity Facility, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to provide for the formation of a Trust, the issuance of a series
of Certificates and other matters contemplated by Section 2.01(b); or
(2) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein contained or of the Company's obligations under any Intercreditor
Agreement or any Liquidity Facility; or
(3) to add to the covenants of the Company for the benefit of the
Certificateholders of any series, or to surrender any right or power
conferred upon the Company in this Agreement, any Intercreditor Agreement
or any Liquidity Facility; or
(4) to correct or supplement any provision in this Agreement, any
Intercreditor Agreement or any Liquidity Facility which may be defective or
inconsistent with any other provision herein or therein or to cure any
ambiguity or to modify any other provision with respect to matters or
questions arising under this Agreement, any Intercreditor Agreement or any
Liquidity Facility, PROVIDED, HOWEVER, that any such action shall not
materially adversely affect the interests of the Certificateholders of any
series; to correct any mistake in this Agreement, any Intercreditor
Agreement or any Liquidity Facility; or, as provided in any Intercreditor
<PAGE>
Agreement, to give effect to or provide for a Replacement Liquidity
Facility (as defined in such Intercreditor Agreement); or
(5) to comply with any requirement of the SEC, any applicable law,
rules or regulations of any exchange or quotation system on which the
Certificates of any series are listed or of any regulatory body; or
(6) to modify, eliminate or add to the provisions of this Agreement,
any Intercreditor Agreement or any Liquidity Facility to such extent as
shall be necessary to continue the qualification of this Agreement, any
Intercreditor Agreement or any Liquidity Facility (including any
supplemental agreement) under the Trust Indenture Act or under any similar
Federal statute hereafter enacted, and to add to this Agreement, any
Intercreditor Agreement or any Liquidity Facility such other provisions as
may be expressly permitted by the Trust Indenture Act, excluding, however,
the provisions referred to in Section 316(a)(2) of the Trust Indenture Act
as in effect at the date as of which this Basic Agreement was executed or
any corresponding provision in any similar Federal statute hereafter
enacted; or
(7) to evidence and provide for the acceptance of appointment under
this Agreement, any Intercreditor Agreement or any Liquidity Facility by a
successor Trustee with respect to one or more Trusts and to add to or
change any of the provisions of this Agreement, any Intercreditor Agreement
or any Liquidity Facility as shall be necessary to provide for or
facilitate the administration of the Trust, pursuant to the requirements of
Section 7.10; or
(8) to provide the information required under Section 7.12 and Section
12.04 as to the Trustee; or
(9) to make any other amendments or modifications hereto, PROVIDED,
HOWEVER, that such amendments or modifications shall apply to Certificates
of any series to be thereafter issued;
PROVIDED, HOWEVER, that no such supplemental agreement shall adversely affect
the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter
J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended,
for U.S. federal income tax purposes.
Section 9.02. SUPPLEMENTAL AGREEMENTS WITH CONSENT OF
CERTIFICATEHOLDERS. With respect to each separate Trust and the series of
Certificates relating thereto, with the consent of the Certificateholders
holding Certificates of such series (including consents obtained in connection
with a tender offer or exchange offer for the Certificates) evidencing
Fractional Undivided Interests aggregating not less than a majority in interest
in such Trust, by Direction of said Certificateholders delivered to the Company
and the Trustee, the Company may (with the consent of the Owner Trustees, if
any, relating to such Certificates, which consent shall not be unreasonably
withheld), but shall not be obligated to, and the Trustee (subject to Section
9.03) shall, enter into an agreement or agreements supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement, any Intercreditor Agreement or any
<PAGE>
Liquidity Facility to the extent applicable to such Certificateholders or of
modifying in any manner the rights and obligations of such Certificateholders
under this Agreement, any Intercreditor Agreement or any Liquidity Facility;
PROVIDED, HOWEVER, that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in such
Trust or distributions that are required to be made herein on any
Certificate of such series, or change any date of payment on any
Certificate of such series, or change the place of payment where, or the
coin or currency in which, any Certificate of such series is payable, or
impair the right to institute suit for the enforcement of any such payment
or distribution on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note included in the Trust
Property of such Trust except as permitted by this Agreement, or otherwise
deprive such Certificateholder of the benefit of the ownership of the
Equipment Notes in such Trust; or
(3) alter the priority of distributions specified in the Intercreditor
Agreement in a manner materially adverse to the interests of the
Certificateholders of any series; or
(4) reduce the specified percentage of the aggregate Fractional
Undivided Interests of such Trust that is required for any such
supplemental agreement, or reduce such specified percentage required for
any waiver (of compliance with certain provisions of this Agreement or
certain defaults hereunder and their consequences) provided for in this
Agreement; or
(5) modify any of the provisions of this Section 9.02 or Section 6.05,
except to increase any such percentage or to provide that certain other
provisions of this Agreement cannot be modified or waived without the
consent of the Certificateholder of each Certificate of such series
affected thereby; or
(6) adversely affect the status of any Trust as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended, for U.S. federal income tax
purposes.
It shall not be necessary for any Direction of such Certificateholders
under this Section 9.02 to approve the particular form of any proposed
supplemental agreement, but it shall be sufficient if such Direction shall
approve the substance thereof.
Section 9.03. DOCUMENTS AFFECTING IMMUNITY OR INDEMNITY. If in the
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or
indemnity in favor of the Trustee under this Basic Agreement or any Trust
Supplement, the Trustee may in its discretion decline to execute such document.
<PAGE>
Section 9.04. EXECUTION OF SUPPLEMENTAL AGREEMENTS. In executing, or
accepting the additional trusts created by, any supplemental agreement permitted
by this Article or the modifications thereby of the trusts created by this
Agreement, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental agreement is authorized or permitted by this Agreement.
Section 9.05. EFFECT OF SUPPLEMENTAL AGREEMENTS. Upon the execution of
any agreement supplemental to this Agreement under this Article, this Basic
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Basic Agreement for all purposes; and every
Certificateholder of each series theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby to the extent applicable to such
series.
Section 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
agreement executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act as then in effect.
Section 9.07. REFERENCE IN CERTIFICATES TO SUPPLEMENTAL AGREEMENTS.
Certificates of each series authenticated and delivered after the execution of
any supplemental agreement applicable to such series pursuant to this Article
may bear a notation in form approved by the Trustee as to any matter provided
for in such supplemental agreement; and, in such case, suitable notation may be
made upon Outstanding Certificates of such series after proper presentation and
demand.
ARTICLE X
AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS
Section 10.01. AMENDMENTS AND SUPPLEMENTS TO INDENTURE AND OTHER NOTE
DOCUMENTS. In the event that the Trustee, as holder (or beneficial owner through
the Subordination Agent) of any Equipment Notes (or as a prospective purchaser
of any Postponed Notes) in trust for the benefit of the Certificateholders of
any series or as Controlling Party under an Intercreditor Agreement, receives
(directly or indirectly through the Subordination Agent) a request for a consent
to any amendment, modification, waiver or supplement under any Indenture, other
Note Document or any other related document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or supplement to each
Certificateholder of such series registered on the Register as of the date of
such notice. The Trustee shall request from the Certificateholders of such
series a Direction as to (a) whether or not to take or refrain from taking (or
direct the Subordination Agent to take or refrain from taking) any action which
a holder of (or, with respect to Postponed Notes, a prospective purchaser of)
such Equipment Note or a Controlling Party has the option to direct, (b) whether
or not to give or execute (or direct the Subordination Agent to give or execute)
any waivers, consents, amendments, modifications or supplements as a holder of
(or, with respect to Postponed Notes, a prospective purchaser of) such Equipment
Note or as Controlling Party and (c) how to vote (or direct the Subordination
<PAGE>
Agent to vote) any Equipment Note (or, with respect to a Postponed Note, its
commitment to acquire such Postponed Note) if a vote has been called for with
respect thereto. Provided such a request for Certificateholder Direction shall
have been made, in directing any action or casting any vote or giving any
consent as the holder of any Equipment Note (or in directing the Subordination
Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee
shall vote for or give consent to any such action with respect to such Equipment
Note (or Postponed Note) in the same proportion as that of (A) the aggregate
face amounts of all Certificates actually voted in favor of or for giving
consent to such action by such Direction of Certificateholders to (B) the
aggregate face amount of all Outstanding Certificates and (ii) as Controlling
Party, the Trustee shall vote as directed in such Certificateholder Direction by
the Certificateholders of such series evidencing a Fractional Undivided Interest
aggregating not less than a majority in interest in the Trust. For purposes of
the immediately preceding sentence, a Certificate shall have been "actually
voted" if the Holder of such Certificate has delivered to the Trustee an
instrument evidencing such Holder's consent to such Direction prior to one
Business Day before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any
Intercreditor Agreement, the Trustee may, with respect to the Certificates of
any series, in its own discretion and at its own direction, consent and notify
the relevant Loan Trustee of such consent (or direct the Subordination Agent to
consent and notify the Loan Trustee of such consent) to any amendment,
modification, waiver or supplement under any related Indenture or any other
related Note Document if an Event of Default hereunder shall have occurred and
be continuing or if such amendment, modification, waiver or supplement will not
materially adversely affect the interests of the Certificateholders of such
series.
ARTICLE XI
TERMINATION OF TRUSTS
Section 11.01. TERMINATION OF THE TRUSTS. In respect of each Trust
created by the Basic Agreement as supplemented by a related Trust Supplement,
the respective obligations and responsibilities of the Company and the Trustee
with respect to such Trust shall terminate upon the distribution to all Holders
of Certificates of the series of such Trust and the Trustee of all amounts
required to be distributed to them pursuant to this Agreement and the
disposition of all property held as part of the Trust Property of such Trust;
PROVIDED, HOWEVER, that in no event shall such Trust continue beyond one hundred
ten (110) years following the date of the execution of the Trust Supplement with
respect to such Trust (or such other final expiration date as may be specified
in such Trust Supplement).
Notice of any termination of a Trust, specifying the applicable
Regular Distribution Date (or applicable Special Distribution Date, as the case
may be) upon which the Certificateholders of any series may surrender their
Certificates to the Trustee for payment of the final distribution and
cancellation, shall be mailed promptly by the Trustee to Certificateholders of
such series not earlier than the minimum number of days and not later than the
maximum number of days specified therefor in the related Trust Supplement
preceding such final distribution specifying (A) the Regular Distribution Date
(or Special Distribution Date, as the case may be) upon which the proposed final
<PAGE>
payment of the Certificates of such series will be made upon presentation and
surrender of Certificates of such series at the office or agency of the Trustee
therein specified, (B) the amount of any such proposed final payment, and (C)
that the Record Date otherwise applicable to such Regular Distribution Date (or
Special Distribution Date, as the case may be) is not applicable, payments being
made only upon presentation and surrender of the Certificates of such series at
the office or agency of the Trustee therein specified. The Trustee shall give
such notice to the Registrar at the time such notice is given to
Certificateholders of such series. Upon presentation and surrender of the
Certificates of such series in accordance with such notice, the Trustee shall
cause to be distributed to Certificateholders of such series amounts
distributable on such Regular Distribution Date (or Special Distribution Date,
as the case may be) pursuant to Section 4.02.
In the event that all of the Certificateholders of such series shall
not surrender their Certificates for cancellation within six months after the
date specified in the above-mentioned written notice, the Trustee shall give a
second written notice to the remaining Certificateholders of such series to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. No additional interest shall accrue on the Certificates of
such series after any Regular Distribution Date (or Special Distribution Date,
as the case may be) of such series, as specified in the first written notice. In
the event that any money held by the Trustee for the payment of distributions on
the Certificates of such series shall remain unclaimed for two years (or such
lesser time as the Trustee shall be satisfied, after 60 days' notice from the
Company, is one month prior to the escheat period provided under applicable law)
after the final distribution date with respect thereto, the Trustee shall pay to
each Loan Trustee the appropriate amount of money relating to such Loan Trustee
and shall give written notice thereof to the related Owner Trustees and the
Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. The death
or incapacity of any Certificateholder of any series shall not operate to
terminate this Agreement or the related Trust, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations, and
liabilities of the parties hereto or any of them.
Section 12.02. LIABILITIES OF CERTIFICATEHOLDERS. Neither the
existence of the Trust nor any provision in this Agreement is intended to or
shall limit the liability the Certificateholders would otherwise incur if the
Certificateholders owned Trust Property as co-owners, or incurred any
obligations of the Trust, directly rather than through the Trust.
Section 12.03. REGISTRATION OF EQUIPMENT NOTES IN NAME OF
SUBORDINATION AGENT. If a Trust is party to an Intercreditor Agreement, the
Trustee agrees that all Equipment Notes to be purchased by such Trust shall be
issued in the name of the Subordination Agent under such Intercreditor Agreement
<PAGE>
or its nominee and held by such Subordination Agent in trust for the benefit of
the Certificateholders, or, if not so held, such Subordination Agent or its
nominee shall be reflected as the owner of such Equipment Notes in the register
of the issuer of such Equipment Notes.
Section 12.04. NOTICES. (a) Unless otherwise specifically provided
herein or in the applicable Trust Supplement with respect to any Trust, all
notices required under the terms and provisions of this Basic Agreement or such
Trust Supplement with respect to such Trust shall be in English and in writing,
and any such notice may be given by United States mail, courier service or
telecopy, and any such notice shall be effective when delivered or received or,
if mailed, three days after deposit in the United States mail with proper
postage for ordinary mail prepaid,
if to the Company:
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Attention: Chief Financial Officer
and General Counsel
Facsimile: (713) 523-2831
if to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Department
Facsimile: (302) 651-8882
Telephone: (302) 651-8584
(b) The Company or the Trustee, by notice to the other, may designate
additional or different addresses for subsequent notices or communications.
(c) Any notice or communication to Certificateholders of any series
shall be mailed by first-class mail to the addresses for Certificateholders of
such series shown on the Register kept by the Registrar and to addresses filed
with the Trustee for Certificate Owners of such series. Failure so to mail a
notice or communication or any defect in such notice or communication shall not
affect its sufficiency with respect to other Certificateholders or Certificate
Owners of such series.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
<PAGE>
(e) If the Company mails a notice or communication to the
Certificateholders of such series, it shall mail a copy to the Trustee and to
each Paying Agent for such series at the same time.
(f) Notwithstanding the foregoing, all communications or notices to
the Trustee shall be deemed to be given only when received by a Responsible
Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy of any
demand, notice or written communication received by the Trustee hereunder from
any Certificateholder, Owner Trustee or Loan Trustee.
Section 12.05. GOVERNING LAW. THIS BASIC AGREEMENT HAS BEEN DELIVERED
IN THE STATE OF NEW YORK AND, TOGETHER WITH ALL TRUST SUPPLEMENTS AND
CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.06. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the related Trust,
or of the Certificates of such series or the rights of the Certificateholders
thereof.
Section 12.07. TRUST INDENTURE ACT CONTROLS. This Agreement is subject
to the provisions of the Trust Indenture Act and shall, to the extent
applicable, be governed by such provisions. If any provision of this Agreement
limits, qualifies or conflicts with another provision which is required to be
included in this Agreement by the Trust Indenture Act, the required provision
shall control.
Section 12.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.09. SUCCESSORS AND ASSIGNS. All covenants, agreements,
representations and warranties in this Agreement by the Trustee and the Company
shall bind and, to the extent permitted hereby, shall inure to the benefit of
and be enforceable by their respective successors and assigns, whether so
expressed or not.
Section 12.10. BENEFITS OF AGREEMENT. Nothing in this Agreement or in
the Certificates of any series, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the
Certificateholders of each series, any benefit or any legal or equitable right,
remedy or claim under this Agreement.
<PAGE>
Section 12.11. LEGAL HOLIDAYS. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate of
any series shall not be a Business Day with respect to such series, then
(notwithstanding any other provision of this Agreement) payment need not be made
on such date, but may be made on the next succeeding Business Day with the same
force and effect as if made on such Regular Distribution Date or Special
Distribution Date, and no interest shall accrue during the intervening period.
Section 12.12. COUNTERPARTS. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 12.13. COMMUNICATION BY CERTIFICATEHOLDERS WITH OTHER
CERTIFICATEHOLDERS. Certificateholders of any series may communicate with other
Certificateholders of such series with respect to their rights under this Basic
Agreement, the related Trust Supplement or the Certificates of such series
pursuant to Section 312(b) of the Trust Indenture Act. The Company, the Trustee
and any and all other persons benefitted by this Agreement shall have the
protection afforded by Section 312(c) of the Trust Indenture Act.
Section 12.14. INTENTION OF PARTIES. The parties hereto intend that
each Trust be classified for U.S. federal income tax purposes as a grantor trust
under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as
amended, and not as a trust or association taxable as a corporation or as a
partnership. The powers granted and obligations undertaken pursuant to this
Agreement shall be so construed so as to further such intent.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
CONTINENTAL AIRLINES, INC.
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, 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 as the registered owner
hereof, Cede & Co., has an interest herein.<F1>
CONTINENTAL AIRLINES ____________ PASS THROUGH TRUST
Pass Through
Certificate, Series __________
Final Regular Distribution Date: _____, ____
evidencing a fractional undivided interest in a
trust, the property of which includes certain
equipment notes each secured by Aircraft owned by
or leased to Continental Airlines, Inc.
Certificate
No.____________ $_________ Fractional Undivided Interest representing
._____% of the Trust per $1,000 face amount
THIS CERTIFIES THAT __________________, for value received, is the
registered owner of a $___________ (________ dollars) Fractional Undivided
Interest in the Continental Airlines Pass Through Trust, Series [___] (the
"TRUST") created by Wilmington Trust Company, as trustee (the "TRUSTEE"),
pursuant to a Pass Through Trust Agreement dated as of [ ], 1997 (the "BASIC
AGREEMENT"), as supplemented by Trust Supplement No. _______ thereto dated
__________, 199_ (collectively, the "Agreement"), between the Trustee and
Continental Airlines, 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 "___%
Continental Airlines Pass Through Certificate, Series ____" (herein called the
"CERTIFICATES"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement. By virtue of its acceptance hereof,
___________________
<F1>This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
<PAGE>
the Certificateholder of this Certificate assents to and agrees to be bound by
the provisions of the Agreement and any related Intercreditor Agreement. The
property of the Trust includes certain Equipment Notes and all rights of the
Trust to receive any payments under any Intercreditor Agreement or Liquidity
Facility (the "TRUST PROPERTY"). Each issue of the Equipment Notes is or will be
secured by, among other things, a security interest in aircraft leased to or
owned by the Company.
The Certificates represent fractional undivided interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement and any
related Intercreditor Agreement, from funds then available to the Trustee, there
will be distributed on each __________ and ___________ (a "REGULAR DISTRIBUTION
DATE"), commencing on _________, 199_, to the Person in whose name this
Certificate is registered at the close of business on the 15th day preceding the
Regular Distribution Date, an amount in respect of the Scheduled Payments on the
Equipment Notes due on such Regular Distribution Date, the receipt of which has
been confirmed by the Trustee, equal to the product of the percentage interest
in the Trust evidenced by this Certificate and an amount equal to the sum of
such Scheduled Payments. Subject to and in accordance with the terms of the
Agreement and any related Intercreditor Agreement, in the event that Special
Payments on the Equipment Notes are received by the Trustee, from funds then
available to the Trustee, there shall be distributed on the applicable Special
Distribution Date, to the Person in whose name this Certificate is registered at
the close of business on the 15th day preceding the Special Distribution Date,
an amount in respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Special Payments so received. If a Regular Distribution
Date or Special Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same force and effect as
if made on such Regular Distribution Date or Special Distribution Date and no
interest shall accrue during the intervening period. The 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 of payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
<PAGE>
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations 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 are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof except that one Certificate may be issued in a
different denomination. 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
<PAGE>
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.
THIS CERTIFICATE AND THE AGREEMENT HAVE EACH BEEN DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES AND
CERTIFICATEHOLDERS HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
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.
CONTINENTAL AIRLINES, INC.
By: WILMINGTON TRUST COMPANY,
as Trustee
By:_____________________________________
Title:__________________________________
Dated: ______________________
<PAGE>
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to
in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
as Trustee
By:_____________________________________
Authorized Officer
TRUST SUPPLEMENT NO. 1997-3A
Dated September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Trustee,
and
CONTINENTAL AIRLINES, INC.
to
PASS THROUGH TRUST AGREEMENT
Dated as of September 25, 1997
$54,440,000
Continental Airlines, Inc.
Pass Through Trust, 1997-3A
Continental Airlines, Inc.
1997-3 Pass Through Certificates,
Class A
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE CERTIFICATES
<S> <C> <C>
Section 1.01. The Certificates ..............................................2
ARTICLE II
DEFINITIONS AND AMENDMENTS
Section 2.01. Definitions ...................................................4
Section 2.02. Amendments ....................................................5
ARTICLE III
DEFAULT
Section 3.01. Purchase Rights of Certificateholders .........................6
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee ...................................................7
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Modified and Ratified .........................8
Section 5.02. GOVERNING LAW .................................................8
Section 5.03. Execution in Counterparts .....................................8
</TABLE>
<PAGE>
This Trust Supplement No. 1997-3A, dated as of September 25, 1997
(herein called the "TRUST SUPPLEMENT"), between Continental Airlines, Inc., a
Delaware corporation (the "COMPANY"), and Wilmington Trust Company (the
"TRUSTEE"), to the Pass Through Trust Agreement, dated as of September 25, 1997,
between the Company and the Trustee (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 having the same
interest rate as, and final maturity dates not later than the final expected
Regular Distribution Date of, the Certificates issued hereunder and shall hold
such Equipment Notes in trust for the benefit of the Class A Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Continental
Airlines Pass Through Trust, Series 1997-3A (the "1997-3A TRUST"), for the
benefit of the Class A Certificateholders, and the initial Class A
Certificateholders as the grantors of the 1997-3A Trust, by their respective
acceptances of the Certificates issued hereunder, join in the creation of this
1997-3A 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; and
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>
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
"Continental Airlines Pass Through Certificates, Series 1997-3A" (hereinafter
defined as the "SERIES 1997-3A CERTIFICATES"). Each Series 1997-3A Certificate
represents a fractional undivided interest in the 1997-3A Trust created hereby.
The Series 1997-3A Certificates shall be the only instruments evidencing a
fractional undivided interest in the 1997-3A Trust.
The terms and conditions applicable to the Series 1997-3A Certificates
are as follows:
(a) The aggregate principal amount of the Series 1997-3A Certificates
that shall be authenticated under the Agreement (except for Series 1997-3A
Certificates authenticated and delivered pursuant to Sections 3.03, 3.04 and
3.06 of the Basic Agreement) is $54,440,000.
(b) The Cut-off Date is October 31, 1997.
(c) The Regular Distribution Date with respect to any payment of
Scheduled Payments means March 24, June 24, September 24 and December 24,
commencing on December 24, 1997 until payment of all of the Scheduled Payments
to be made under the Equipment Notes has been made.
(d) The Special Distribution Date with respect to the Series 1997-3A
Certificates means any Business Day on which a Special Payment is to be
distributed pursuant to the Agreement.
(e)(i) The Series 1997-3A Certificates shall be in the form attached
hereto as Exhibit A. Any Person acquiring or accepting a Series 1997-3A
Certificate or an interest therein will, by such acquisition or acceptance, be
deemed to have represented and warranted to and for the benefit of each Owner
Participant and the Company that either (i) the assets of an employee benefit
plan subject to Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or of a plan subject to Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), have not been used to purchase
Series 1997-3A Certificates or an interest therein or (ii) the purchase and
holding of Series 1997-3A Certificates or interest therein are exempt from the
prohibited transaction restrictions of ERISA and the Code pursuant to one or
more prohibited transaction statutory or administrative exemptions.
(ii) The Series 1997-3A Certificates shall be Book-Entry Certificates
and shall be subject to the conditions set forth in the Letter of
Representations between the Company, the Trustee and the Clearing Agency
attached hereto as Exhibit B.
(f) The Scheduled Payments of principal shall be as set forth in
Exhibit C hereto.
<PAGE>
(g)All or a portion of the proceeds of the Series 1997-3A Certificates
shall be used to purchase the Equipment Notes in the principal amounts specified
below and the unused portion of such proceeds, if any, shall be deposited in the
Escrow Account to be applied as set forth in the Agreement:
<TABLE>
<CAPTION>
REGISTRATION NUMBER PRINCIPAL AMOUNT
------------------- ----------------
<S> <C>
N14925............................................$6,276,000
N15926............................................ 6,276,000
N16927............................................ 6,276,000
N17928............................................ 5,540,000
N13929............................................ 5,540,000
N14930............................................ 6,133,000
N14931............................................ 6,133,000
N15932............................................ 6,133,000
N14933............................................ 6,133,000
</TABLE>
(h) 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>
REGISTRATION NUMBER AIRCRAFT TYPE ENGINE TYPE
- ------------------- ------------- -----------
<S> <C> <C>
N14925 Embraer EMB-145 AE3007A
N15926 Embraer EMB-145 AE3007A
N16927 Embraer EMB-145 AE3007A
N17928 Embraer EMB-145 AE3007A
N13929 Embraer EMB-145 AE3007A
N14930 Embraer EMB-145 AE3007A
N14931 Embraer EMB-145 AE3007A
N15932 Embraer EMB-145 AE3007A
N14933 Embraer EMB-145 AE3007A
</TABLE>
(i) The related Note Documents are listed on Exhibit D.
(j) Notice of any termination of the 1997-3A Trust shall be mailed
promptly by the Trustee to the Class A Certificateholders not earlier than the
60th day and not later than the 15th day next preceding the final distribution
pursuant to the Agreement.
(k) Except as contemplated by Section 2.02(b) of the Basic Agreement,
there will be no deposit agreement or other arrangement prior to the delivery of
any Aircraft.
(l) The Series 1997-3A Certificates are subject to the Intercreditor
Agreement.
(m) The Series 1997-3A Certificates will have the benefit of the
Liquidity Facility.
<PAGE>
(n) The Responsible Party is the Company.
(o) The Final Legal Distribution Date is September 24, 2014.
(p) The particular "sections of the Note Purchase Agreement", for
purposes of clause (3) of Section 7.07 of the Basic Agreement, are Section 9.1
of each Note Purchase Agreement.
ARTICLE II
DEFINITIONS AND AMENDMENTS
Section 2.01. DEFINITIONS. For all purposes of the Basic Agreement as
supplemented by this Trust Supplement, the following capitalized terms shall
have the following meanings:
CLASS A CERTIFICATEHOLDER: Means the Person in whose name a Series
1997-3A Certificate is registered on the Register for the Series 1997-3A
Certificates.
INTERCREDITOR AGREEMENT: Means the Intercreditor Agreement dated as of
the date hereof among the Trustee, the Other Trustees, the Liquidity
Provider named therein and Wilmington Trust Company, as Subordination Agent
and as trustee, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
LIQUIDITY FACILITY: Means the Revolving Credit Agreement dated as of
the date hereof among Wilmington Trust Company, as Subordination Agent and
trustee for the 1997-3A Trust, and ABN AMRO Bank, N.V., acting through its
Chicago Branch, as amended, replaced, supplemented or otherwise modified
from time to time in accordance with its terms and the terms of the
Intercreditor Agreement..
OTHER AGREEMENTS: Means (i) the Basic Agreement as supplemented by
Trust Supplement 1997-3B dated as of the date hereof relating to the
Continental Airlines Pass Through Trust created thereunder and (ii) the
Basic Agreement as supplemented by Trust Supplement No. 1997-3C dated the
date hereof relating to the Continental Airlines Pass Through Trust created
thereunder.
OTHER TRUSTEES: Means each of the trustees under the Other Agreements,
and any successor thereunder or other trustee appointed as provided
therein.
PTC EVENT OF DEFAULT: Means the failure to pay within ten Business
Days of the due date thereof: (i) the outstanding Pool Balance of the
Series 1997-3A Certificates on the Final Legal Distribution Date for such
Series 1997-3A Certificates or (ii) interest due on such Series 1997-3A
Certificates on any Distribution Date (unless the Subordination Agent shall
have made an Interest Drawing or Drawings (as defined in the Intercreditor
Agreement), or a withdrawal or withdrawals pursuant to a cash collateral
account under the Intercreditor Agreement, with respect thereto in an
aggregate amount sufficient to pay such interest and shall have distributed
such amount to the Trustee).
<PAGE>
Section 2.02. AMENDMENTS. Solely for purposes of this Trust
Supplement, Section 2.02(b) of the Basic Agreement shall be amended to read as
follows:
(b) If on or prior to the Issuance Date with respect to a series of
Certificates the Company shall deliver to the Trustee a Postponement Notice
relating to one or more Postponed Notes, the Trustee shall postpone the purchase
of such Postponed Notes and shall deposit into an escrow account (as to such
Trust, the "ESCROW ACCOUNT") to be maintained as part of the related Trust an
amount equal to the purchase price of such Postponed Notes (the "ESCROWED
FUNDS"). The portion of the Escrowed Funds so deposited with respect to any
particular Postponed Notes shall be invested by the Trustee at the written
direction of the Responsible Party in Specified Investments (i) maturing no
later than any scheduled Transfer Date relating to such Postponed Notes or (ii)
if no such Transfer Date has been scheduled, maturing on the next Business Day,
or (iii) if the Company has given notice to the Trustee that such Postponed
Notes will not be issued, maturing on the next applicable Special Distribution
Date, if such investments are reasonably available for purchase. The Trustee
shall make withdrawals from the Escrow Account only as provided in this
Agreement. Upon request of the Company on one or more occasions and the
satisfaction or waiver of the closing conditions specified in the applicable
Note Purchase Agreements on or prior to the related Cut-off Date, the Trustee
shall purchase the applicable Postponed Notes with the Escrowed Funds withdrawn
from the Escrow Account. The purchase price shall equal the principal amount of
such Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments (including any earnings thereon) shall be reinvested by the Trustee
at the written direction of the Responsible Party in Specified Investments
maturing as provided in the preceding paragraph. The Responsible Party shall pay
to the Trustee for deposit to the relevant Escrow Account an amount equal to any
losses on such Specified Investments as incurred.
On the Initial Regular Distribution Date in respect of the
Certificates of any series, the Responsible Party will pay (in immediately
available funds) to the Trustee an amount equal to (i) the interest that would
have accrued on any Postponed Notes with respect to such Certificates, if any,
purchased after the Issuance Date if such Postponed Notes had been purchased on
the Issuance Date, from the Issuance Date to, but not including, the date of the
purchase of such Postponed Notes by the Trustee minus (ii) the earnings on
Specified Investments (disregarding any losses thereon) received (with respect
to the portion of the Escrow Funds deposited with respect to the Postponed Notes
described in clause (i) of this paragraph) by the Trustee from and including the
Issuance Date to, but not including, the Initial Regular Distribution Date.
If, in respect of the Certificates of any series, the Company notifies
the Trustee prior to the Cut-off Date that any Postponed Notes will not be
issued on or prior to the Cut-off Date for any reason, on the next Special
Distribution Date for such Certificates occurring not less than 15 days
<PAGE>
following the date of such notice, (i) the Responsible Party shall pay to the
Trustee for deposit in the related Special Payments Account, in immediately
available funds, an amount equal to (A) the interest that would have accrued on
the Postponed Notes designated in such notice at a rate equal to the interest
rate applicable to such Certificates from the Issuance Date to, but not
including, such Special Distribution Date minus (B) the earnings on Specified
Investments (disregarding any losses thereon) received (with respect to the
portion of the Escrowed Funds deposited with respect to the Postponed Notes
designated in such notice) by the Trustee from and including the Issuance Date
to, but not including, such Special Distribution Date and (ii) the Trustee shall
transfer an amount equal to that amount of Escrowed Funds that would have been
used to purchase the Postponed Notes designated in such notice and the amount
paid by the Responsible Party pursuant to the immediately preceding clause (i)
to the related Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
If, on such Cut-off Date, an amount equal to less than all of the
Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the next such
Special Distribution Date occurring not less than 15 days following such Cut-off
Date, (i) the Responsible Party shall pay to the Trustee for deposit in such
Special Payments Account, in immediately available funds, an amount equal to (A)
the interest that would have accrued on such Postponed Notes contemplated to be
purchased with such unused Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) but not so purchased at a rate equal to
the interest rate applicable to such Certificates from the Issuance Date to, but
not including, such Special Distribution Date minus (B) the earnings on
Specified Investments (disregarding any losses thereon) received (with respect
to the portion of the Escrowed Funds deposited with respect to the Postponed
Notes contemplated to be purchased with such unused Escrowed Funds (other than
Escrowed Funds referred to in the immediately preceding paragraph) but not so
purchased) by the Trustee from and including the Issuance Date to, but not
including, such Special Distribution Date and (ii) the Trustee shall transfer
such unused Escrowed Funds and the amount paid by the Responsible Party pursuant
to the immediately preceding clause (i) to such Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
ARTICLE III
DEFAULT
Section 3.01. PURCHASE RIGHTS OF CERTIFICATEHOLDERS. (a) By acceptance
of its Series 1997-3A Certificate, each Class A Certificateholder agrees that at
any time after the occurrence and during the continuation of a Triggering Event,
(i) Each Class B Certificateholder shall have the right to purchase
all, but not less than all, of the Series 1997-3A Certificates upon ten
days' written notice to the Trustee and each other Class B
Certificateholder, provided that (A) if prior to the end of such ten-day
period any other Class B Certificateholder notifies such purchasing Class B
Certificateholder that such other Class B Certificateholder wants to
participate in such purchase, then such other Class B Certificateholder may
<PAGE>
join with the purchasing Class B Certificateholder to purchase, for the
purchase price and otherwise in accordance with and subject to the
provisions set forth in Section 6.01(b) of the Basic Agreement, all, but
not less than all, of the Series 1997-3A Certificates pro rata based on the
Fractional Undivided Interest in the Class B Trust held by each such Class
B Certificateholder and (B) if prior to the end of such ten-day period any
other Class B Certificateholder fails to notify the purchasing Class B
Certificateholder of such other Class B Certificateholder's desire to
participate in such a purchase, then such other Class B Certificateholder
shall lose its right to purchase the Series 1997-3A Certificates pursuant
to this Section and Section 6.01(b) of the Basic Agreement; and
(ii) Each Class C Certificateholder shall have the right (which shall
not expire upon any purchase of the Series 1997-3A Certificates pursuant to
clause (i) above) to purchase, for the purchase price and otherwise in
accordance with and subject to the provisions set forth in Section 6.01(b)
of the Basic Agreement, all, but not less than all, of the Series 1997-3A
Certificates and the Class B Certificates upon ten days' written notice to
the Trustee, the Class B Trustee and each other Class C Certificateholder,
provided that (A) if prior to the end of such ten-day period any other
Class C Certificateholder notifies such purchasing Class C
Certificateholder that such other Class C Certificateholder wants to
participate in such purchase, then such other Class C Certificateholder may
join with the purchasing Class C Certificateholder to purchase all, but not
less than all, of the Series 1997-3A Certificates and the Class B
Certificates pro rata based on the Fractional Undivided Interest in the
Class C Trust held by each such Class C Certificateholder and (b) if prior
to the end of such ten-day period any other Class C Certificateholder fails
to notify the purchasing Class C Certificateholder of such other Class C
Certificateholder's desire to participate in such a purchase, then such
other Class C Certificateholder shall lose its right to purchase the Series
1997-3A Certificates and the Class B Certificates pursuant to this Section
and Section 6.01(b) of the Basic Agreement.
(b) As used in this Article III, the terms "Class B Certificate",
"Class B Certificateholder", "Class B Trust", "Class B Trustee", "Class C
Certificateholder" and "Class C Trust" shall have the respective meanings
assigned to such terms in the Intercreditor Agreement.
ARTICLE IV
THE TRUSTEE
Section 4.01. THE TRUSTEE. The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement on or prior to the Issuance Date in the
form delivered to the Trustee by the Company. 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.
The Trustee, upon the execution and delivery of this Trust Supplement,
acknowledges its acceptance of all right, title and interest in and to the Trust
Property with respect to the 1997-3A Trust and declares that the Trustee holds
<PAGE>
and will hold such right, title and interest for the benefit of all then present
and future Class A Certificateholders, upon the trusts set forth in the Basic
Agreement and this Trust Supplement. By its acceptance of each Series 1997-3A
Certificate issued to it under the Agreement, each initial Class A
Certificateholder as grantor of the 1997-3A Trust thereby joins in the creation
and declaration of the 1997-3A Trust.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed, by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as if the same were herein set forth at length.
The Trustee represents and warrants that the Intercreditor Agreement
will be duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such document on its behalf.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. BASIC AGREEMENT MODIFIED AND RATIFIED. The Basic
Agreement is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Trust Supplement as if set forth in full herein, and
is in all respects ratified and confirmed, as supplemented and modified by this
Trust Supplement.
Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE CLASS A
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
Section 5.03. 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 thereunto duly
authorized, as of the day and year first written above.
CONTINENTAL AIRLINES, INC.
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
Form of Certificate
[Include on each Certificate that is a Global 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 as the registered owner hereof, Cede & Co., has an interest
herein.]<F1>
CONTINENTAL AIRLINES 1997-3A PASS THROUGH TRUST
Pass Through
Certificate, Series 1997-3A
Issuance Date: September 25, 1997
Final Expected Distribution Date: March 24, 2013
evidencing a fractional undivided interest in a 1997-3A Trust,
the property of which includes certain equipment notes each
secured by aircraft leased to Continental Airlines, Inc.
Certificate
No. _______ $ ________Fractional Undivided Interest representing 0.0018369%
of the Trust per $1,000 of face amount
THIS CERTIFIES THAT _________________, for value received, is the
registered owner of a $_____ (__ dollars) Fractional Undivided Interest in the
Continental Airlines Pass Through Trust, Series 1997-3A (the "TRUST") created by
Wilmington Trust Company, as trustee (the "TRUSTEE"), pursuant to a Pass Through
Trust Agreement, dated as of September 25, 1997 (the "BASIC AGREEMENT"), as
supplemented by Trust Supplement No. 1997-3A thereto, dated as of September 25,
1997 (collectively, the "AGREEMENT") between the Trustee and Continental
Airlines, Inc., a Delaware corporation (the "COMPANY" or the "ISSUER"), 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 "Continental Airlines Pass Through
Certificates, Series 1997-3A" (herein called the "CERTIFICATES"). This
Certificate is issued under and is subject to the terms, provisions and
___________________
<F1> This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
<PAGE>
conditions of the Agreement. By virtue of its acceptance hereof, the
Certificateholder of this Certificate assents to and agrees to be bound by the
provisions of the Agreement and the Intercreditor Agreement. The property of the
Trust includes certain Equipment Notes and all rights of the Trust to receive
payments under the Intercreditor Agreement and the Liquidity Facility (the
"TRUST PROPERTY"). Each issue of the Equipment Notes is secured by, among other
things, a security interest in aircraft leased to the Company.
The Certificates represent fractional undivided interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement and the
Intercreditor Agreement, from funds then available to the Trustee, there will be
distributed on each March 24, June 24, September 24 and December 24 (a "REGULAR
DISTRIBUTION DATE"), commencing on December 24, 1997, 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 and the Intercreditor Agreement, in the event that
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The 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 of payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
<PAGE>
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations set
forth therein, 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 are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof except that one Certificate may be issued in a
different denomination. 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
<PAGE>
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.
Any Person acquiring or accepting this Certificate or an interest
herein will, by such acquisition or acceptance, be deemed to have represented
and warranted to and for the benefit of each Owner Participant and the Company
that either: (i) the assets of an employee benefit plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of
a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended
(the "CODE"), have not been used to purchase this Certificate or an interest
herein or (ii) the purchase and holding of this Certificate or interest herein
are exempt from the prohibited transaction restrictions of ERISA and the Code
pursuant to one or more prohibited transaction statutory or administration
exemptions.
THIS CERTIFICATE AND THE AGREEMENT HAVE EACH BEEN DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
CERTIFICATEHOLDERS HEREUNDER AND THE PARTIES THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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.
CONTINENTAL AIRLINES 1997-3A PASS
THROUGH TRUST
By: WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Title:_______________________________
Dated:____________________________
<PAGE>
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT B
---------
DTC Letter of Representations
<PAGE>
EXHIBIT C
---------
<TABLE>
<CAPTION>
Regular Distribution Dates
and
Scheduled Payments
DATE SCHEDULED PAYMENTS OF PRINCIPAL
- ---- -------------------------------
<S> <C>
December 24, 1997............................... $ 515,402
March 24, 1998.................................. 423,390
June 24, 1998................................... 45,761
September 24, 1998.............................. 149,601
December 24, 1998............................... 566,859
March 24, 1999.................................. 172,652
June 24, 1999................................... 299,241
September 24, 1999.............................. 173,049
December 24, 1999............................... 831,531
March 24, 2000.................................. 348,512
June 24, 2000................................... 374,988
September 24, 2000.............................. 257,094
December 24, 2000............................... 905,558
March 24, 2001.................................. 128,608
June 24, 2001................................... 252,000
September 24, 2001.............................. 167,136
December 24, 2001............................... 775,924
March 24, 2002.................................. 128,608
June 24, 2002................................... 252,000
September 24, 2002.............................. 137,589
December 24, 2002............................... 805,471
March 24, 2003.................................. 128,608
June 24, 2003................................... 252,000
September 24, 2003.............................. 105,870
December 24, 2003............................... 837,190
March 24, 2004.................................. 128,608
June 24, 2004................................... 252,000
September 24, 2004.............................. 71,814
December 24, 2004............................... 999,616
March 24, 2005.................................. 141,238
June 24, 2005................................... 111,002
September 24, 2005.............................. 269,589
December 24, 2005............................... 1,059,437
March 24, 2006.................................. 0
June 24, 2006................................... 213,854
September 24, 2006.............................. 61,588
</TABLE>
<PAGE>
<TABLE>
DATE SCHEDULED PAYMENTS OF PRINCIPAL
- ---- -------------------------------
<S> <C>
December 24, 2006............................... 1,305,826
March 24, 2007.................................. 0
June 24, 2007................................... 213,854
September 24, 2007.............................. 453,429
December 24, 2007............................... 1,855,972
March 24, 2008.................................. 743,622
June 24, 2008................................... 707,548
September 24, 2008.............................. 1,493,224
December 24, 2008............................... 1,689,375
March 24, 2009.................................. 1,975,143
June 24, 2009................................... 2,010,656
September 24, 2009.............................. 2,046,811
December 24, 2009............................... 2,083,614
March 24, 2010.................................. 2,121,079
June 24, 2010................................... 2,159,219
September 24, 2010.............................. 2,198,046
December 24, 2010............................... 2,237,568
March 24, 2011.................................. 2,277,805
June 24, 2011................................... 2,318,762
September 24, 2011.............................. 2,183,728
December 24, 2011............................... 1,819,586
March 24, 2012.................................. 2,104,210
June 24, 2012................................... 1,885,708
September 24, 2012.............................. 1,919,666
December 24, 2012............................... 1,746,152
March 24, 2013.................................. 546,009
</TABLE>
<PAGE>
EXHIBIT D
---------
Related Note Documents
[Information to be inserted post-closing]
TRUST SUPPLEMENT NO. 1997-3B
Dated September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Trustee,
and
CONTINENTAL AIRLINES, INC.
to
PASS THROUGH TRUST AGREEMENT
Dated as of September 25, 1997
$19,731,000
Continental Airlines, Inc.
Pass Through Trust, 1997-3B
Continental Airlines, Inc.
1997-3 Pass Through Certificates,
Class B
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE CERTIFICATES
Section 1.01. The Certificates...............................................2
ARTICLE II
DEFINITIONS AND AMENDMENTS
Section 2.01. Definitions....................................................4
Section 2.02. Amendments.....................................................5
ARTICLE III
DEFAULT
Section 3.01. Purchase Rights of Certificateholders..........................7
ARTICLE IV
THE TRUSTEE
Section 4.01. The Trustee....................................................8
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Modified and Ratified..........................8
Section 5.02. GOVERNING LAW..................................................8
Section 5.03. Execution in Counterparts......................................8
<PAGE>
This Trust Supplement No. 1997-3B, dated as of September 25, 1997
(herein called the "TRUST SUPPLEMENT"), between Continental Airlines, Inc., a
Delaware corporation (the "COMPANY"), and Wilmington Trust Company (the
"TRUSTEE"), to the Pass Through Trust Agreement, dated as of September 25, 1997,
between the Company and the Trustee (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 having the same
interest rate as, and final maturity dates not later than the final expected
Regular Distribution Date of, the Certificates issued hereunder and shall hold
such Equipment Notes in trust for the benefit of the Class B Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Continental
Airlines Pass Through Trust, Series 1997-3B (the "1997-3B Trust"), for the
benefit of the Class B Certificateholders, and the initial Class B
Certificateholders as the grantors of the 1997-3B Trust, by their respective
acceptances of the Certificates issued hereunder, join in the creation of this
1997-3B 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; and
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>
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
"Continental Airlines Pass Through Certificates, Series 1997-3B" (hereinafter
defined as the "Series 1997-3B Certificates"). Each Series 1997-3B Certificate
represents a fractional undivided interest in the 1997-3B Trust created hereby.
The Series 1997-3B Certificates shall be the only instruments evidencing a
fractional undivided interest in the 1997-3B Trust.
The terms and conditions applicable to the Series 1997-3B Certificates
are as follows:
(a) The aggregate principal amount of the Series 1997-3B Certificates
that shall be authenticated under the Agreement (except for Series 1997-3B
Certificates authenticated and delivered pursuant to Sections 3.03, 3.04
and 3.06 of the Basic Agreement) is $19,731,000.
(b) The Cut-off Date is October 31, 1997.
(c) The Regular Distribution Date with respect to any payment of
Scheduled Payments means March 24, June 24, September 24 and December 24,
commencing on December 24, 1997 until payment of all of the Scheduled
Payments to be made under the Equipment Notes has been made.
(d) The Special Distribution Date with respect to the Series 1997-3B
Certificates means any Business Day on which a Special Payment is to be
distributed pursuant to the Agreement.
(e) (i) The Series 1997-3B Certificates shall be in the form attached
hereto as Exhibit A. Any Person acquiring or accepting a Series 1997-3B
Certificate or an interest therein will, by such acquisition or acceptance,
be deemed to have represented and warranted to and for the benefit of each
Owner Participant and the Company that either (i) the assets of an employee
benefit plan subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or of a plan subject to Section 4975 of
the Internal Revenue Code of 1986, as amended (the "CODE"), have not been
used to purchase Series 1997-3B Certificates or an interest therein or (ii)
the purchase and holding of Series 1997-3B Certificates or interest therein
are exempt from the prohibited transaction restrictions of ERISA and the
Code pursuant to one or more prohibited transaction statutory or
administrative exemptions.
(ii) The Series 1997-3B Certificates shall be Book-Entry Certificates
and shall be subject to the conditions set forth in the Letter of
Representations between the Company, the Trustee and the Clearing Agency
attached hereto as Exhibit B.
<PAGE>
(f) The Scheduled Payments of principal shall be as set forth in
Exhibit C hereto.
(g) All or a portion of the proceeds of the Series 1997-3B
Certificates shall be used to purchase the Equipment Notes in the principal
amounts specified below and the unused portion of such proceeds, if any,
shall be deposited in the Escrow Account to be applied as set forth in the
Agreement:
<TABLE>
<CAPTION>
REGISTRATION NUMBER PRINCIPAL AMOUNT
------------------- ----------------
<S> <C>
N14925................................... $1,989,000
N15926................................... 1,989,000
N16927................................... 1,989,000
N17928................................... 2,516,000
N13929................................... 2,516,000
N14930................................... 2,183,000
N14931................................... 2,183,000
N15932................................... 2,183,000
N14933................................... 2,183,000
</TABLE>
(h) 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>
REGISTRATION NUMBER AIRCRAFT TYPE ENGINE TYPE
------------------- ------------- -----------
<S> <C> <C>
N14925 Embraer EMB-145 AE3007A
N15926 Embraer EMB-145 AE3007A
N16927 Embraer EMB-145 AE3007A
N17928 Embraer EMB-145 AE3007A
N13929 Embraer EMB-145 AE3007A
N14930 Embraer EMB-145 AE3007A
N14931 Embraer EMB-145 AE3007A
N15932 Embraer EMB-145 AE3007A
N14933 Embraer EMB-145 AE3007A
</TABLE>
(i) The related Note Documents are listed on Exhibit D.
(j) Notice of any termination of the 1997-3B Trust shall be mailed
promptly by the Trustee to the Class B Certificateholders not earlier than
the 60th day and not later than the 15th day next preceding the final
distribution pursuant to the Agreement.
(k) Except as contemplated by Section 2.02(b) of the Basic Agreement,
there will be no deposit agreement or other arrangement prior to the
delivery of any Aircraft.
(l) The Series 1997-3B Certificates are subject to the Intercreditor
Agreement.
<PAGE>
(m) The Series 1997-3B Certificates will have the benefit of the
Liquidity Facility.
(n) The Responsible Party is the Company.
(o) The Final Legal Distribution Date is December 24, 2008.
(p) The particular "sections of the Note Purchase Agreement", for
purposes of clause (3) of Section 7.07 of the Basic Agreement, are Section
9.1 of each Note Purchase Agreement.
ARTICLE II
DEFINITIONS AND AMENDMENTS
Section 2.01. DEFINITIONS. For all purposes of the Basic Agreement as
supplemented by this Trust Supplement, the following capitalized terms shall
have the following meanings:
CLASS B CERTIFICATEHOLDER: Means the Person in whose name a Series
1997-3B Certificate is registered on the Register for the Series 1997-3B
Certificates.
INTERCREDITOR AGREEMENT: Means the Intercreditor Agreement dated as of
the date hereof among the Trustee, the Other Trustees, the Liquidity
Provider named therein and Wilmington Trust Company, as Subordination Agent
and as trustee, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
LIQUIDITY FACILITY: Means the Revolving Credit Agreement dated as of
the date hereof among Wilmington Trust Company, as Subordination Agent and
trustee for the 1997-3B Trust, and ABN AMRO Bank, N.V., acting through its
Chicago Branch, as amended, replaced, supplemented or otherwise modified
from time to time in accordance with its terms and the terms of the
Intercreditor Agreement..
OTHER AGREEMENTS: Means (i) the Basic Agreement as supplemented by
Trust Supplement 1997-3A dated as of the date hereof relating to the
Continental Airlines Pass Through Trust created thereunder and (ii) the
Basic Agreement as supplemented by Trust Supplement No. 1997-3C dated the
date hereof relating to the Continental Airlines Pass Through Trust created
thereunder.
OTHER TRUSTEES: Means each of the trustees under the Other Agreements,
and any successor thereunder or other trustee appointed as provided
therein.
PTC EVENT OF DEFAULT: Means the failure to pay within ten Business
Days of the due date thereof: (i) the outstanding Pool Balance of the
Series 1997-3B Certificates on the Final Legal Distribution Date for such
Series 1997-3B Certificates or (ii) interest due on such Series 1997-3B
Certificates on any Distribution Date (unless the Subordination Agent shall
have made an Interest Drawing or Drawings (as defined in the Intercreditor
<PAGE>
Agreement), or a withdrawal or withdrawals pursuant to a cash collateral
account under the Intercreditor Agreement, with respect thereto in an
aggregate amount sufficient to pay such interest and shall have distributed
such amount to the Trustee).
Section 2.02. AMENDMENTS. Solely for purposes of this Trust
Supplement, Section 2.02(b) of the Basic Agreement shall be amended to read as
follows:
(b) If on or prior to the Issuance Date with respect to a series of
Certificates the Company shall deliver to the Trustee a Postponement Notice
relating to one or more Postponed Notes, the Trustee shall postpone the
purchase of such Postponed Notes and shall deposit into an escrow account
(as to such Trust, the "ESCROW ACCOUNT") to be maintained as part of the
related Trust an amount equal to the purchase price of such Postponed Notes
(the "ESCROWED Funds"). The portion of the Escrowed Funds so deposited with
respect to any particular Postponed Notes shall be invested by the Trustee
at the written direction of the Responsible Party in Specified Investments
(i) maturing no later than any scheduled Transfer Date relating to such
Postponed Notes or (ii) if no such Transfer Date has been scheduled,
maturing on the next Business Day, or (iii) if the Company has given notice
to the Trustee that such Postponed Notes will not be issued, maturing on
the next applicable Special Distribution Date, if such investments are
reasonably available for purchase. The Trustee shall make withdrawals from
the Escrow Account only as provided in this Agreement. Upon request of the
Company on one or more occasions and the satisfaction or waiver of the
closing conditions specified in the applicable Note Purchase Agreements on
or prior to the related Cut-off Date, the Trustee shall purchase the
applicable Postponed Notes with the Escrowed Funds withdrawn from the
Escrow Account. The purchase price shall equal the principal amount of such
Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any
applicable Transfer Date, any proceeds received on the maturity of such
Specified Investments (including any earnings thereon) shall be reinvested
by the Trustee at the written direction of the Responsible Party in
Specified Investments maturing as provided in the preceding paragraph. The
Responsible Party shall pay to the Trustee for deposit to the relevant
Escrow Account an amount equal to any losses on such Specified Investments
as incurred.
On the Initial Regular Distribution Date in respect of the
Certificates of any series, the Responsible Party will pay (in immediately
available funds) to the Trustee an amount equal to (i) the interest that
would have accrued on any Postponed Notes with respect to such
Certificates, if any, purchased after the Issuance Date if such Postponed
Notes had been purchased on the Issuance Date, from the Issuance Date to,
but not including, the date of the purchase of such Postponed Notes by the
Trustee minus (ii) the earnings on Specified Investments (disregarding any
losses thereon) received (with respect to the portion of the Escrow Funds
deposited with respect to the Postponed Notes described in clause (i) of
<PAGE>
this paragraph) by the Trustee from and including the Issuance Date to, but
not including, the Initial Regular Distribution Date.
If, in respect of the Certificates of any series, the Company notifies
the Trustee prior to the Cut-off Date that any Postponed Notes will not be
issued on or prior to the Cut-off Date for any reason, on the next Special
Distribution Date for such Certificates occurring not less than 15 days
following the date of such notice, (i) the Responsible Party shall pay to
the Trustee for deposit in the related Special Payments Account, in
immediately available funds, an amount equal to (A) the interest that would
have accrued on the Postponed Notes designated in such notice at a rate
equal to the interest rate applicable to such Certificates from the
Issuance Date to, but not including, such Special Distribution Date minus
(B) the earnings on Specified Investments (disregarding any losses thereon)
received (with respect to the portion of the Escrowed Funds deposited with
respect to the Postponed Notes designated in such notice) by the Trustee
from and including the Issuance Date to, but not including, such Special
Distribution Date and (ii) the Trustee shall transfer an amount equal to
that amount of Escrowed Funds that would have been used to purchase the
Postponed Notes designated in such notice and the amount paid by the
Responsible Party pursuant to the immediately preceding clause (i) to the
related Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
If, on such Cut-off Date, an amount equal to less than all of the
Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the next
such Special Distribution Date occurring not less than 15 days following
such Cut-off Date, (i) the Responsible Party shall pay to the Trustee for
deposit in such Special Payments Account, in immediately available funds,
an amount equal to (A) the interest that would have accrued on such
Postponed Notes contemplated to be purchased with such unused Escrowed
Funds (other than Escrowed Funds referred to in the immediately preceding
paragraph) but not so purchased at a rate equal to the interest rate
applicable to such Certificates from the Issuance Date to, but not
including, such Special Distribution Date minus (B) the earnings on
Specified Investments (disregarding any losses thereon) received (with
respect to the portion of the Escrowed Funds deposited with respect to the
Postponed Notes contemplated to be purchased with such unused Escrowed
Funds (other than Escrowed Funds referred to in the immediately preceding
paragraph) but not so purchased) by the Trustee from and including the
Issuance Date to, but not including, such Special Distribution Date and
(ii) the Trustee shall transfer such unused Escrowed Funds and the amount
paid by the Responsible Party pursuant to the immediately preceding clause
(i) to such Special Payments Account for distribution as a Special Payment
in accordance with the provisions hereof.
<PAGE>
ARTICLE III
DEFAULT
Section 3.01. PURCHASE RIGHTS OF CERTIFICATEHOLDERS. (a) At any time
after the occurrence and during the continuance of a Triggering Event, each
Class B Certificateholder shall have the right to purchase, for the purchase
price and otherwise in accordance with and subject to the provisions set forth
in Section 6.01(b) of the Basic Agreement, all, but not less than all, of the
Class A Certificates upon ten days' written notice to the Class A Trustee and
each other Class B Certificateholder, provided that (i) if prior to the end of
such ten day period any other Class B Certificateholder notifies such purchasing
Class B Certificateholder that such other Class B Certificateholder wants to
participate in such purchase, then such other Class B Certificateholder may join
with the purchasing Class B Certificateholder to purchase all, but not less than
all, of the Class A Certificates pro rata based on the Fractional Undivided
Interest in the 1997-3B Trust held by each such Class B Certificateholder and
(ii) if prior to the end of such ten-day period any other Class B
Certificateholder fails to notify the purchasing Class B Certificateholder of
such other Class B Certificateholder's desire to participate in such a purchase,
then such other Class B Certificateholder shall lose its right to purchase the
Class A Certificates pursuant to this Section and Section 6.01(b) of the Basic
Agreement; and
(b) By acceptance of its Series 1997-3B Certificate, each Class B
Certificateholder agrees that at any time after the occurrence and during the
continuation of a Triggering Event, each Class C Certificateholder shall have
the right (which shall not expire upon any purchase of the Class A Certificates
pursuant to paragraph (a) above) to purchase, for the purchase price and
otherwise in accordance with and subject to the provisions set forth in Section
6.01(b) of the Basic Agreement, all, but not less than all, of the Class A
Certificates and the Series 1997-3B Certificates upon ten days' written notice
to the Class A Trustee, the Trustee and each other Class C Certificateholder,
provided that (i) if prior to the end of such ten-day period any other Class C
Certificateholder notifies such purchasing Class C Certificateholder that such
other Class C Certificateholder wants to participate in such purchase, then such
other Class C Certificateholder may join with the purchasing Class C
Certificateholder to purchase all, but not less than all, of the Class A
Certificates and the Series 1997-3B Certificates pro rata based on the
Fractional Undivided Interest in the Class C Trust held by each such Class C
Certificateholder and (B) if prior to the end of such ten-day period any other
Class C Certificateholder fails to notify the purchasing Class C
Certificateholder of such other Class C Certificateholder's desire to
participate in such a purchase, then such other Class C Certificateholder shall
lose its right to purchase the Class A Certificates and the Series 1997-3B
Certificates pursuant to this Section and Section 6.01(b) of the Basic
Agreement.
(c) As used in this Article III, the terms "Class A Certificate",
"Class A Trustee", "Class C Certificateholder" and "Class C Trust" shall have
the respective meanings assigned to such terms in the Intercreditor Agreement.
<PAGE>
ARTICLE IV
THE TRUSTEE
Section 4.01. THE TRUSTEE. The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement on or prior to the Issuance Date in the
form delivered to the Trustee by the Company. 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.
The Trustee, upon the execution and delivery of this Trust Supplement,
acknowledges its acceptance of all right, title and interest in and to the Trust
Property with respect to the 1997-3B Trust and declares that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Class B Certificateholders, upon the trusts set forth in the Basic
Agreement and this Trust Supplement. By its acceptance of each Series 1997-3B
Certificate issued to it under the Agreement, each initial Class B
Certificateholder as grantor of the 1997-3B Trust thereby joins in the creation
and declaration of the Trust.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed, by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as if the same were herein set forth at length.
The Trustee represents and warrants that the Intercreditor Agreement
will be duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such document on its behalf.
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. BASIC AGREEMENT MODIFIED AND RATIFIED. The Basic
Agreement is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Trust Supplement as if set forth in full herein, and
is in all respects ratified and confirmed, as supplemented and modified by this
Trust Supplement.
Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE CLASS B
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
Section 5.03. 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 thereunto duly
authorized, as of the day and year first written above.
CONTINENTAL AIRLINES, INC.
By: ___________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee
By: ___________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
Form of Certificate
[Include on each Certificate that is a Global 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 as the registered owner hereof, Cede & Co., has an interest
herein.]<F1>
CONTINENTAL AIRLINES 1997-3B PASS THROUGH TRUST
Pass Through Certificate,
Series 1997-3B
Issuance Date: September 25, 1997
Final Expected Distribution Date: June 24, 2007
evidencing a fractional undivided interest in a 1997-3B Trust,
the property of which includes certain equipment notes each
secured by aircraft leased to Continental Airlines, Inc.
Certificate
No._____ $________ Fractional Undivided Interest representing 0.0050682%
of the Trust per $1,000 of face amount
THIS CERTIFIES THAT ____________, for value received, is the
registered owner of a $__________ (_______ dollars) Fractional Undivided
Interest in the Continental Airlines Pass Through Trust, Series 1997-3B (the
"TRUST") created by Wilmington Trust Company, as trustee (the "TRUSTEE"),
pursuant to a Pass Through Trust Agreement, dated as of September 25, 1997 (the
"BASIC AGREEMENT"), as supplemented by Trust Supplement No. 1997-3B thereto,
dated as of September 25, 1997 (collectively, the "AGREEMENT") between the
Trustee and Continental Airlines, Inc., a Delaware corporation (the "COMPANY" or
the "ISSUER"), 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
"Continental Airlines Pass Through Certificates, Series 1997-3B" (herein called
_________
<F1> This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
<PAGE>
the "CERTIFICATES"). This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement. By virtue of its acceptance
hereof, the Certificateholder of this Certificate assents to and agrees to be
bound by the provisions of the Agreement and the Intercreditor Agreement. The
property of the Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement and the Liquidity
Facility (the "TRUST PROPERTY"). Each issue of the Equipment Notes is secured
by, among other things, a security interest in aircraft leased to the Company.
The Certificates represent fractional undivided interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement and the
Intercreditor Agreement, from funds then available to the Trustee, there will be
distributed on each March 24, June 24, September 24 and December 24 (a "REGULAR
DISTRIBUTION DATE"), commencing on December 24, 1997, 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 and the Intercreditor Agreement, in the event that
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The 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
<PAGE>
affiliate thereof. The Certificates are limited in right of payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations set
forth therein, 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 are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof except that one Certificate may be issued in a
different denomination. 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.
<PAGE>
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.
Any Person acquiring or accepting this Certificate or an interest
herein will, by such acquisition or acceptance, be deemed to have represented
and warranted to and for the benefit of each Owner Participant and the Company
that either: (i) the assets of an employee benefit plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of
a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended
(the "CODE"), have not been used to purchase this Certificate or an interest
herein or (ii) the purchase and holding of this Certificate or interest herein
are exempt from the prohibited transaction restrictions of ERISA and the Code
pursuant to one or more prohibited transaction statutory or administration
exemptions.
THIS CERTIFICATE AND THE AGREEMENT HAVE EACH BEEN DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
CERTIFICATEHOLDERS HEREUNDER AND THE PARTIES THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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.
CONTINENTAL AIRLINES 1997-3B PASS
THROUGH TRUST
By: WILMINGTON TRUST COMPANY,
as Trustee
By: _______________________________
Title:_____________________________
Dated: ______________
<PAGE>
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
WILMINGTON TRUST COMPANY,
as Trustee
By: _______________________________________
Name:
Title:
<PAGE>
EXHIBIT B
---------
DTC Letter of Representations
<PAGE>
EXHIBIT C
---------
<TABLE>
<CAPTION>
Regular Distribution Dates
and
Scheduled Payments
DATE SCHEDULED PAYMENTS OF PRINCIPAL
---- -------------------------------
<S> <C>
December 24, 1997................................. $ 193,210
March 24, 1998.................................... 83,136
June 24, 1998..................................... 268,625
September 24, 1998................................ 589,100
December 24, 1998................................. 193,210
March 24, 1999.................................... 125,414
June 24, 1999..................................... 226,267
September 24, 1999................................ 589,100
December 24, 1999................................. 193,210
March 24, 2000.................................... 112,156
June 24, 2000..................................... 239,527
September 24, 2000................................ 589,100
December 24, 2000................................. 193,210
March 24, 2001.................................... 98,898
June 24, 2001..................................... 252,785
September 24, 2001................................ 589,100
December 24, 2001................................. 193,210
March 24, 2002.................................... 85,640
June 24, 2002..................................... 266,043
September 24, 2002................................ 589,100
December 24, 2002................................. 193,210
March 24, 2003.................................... 83,088
June 24, 2003..................................... 268,595
September 24, 2003................................ 654,814
December 24, 2003................................. 342,734
March 24, 2004.................................... 278,670
June 24, 2004..................................... 941,351
September 24, 2004................................ 684,136
December 24, 2004................................. 534,524
March 24, 2005.................................... 785,204
June 24, 2005..................................... 751,447
September 24, 2005................................ 797,890
December 24, 2005................................. 205,858
March 24, 2006.................................... 1,642,589
June 24, 2006..................................... 926,396
September 24, 2006................................ 1,403,842
December 24, 2006................................. 370,976
March 24, 2007.................................... 1,789,232
June 24, 2007..................................... 1,406,403
</TABLE>
<PAGE>
EXHIBIT D
---------
Related Note Documents
[Information to be added upon receipt
of HHR's Closing memo]
TRUST SUPPLEMENT NO. 1997-3C
Dated September 25, 1997
between
WILMINGTON TRUST COMPANY,
as Trustee,
and
CONTINENTAL AIRLINES, INC.
to
PASS THROUGH TRUST AGREEMENT
Dated as of September 25, 1997
$14,418,000
Continental Airlines, Inc.
Pass Through Trust, 1997-3C
Continental Airlines, Inc.
1997-3 Pass Through Certificates,
Class C
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - THE CERTIFICATES
<S> <C> <C>
Section 1.01. The Certificates ..............................................3
ARTICLE II - DEFINITIONS AND AMENDMENTS
Section 2.01. Definitions ...................................................5
Section 2.02. Amendments ....................................................6
ARTICLE III - DEFAULT
Section 3.01. Purchase Rights of Certificateholders .........................8
ARTICLE IV - THE TRUSTEE
Section 4.01. The Trustee ...................................................8
ARTICLE V - MISCELLANEOUS PROVISIONS
Section 5.01. Basic Agreement Modified and Ratified .........................9
Section 5.02. GOVERNING LAW .................................................9
EXHIBIT A Form of Certificate
EXHIBIT B DTC Letter of Representations
EXHIBIT C Regular Distribution Dates and Scheduled Payments
EXHIBIT D Related Note Documents
</TABLE>
<PAGE>
This Trust Supplement No. 1997-3C, dated as of September 25, 1997
(herein called the "TRUST SUPPLEMENT"), between Continental Airlines, Inc., a
Delaware corporation (the "COMPANY"), and Wilmington Trust Company (the
"TRUSTEE"), to the Pass Through Trust Agreement, dated as of September 25, 1997,
between the Company and the Trustee (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 having the same
interest rate as, and final maturity dates not later than the final expected
Regular Distribution Date of, the Certificates issued hereunder and shall hold
such Equipment Notes in trust for the benefit of the Class C Certificateholders;
WHEREAS, the Trustee hereby declares the creation of this Continental
Airlines Pass Through Trust, Series 1997-3C (the "1997-3C TRUST"), for the
benefit of the Class C Certificateholders, and the initial Class C
Certificateholders as the grantors of the 1997-3C Trust, by their respective
acceptances of the Certificates issued hereunder, join in the creation of this
1997-3C 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; and
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>
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
"Continental Airlines Pass Through Certificates, Series 1997-3C" (hereinafter
defined as the "SERIES 1997-3C CERTIFICATES"). Each Series 1997-3C Certificate
represents a fractional undivided interest in the 1997-3C Trust created hereby.
The Series 1997-3C Certificates shall be the only instruments evidencing a
fractional undivided interest in the 1997-3C Trust.
The terms and conditions applicable to the Series 1997-3C Certificates
are as follows:
(a) The aggregate principal amount of the Series 1997-3C
Certificates that shall be authenticated under the Agreement (except
for Series 1997-3C Certificates authenticated and delivered pursuant
to Sections 3.03, 3.04 and 3.06 of the Basic Agreement) is
$14,418,000.
(b) The Cut-off Date is October 31, 1997.
(c) The Regular Distribution Date with respect to any payment of
Scheduled Payments means March 24, June 24, September 24 and December
24, commencing on December 24, 1997 until payment of all of the
Scheduled Payments to be made under the Equipment Notes has been made.
(d) The Special Distribution Date with respect to the Series
1997-3C Certificates means any Business Day on which a Special Payment
is to be distributed pursuant to the Agreement.
(e) (i) The Series 1997-3C Certificates shall be in the form
attached hereto as Exhibit A. Any Person acquiring or accepting a
Series 1997-3C Certificate or an interest therein will, by such
acquisition or acceptance, be deemed to have represented and warranted
to and for the benefit of each Owner Participant and the Company that
either (i) the assets of an employee benefit plan subject to Title I
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or of a plan subject to Section 4975 of the Internal
Revenue Code of 1986, as amended (the "CODE"), have not been used to
purchase Series 1997-3C Certificates or an interest therein or (ii)
the purchase and holding of Series 1997-3C Certificates or interest
therein are exempt from the prohibited transaction restrictions of
ERISA and the Code pursuant to one or more prohibited transaction
statutory or administrative exemptions.
(ii) The Series 1997-3C Certificates shall be Book-Entry
Certificates and shall be subject to the conditions set forth in the
<PAGE>
Letter of Representations between the Company, the Trustee and the
Clearing Agency attached hereto as Exhibit B.
(f) The Scheduled Payments of principal shall be as set forth in
Exhibit C hereto.
(g) All or a portion of the proceeds of the Series 1997-3C
Certificates shall be used to purchase the Equipment Notes in the
principal amounts specified below and the unused portion of such
proceeds, if any, shall be deposited in the Escrow Account to be
applied as set forth in the Agreement:
<TABLE>
<CAPTION>
REGISTRATION NUMBER PRINCIPAL AMOUNT
------------------- ----------------
<S> <C>
N14925........................................$1,692,000
N15926.........................................1,692,000
N16927.........................................1,692,000
N17928.........................................1,409,000
N13929.........................................1,409,000
N14930.........................................1,631,000
N14931.........................................1,631,000
N15932.........................................1,631,000
N14933.........................................1,631,000
</TABLE>
(h) 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>
REGISTRATION NUMBER AIRCRAFT TYPE ENGINE TYPE
------------------- ------------- -----------
<S> <C> <C>
N14925 Embraer EMB-145 AE3007A
N15926 Embraer EMB-145 AE3007A
N16927 Embraer EMB-145 AE3007A
N17928 Embraer EMB-145 AE3007A
N13929 Embraer EMB-145 AE3007A
N14930 Embraer EMB-145 AE3007A
N14931 Embraer EMB-145 AE3007A
N15932 Embraer EMB-145 AE3007A
N14933 Embraer EMB-145 AE3007A
</TABLE>
(i) The related Note Documents are listed on Exhibit D.
(j) Notice of any termination of the 1997-3C Trust shall be
mailed promptly by the Trustee to the Class C Certificateholders not
earlier than the 60th day and not later than the 15th day next
preceding the final distribution pursuant to the Agreement.
<PAGE>
(k) Except as contemplated by Section 2.02(b) of the Basic
Agreement, there will be no deposit agreement or other arrangement
prior to the delivery of any Aircraft.
(l) The Series 1997-3C Certificates are subject to the
Intercreditor Agreement.
(m) The Series 1997-3C Certificates will have the benefit of the
Liquidity Facility.
(n) The Responsible Party is the Company.
(o) The Final Legal Distribution Date is September 24, 2006.
(p) The particular "sections of the Note Purchase Agreement", for
purposes of clause (3) of Section 7.07 of the Basic Agreement, are
Section 9.1 of each Note Purchase Agreement.
ARTICLE II
DEFINITIONS AND AMENDMENTS
--------------------------
Section 2.01. DEFINITIONS. For all purposes of the Basic Agreement as
supplemented by this Trust Supplement, the following capitalized terms shall
have the following meanings:
CLASS C CERTIFICATEHOLDER: Means the Person in whose name a
Series 1997-3C Certificate is registered on the Register for the
Series 1997-3C Certificates.
INTERCREDITOR AGREEMENT: Means the Intercreditor Agreement dated
as of the date hereof among the Trustee, the Other Trustees, the
Liquidity Provider named therein and Wilmington Trust Company, as
Subordination Agent and as trustee, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
LIQUIDITY FACILITY: Means the Revolving Credit Agreement dated as
of the date hereof among Wilmington Trust Company, as Subordination
Agent and trustee for the 1997-3C Trust, and ABN AMRO Bank, N.V.,
acting through its Chicago Branch, as amended, replaced, supplemented
or otherwise modified from time to time in accordance with its terms
and the terms of the Intercreditor Agreement..
OTHER AGREEMENTS: Means (i) the Basic Agreement as supplemented
by Trust Supplement 1997-3A dated as of the date hereof relating to
the Continental Airlines Pass Through Trust created thereunder and
<PAGE>
(ii) the Basic Agreement as supplemented by Trust Supplement No.
1997-3B dated the date hereof relating to the Continental Airlines
Pass Through Trust created thereunder.
OTHER TRUSTEES: Means each of the trustees under the Other
Agreements, and any successor thereunder or other trustee appointed as
provided therein.
PTC EVENT OF DEFAULT: Means the failure to pay within ten
Business Days of the due date thereof: (i) the outstanding Pool
Balance of the Series 1997-3C Certificates on the Final Legal
Distribution Date for such Series 1997-3C Certificates or (ii)
interest due on such Series 1997-3C Certificates on any Distribution
Date (unless the Subordination Agent shall have made an Interest
Drawing or Drawings (as defined in the Intercreditor Agreement), or a
withdrawal or withdrawals pursuant to a cash collateral account under
the Intercreditor Agreement, with respect thereto in an aggregate
amount sufficient to pay such interest and shall have distributed such
amount to the Trustee).
Section 2.02. AMENDMENTS. Solely for purposes of this Trust
Supplement, Section 2.02(b) of the Basic Agreement shall be amended to read as
follows:
(b) If on or prior to the Issuance Date with respect to a series
of Certificates the Company shall deliver to the Trustee a
Postponement Notice relating to one or more Postponed Notes, the
Trustee shall postpone the purchase of such Postponed Notes and shall
deposit into an escrow account (as to such Trust, the "ESCROW
ACCOUNT") to be maintained as part of the related Trust an amount
equal to the purchase price of such Postponed Notes (the "ESCROWED
FUNDS"). The portion of the Escrowed Funds so deposited with respect
to any particular Postponed Notes shall be invested by the Trustee at
the written direction of the Responsible Party in Specified
Investments (i) maturing no later than any scheduled Transfer Date
relating to such Postponed Notes or (ii) if no such Transfer Date has
been scheduled, maturing on the next Business Day, or (iii) if the
Company has given notice to the Trustee that such Postponed Notes will
not be issued, maturing on the next applicable Special Distribution
Date, if such investments are reasonably available for purchase. The
Trustee shall make withdrawals from the Escrow Account only as
provided in this Agreement. Upon request of the Company on one or more
occasions and the satisfaction or waiver of the closing conditions
specified in the applicable Note Purchase Agreements on or prior to
the related Cut-off Date, the Trustee shall purchase the applicable
Postponed Notes with the Escrowed Funds withdrawn from the Escrow
Account. The purchase price shall equal the principal amount of such
Postponed Notes.
The Trustee shall hold all Specified Investments until the
maturity thereof and will not sell or otherwise transfer Specified
Investments. If Specified Investments held in an Escrow Account mature
prior to any applicable Transfer Date, any proceeds received on the
maturity of such Specified Investments (including any earnings
thereon) shall be reinvested by the Trustee at the written direction
<PAGE>
of the Responsible Party in Specified Investments maturing as provided
in the preceding paragraph. The Responsible Party shall pay to the
Trustee for deposit to the relevant Escrow Account an amount equal to
any losses on such Specified Investments as incurred.
On the Initial Regular Distribution Date in respect of the
Certificates of any series, the Responsible Party will pay (in
immediately available funds) to the Trustee an amount equal to (i) the
interest that would have accrued on any Postponed Notes with respect
to such Certificates, if any, purchased after the Issuance Date if
such Postponed Notes had been purchased on the Issuance Date, from the
Issuance Date to, but not including, the date of the purchase of such
Postponed Notes by the Trustee minus (ii) the earnings on Specified
Investments (disregarding any losses thereon) received (with respect
to the portion of the Escrow Funds deposited with respect to the
Postponed Notes described in clause (i) of this paragraph) by the
Trustee from and including the Issuance Date to, but not including,
the Initial Regular Distribution Date.
If, in respect of the Certificates of any series, the Company
notifies the Trustee prior to the Cut-off Date that any Postponed
Notes will not be issued on or prior to the Cut-off Date for any
reason, on the next Special Distribution Date for such Certificates
occurring not less than 15 days following the date of such notice, (i)
the Responsible Party shall pay to the Trustee for deposit in the
related Special Payments Account, in immediately available funds, an
amount equal to (A) the interest that would have accrued on the
Postponed Notes designated in such notice at a rate equal to the
interest rate applicable to such Certificates from the Issuance Date
to, but not including, such Special Distribution Date minus (B) the
earnings on Specified Investments (disregarding any losses thereon)
received (with respect to the portion of the Escrowed Funds deposited
with respect to the Postponed Notes designated in such notice) by the
Trustee from and including the Issuance Date to, but not including,
such Special Distribution Date and (ii) the Trustee shall transfer an
amount equal to that amount of Escrowed Funds that would have been
used to purchase the Postponed Notes designated in such notice and the
amount paid by the Responsible Party pursuant to the immediately
preceding clause (i) to the related Special Payments Account for
distribution as a Special Payment in accordance with the provisions
hereof.
If, on such Cut-off Date, an amount equal to less than all of the
Escrowed Funds (other than Escrowed Funds referred to in the
immediately preceding paragraph) has been used to purchase Postponed
Notes, on the next such Special Distribution Date occurring not less
than 15 days following such Cut-off Date, (i) the Responsible Party
shall pay to the Trustee for deposit in such Special Payments Account,
in immediately available funds, an amount equal to (A) the interest
that would have accrued on such Postponed Notes contemplated to be
purchased with such unused Escrowed Funds (other than Escrowed Funds
referred to in the immediately preceding paragraph) but not so
<PAGE>
purchased at a rate equal to the interest rate applicable to such
Certificates from the Issuance Date to, but not including, such
Special Distribution Date minus (B) the earnings on Specified
Investments (disregarding any losses thereon) received (with respect
to the portion of the Escrowed Funds deposited with respect to the
Postponed Notes contemplated to be purchased with such unused Escrowed
Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased) by the Trustee from and
including the Issuance Date to, but not including, such Special
Distribution Date and (ii) the Trustee shall transfer such unused
Escrowed Funds and the amount paid by the Responsible Party pursuant
to the immediately preceding clause (i) to such Special Payments
Account for distribution as a Special Payment in accordance with the
provisions hereof.
ARTICLE III
DEFAULT
-------
Section 3.01. PURCHASE RIGHTS OF CERTIFICATEHOLDERS. (a) At any time
after the occurrence and during the continuation of a Triggering Event, each
Class C Certificateholder shall have the right (which shall not expire upon any
purchase of the Class A Certificates pursuant to the Class B Trust Agreement),
to purchase, for the purchase price and otherwise in accordance with and subject
to the provisions set forth in Section 6.01(b) of the Basic Agreement, all, but
not less than all, of the Class A Certificates and the Class B Certificates upon
ten days' written notice to the Class A Trustee, the Class B Trustee, and each
other Class C Certificateholder, provided that (i) if prior to the end of such
ten-day period any other Class C Certificateholder notifies such purchasing
Class C Certificateholder that such other Class C Certificateholder wants to
participate in such purchase, then such other Class C Certificateholder may join
with the purchasing Class C Certificateholder to purchase all, but not less than
all, of the Class A Certificates and the Class B Certificates pro rata based on
the Fractional Undivided Interest in the 1997-3C Trust held by each such Class C
Certificateholder and (ii) if prior to the end of such ten-day period any other
Class C Certificateholder fails to notify the purchasing Class C
Certificateholder of such other Class C Certificateholder's desire to
participate in such a purchase, then such other Class C Certificateholder shall
lose its right to purchase the Class A Certificates and the Class B Certificates
pursuant to this Section and Section 6.01(b) of the Basic Agreement.
(b) As used in this Article III, the terms "Class A Certificate",
"Class A Trustee", "Class B Certificate", "Class B Trustee", and
"Class B Trust Agreement" shall have the respective meanings assigned
to such terms in the Intercreditor Agreement.
ARTICLE IV
THE TRUSTEE
-----------
Section 4.01. THE TRUSTEE. The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement on or prior to the Issuance Date in the
<PAGE>
form delivered to the Trustee by the Company. 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.
The Trustee, upon the execution and delivery of this Trust Supplement,
acknowledges its acceptance of all right, title and interest in and to the Trust
Property with respect to the 1997-3C Trust and declares that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Class C Certificateholders, upon the trusts set forth in the Basic
Agreement and this Trust Supplement. By its acceptance of each Series 1997-3C
Certificate issued to it under the Agreement, each initial Class C
Certificateholder as grantor of the 1997-3C Trust thereby joins in the creation
and declaration of the 1997-3C Trust.
Except as herein otherwise provided, no duties, responsibilities or
liabilities are assumed, or shall be construed to be assumed, by the Trustee by
reason of this Trust Supplement other than as set forth in the Basic Agreement,
and this Trust Supplement is executed and accepted on behalf of the Trustee,
subject to all the terms and conditions set forth in the Basic Agreement, upon
the effectiveness thereof, as if the same were herein set forth at length.
The Trustee represents and warrants that the Intercreditor Agreement
will be duly executed and delivered by one of its officers who is duly
authorized to execute and deliver such document on its behalf.
ARTICLE V
MISCELLANEOUS PROVISIONS
------------------------
Section 5.01. BASIC AGREEMENT MODIFIED AND RATIFIED. The Basic
Agreement is incorporated herein by reference in its entirety, and shall be
deemed to be a part of this Trust Supplement as if set forth in full herein, and
is in all respects ratified and confirmed, as supplemented and modified by this
Trust Supplement.
Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE CLASS C
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.
Section 5.03. 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 thereunto duly
authorized, as of the day and year first written above.
CONTINENTAL AIRLINES, INC.
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
Form of Certificate
[Include on each Certificate that is a Global 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 as the registered owner hereof, Cede & Co., has an interest
herein.]<F1>
CONTINENTAL AIRLINES 1997-3C PASS THROUGH TRUST
Pass Through
Certificate, Series 1997-3C
Issuance Date: September 25, 1997
Final Expected Distribution Date: March 24, 2005
evidencing a fractional undivided interest in a 1997-3C
Trust, the property of which includes certain equipment
notes each secured by aircraft leased to Continental
Airlines, Inc.
Certificate
No.________ $__________ Fractional Undivided Interest representing 0.0069358%
of the Trust per $1,000 of face amount
THIS CERTIFIES THAT ______________________, for value received, is the
registered owner of a $____________ (__ dollars) Fractional Undivided Interest
in the Continental Airlines Pass Through Trust, Series 1997-3C (the "TRUST")
created by Wilmington Trust Company, as trustee (the "TRUSTEE"), pursuant to a
Pass Through Trust Agreement, dated as of September 25, 1997 (the "BASIC
AGREEMENT"), as supplemented by Trust Supplement No. 1997-3C thereto, dated as
of September 25, 1997 (collectively, the "AGREEMENT") between the Trustee and
Continental Airlines, Inc., a Delaware corporation (the "COMPANY" or the
"ISSUER"), 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
"Continental Airlines Pass Through Certificates, Series 1997-3C" (herein called
the "CERTIFICATES"). This Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement. By virtue of its acceptance
hereof, the Certificateholder of this Certificate assents to and agrees to be
___________________
<F1>This legend to appear on Book-Entry Certificates to be deposited with The
Depository Trust Company.
<PAGE>
bound by the provisions of the Agreement and the Intercreditor Agreement. The
property of the Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement and the Liquidity
Facility (the "TRUST PROPERTY"). Each issue of the Equipment Notes is secured
by, among other things, a security interest in aircraft leased to the Company.
The Certificates represent fractional undivided interests in the Trust
and the Trust Property, and have no rights, benefits or interest in respect of
any other separate trust established pursuant to the terms of the Basic
Agreement for any other series of certificates issued pursuant thereto.
Subject to and in accordance with the terms of the Agreement and the
Intercreditor Agreement, from funds then available to the Trustee, there will be
distributed on each March 24, June 24, September 24 and December 24 (a "REGULAR
DISTRIBUTION DATE"), commencing on December 24, 1997, 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 and the Intercreditor Agreement, in the event that
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The 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 of payment, all as more
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
<PAGE>
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations set
forth therein, 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 are issuable only as registered Certificates without
coupons in minimum denominations of $1,000 Fractional Undivided Interest and
integral multiples thereof except that one Certificate may be issued in a
different denomination. 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
<PAGE>
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.
Any Person acquiring or accepting this Certificate or an interest
herein will, by such acquisition or acceptance, be deemed to have represented
and warranted to and for the benefit of each Owner Participant and the Company
that either: (i) the assets of an employee benefit plan subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of
a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended
(the "CODE"), have not been used to purchase this Certificate or an interest
herein or (ii) the purchase and holding of this Certificate or interest herein
are exempt from the prohibited transaction restrictions of ERISA and the Code
pursuant to one or more prohibited transaction statutory or administration
exemptions.
THIS CERTIFICATE AND THE AGREEMENT HAVE EACH BEEN DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
CERTIFICATEHOLDERS HEREUNDER AND THE PARTIES THEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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.
CONTINENTAL AIRLINES 1997-3C PASS
THROUGH TRUST
By: WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Title:_______________________________
Dated:____________________________
<PAGE>
FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Agreement.
WILMINGTON TRUST COMPANY, as Trustee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT B
---------
DTC Letter of Representations
<PAGE>
EXHIBIT C
---------
<TABLE>
<CAPTION>
Regular Distribution Dates
and
Scheduled Payments
DATE SCHEDULED PAYMENTS OF PRINCIPAL
---- -------------------------------
<S> <C>
December 24, 1997................................ $ 180,078
March 24, 1998................................... 380,004
June 24, 1998.................................... 643,996
September 24, 1998............................... 39,800
December 24, 1998................................ 144,819
March 24, 1999................................... 597,751
June 24, 1999.................................... 469,114
September 24, 1999............................... 39,800
December 24, 1999................................ 56,826
March 24, 2000................................... 622,060
June 24, 2000.................................... 541,102
September 24, 2000............................... 43,373
December 24, 2000................................ 56,826
March 24, 2001................................... 905,341
June 24, 2001.................................... 728,584
September 24, 2001............................... 198,966
December 24, 2001................................ 253,262
March 24, 2002................................... 973,326
June 24, 2002.................................... 797,789
September 24, 2002............................... 612,707
December 24, 2002................................ 364,716
March 24, 2003................................... 1,176,170
June 24, 2003.................................... 892,114
September 24, 2003............................... 677,321
December 24, 2003................................ 283,844
March 24, 2004................................... 1,066,658
June 24, 2004.................................... 268,731
September 24, 2004............................... 751,110
December 24, 2004................................ 0
March 24, 2005................................... 651,812
</TABLE>
<PAGE>
EXHIBIT D
---------
Related Note Documents
[Information to be added upon receipt
of HHR's Closing memo]
================================================================================
INTERCREDITOR AGREEMENT
Dated as of
September 25, 1997
among
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee under the
Continental Airlines Pass Through Trust 1997-Series 3A,
Continental Airlines Pass Through Trust 1997-Series 3B
and
Continental Airlines Pass Through Trust 1997-Series 3C
ABN AMRO BANK N.V.,
Chicago Branch,
as Class A Liquidity Provider,
Class B Liquidity Provider
and Class C Liquidity Provider,
and
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as expressly set forth herein but
solely as Subordination Agent and Trustee
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions....................................................2
ARTICLE II
TRUST ACCOUNTS; CONTROLLING PARTY
SECTION 2.1 Agreement to Terms of Subordination; Payments from
Monies Received Only..........................................20
SECTION 2.2 Trust Accounts................................................20
SECTION 2.3 Deposits to the Collection Account and Special Payments
Account.......................................................22
SECTION 2.4 Distributions of Special Payments.............................22
SECTION 2.5 Designated Representatives....................................24
SECTION 2.6 Controlling Party.............................................25
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED
SECTION 3.1 Written Notice of Distribution................................26
SECTION 3.2 Distribution of Amounts on Deposit in the Collection
Account.......................................................28
SECTION 3.3 Distribution of Amounts on Deposit Following a Triggering
Event.........................................................30
SECTION 3.4 Other Payments................................................32
SECTION 3.5 Payments to the Trustees and the Liquidity Providers..........32
SECTION 3.6 Liquidity Facilities..........................................32
ARTICLE IV
EXERCISE OF REMEDIES
SECTION 4.1 Directions from the Controlling Party.........................38
SECTION 4.2 Remedies Cumulative...........................................40
SECTION 4.3 Discontinuance of Proceedings.................................40
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
SECTION 4.4 Right of Certificateholders to Receive Payments Not to Be
Impaired......................................................40
SECTION 4.5 Undertaking for Costs.........................................40
ARTICLE V
DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC.
SECTION 5.1 Notice of Indenture Default or Triggering Event...............41
SECTION 5.2 Indemnification...............................................41
SECTION 5.3 No Duties Except as Specified in Intercreditor Agreement......41
SECTION 5.4 Notice from the Liquidity Providers and Trustees..............42
ARTICLE VI
THE SUBORDINATION AGENT
SECTION 6.1 Authorization; Acceptance of Trusts and Duties................42
SECTION 6.2 Absence of Duties.............................................42
SECTION 6.3 No Representations or Warranties as to Documents..............42
SECTION 6.4 No Segregation of Monies; No Interest.........................43
SECTION 6.5 Reliance; Agents; Advice of Counsel...........................43
SECTION 6.6 Capacity in Which Acting......................................43
SECTION 6.7 Compensation..................................................43
SECTION 6.8 May Become Certificateholder..................................44
SECTION 6.9 Subordination Agent Required; Eligibility.....................44
SECTION 6.10 Money to Be Held in Trust.....................................44
ARTICLE VII
INDEMNIFICATION OF SUBORDINATION AGENT
SECTION 7.1 Scope of Indemnification......................................44
ARTICLE VIII
SUCCESSOR SUBORDINATION AGENT
SECTION 8.1 Replacement of Subordination Agent; Appointment of
Successor.....................................................45
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
SECTION 9.1 Amendments, Waivers, Etc......................................46
SECTION 9.2 Subordination Agent Protected.................................47
SECTION 9.3 Effect of Supplemental Agreements.............................47
SECTION 9.4 Notice to Rating Agencies.....................................47
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Termination of Intercreditor Agreement........................47
SECTION 10.2 Intercreditor Agreement for Benefit of Trustees,
Liquidity Providers and Subordination Agent...................48
SECTION 10.3 Notices.......................................................48
SECTION 10.4 Severability..................................................49
SECTION 10.5 No Oral Modifications or Continuing Waivers...................49
SECTION 10.6 Successors and Assigns........................................49
SECTION 10.7 Headings......................................................49
SECTION 10.8 Counterpart Form..............................................49
SECTION 10.9 Subordination.................................................49
SECTION 10.10 Governing Law.................................................51
SECTION 10.11 Submission to Jurisdiction; Waiver of Jury Trial; Waiver
of Immunity...................................................51
</TABLE>
<PAGE>
INTERCREDITOR AGREEMENT
-----------------------
INTERCREDITOR AGREEMENT dated as of September 25, 1997, among
WILMINGTON TRUST COMPANY, a Delaware corporation ("WTC"), not in its individual
capacity but solely as Trustee of each Trust (each as defined below), ABN AMRO
BANK N.V., a bank organized under the laws of The Netherlands, acting through
its Chicago Branch ("ABN AMRO"), as Class A Liquidity Provider, as Class B
Liquidity Provider and as Class C Liquidity Provider, and WILMINGTON TRUST
COMPANY, not in its individual capacity except as expressly set forth herein,
but solely as Subordination Agent and trustee hereunder (in such capacity,
together with any successor appointed pursuant to Article VIII hereof, the
"SUBORDINATION AGENT").
WHEREAS, all capitalized terms used herein shall have the respective
meanings referred to in Article I hereof;
WHEREAS, pursuant to each Indenture, the related Owner Trustee
proposes to issue on a nonrecourse basis three series of Equipment Notes to
finance the current indebtedness of such Owner Trustee originally incurred to
finance the purchase of the Aircraft referred to in such Indenture that has been
leased to Continental pursuant to the related Lease;
WHEREAS, pursuant to the Financing Agreements, each Trust will acquire
Equipment Notes having an interest rate equal to the interest rate applicable to
the Certificates to be issued by such Trust;
WHEREAS, pursuant to each Trust Agreement, the Trust created thereby
proposes to issue a single class of Certificates (a "CLASS") bearing the
interest rate and having the final distribution date described in such Trust
Agreement on the terms and subject to the conditions set forth therein;
WHEREAS, pursuant to the Underwriting Agreement, the Underwriters
propose to purchase the Certificates issued by each Trust in the aggregate face
amount set forth opposite the name of such Trust on Schedule I thereto on the
terms and subject to the conditions set forth therein;
WHEREAS, each Liquidity Provider proposes to enter into a revolving
credit agreement (each, a "LIQUIDITY Facility") with the Subordination Agent, as
agent for the Trustee of each Trust, respectively, for the benefit of the
Certificateholders of such Trust; and
WHEREAS, it is a condition precedent to the obligations of the
Underwriters under the Underwriting Agreement that the Subordination Agent, the
Trustees and the Liquidity Providers agree to the terms of subordination set
forth in this Agreement in respect of each Class of Certificates, and the
Subordination Agent, the Trustees and the Liquidity Providers, by entering into
this Agreement, hereby acknowledge and agree to such terms of subordination and
the other provisions of this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article have the
meanings assigned to them in this Article, and include the plural as well
as the singular;
(2) all references in this Agreement to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Agreement;
(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision; and
(4) the term "including" shall mean "including without limitation".
"ABN AMRO" has the meaning assigned to such term in the recital of
parties to this Agreement.
"ACCELERATION" means, with respect to the amounts payable in respect
of the Equipment Notes issued under any Indenture, such amounts becoming
immediately due and payable by declaration or otherwise. This definition
shall also apply to related uses of the term, including "ACCELERATE" and
"ACCELERATED".
"ADJUSTED EXPECTED DISTRIBUTIONS" means, with respect to the
Certificates of any Trust on any Current Distribution Date, the sum of (x)
the amount of accrued and unpaid interest on such Certificates (after
giving effect to any Escrowed Funds Interest Distribution to be made on
such Current Distribution Date with respect to such Certificates) plus (y)
the greater of:
(A) the difference between (x) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date (or, if
the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust),
less (if applicable) the aggregate amount of Escrowed Funds for such
Class of Certificates as of such immediately preceding Distribution
Date (or, if the Current Distribution Date is the first Distribution
Date, as of the Closing Date) thereafter distributed to the
Certificateholders of such Class (instead of being used to purchase
<PAGE>
Postponed Notes) pursuant to the Trust Agreement for such Class
(excluding the interest component of any such distribution), and (y)
the Pool Balance of such Certificates as of the Current Distribution
Date calculated on the basis that (i) the principal of the
Non-Performing Equipment Notes held in such Trust has been paid in
full and such payments have been distributed to the holders of such
Certificates, (ii) the principal of the Performing Equipment Notes
held in such Trust has been paid when due (but without giving effect
to any unpaid Acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust
that have been sold pursuant to the terms hereof has been paid in full
and such payments have been distributed to the holders of such
Certificates; and
(B) the amount of the excess, if any, of (i) the Pool Balance of
such Class of Certificates as of the immediately preceding
Distribution Date (or if the Current Distribution Date is the first
Distribution Date, the original aggregate face amount of the
Certificates of such Trust), less (if applicable) the aggregate amount
of Escrowed Funds for such Class of Certificates as of such
immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, as of the Closing
Date) thereafter distributed to the Certificateholders of such Class
(instead of being used to purchase Postponed Notes) pursuant to the
Trust Agreement for such Class (excluding the interest component of
any such distribution), over (ii) the Aggregate LTV Collateral Amount
for such Class of Certificates for the Current Distribution Date;
PROVIDED that, until the initial LTV Appraisals, clause (B) above shall not
apply. For purposes of calculating Adjusted Expected Distributions with
respect to the Certificates of any Trust, any premium paid on the Equipment
Notes held in such Trust that has not been distributed to the
Certificateholders of such Trust (other than such premium or a portion
thereof applied to the payment of interest on the Certificates of such
Trust or the reduction of the Pool Balance of such Trust) shall be added to
the amount of such Adjusted Expected Distributions.
"ADVANCE", with respect to any Liquidity Facility, has the meaning
assigned to such term in such Liquidity Facility.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
with such Person. For the purposes of this definition, "control" means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of
voting securities or by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"AGGREGATE LTV COLLATERAL AMOUNT" means for any Class of Certificates
for any Distribution Date the sum of the applicable LTV Collateral Amounts
for each Aircraft minus the Pool Balance for each Class of Certificates, if
<PAGE>
any, senior to such Class, after giving effect to any distribution of
principal on such Distribution Date on such senior Class or Classes.
"AIRCRAFT" means, with respect to each Indenture, the "Aircraft"
referred to therein.
"APPRAISED CURRENT MARKET VALUE" of any Aircraft means the lower of
the average or the median of the most recent three LTV Appraisals of such
Aircraft.
"APPRAISERS" means Aircraft Information Services, Inc., BK Associates,
Inc. and Morten Beyer and Associates, Inc.
"AVAILABLE AMOUNT" means, with respect to any Liquidity Facility on
any drawing date, subject to the proviso contained in the first sentence of
Section 3.6(g) hereof, an amount equal to (a) the Stated Amount of such
Liquidity Facility at such time, LESS (b) the aggregate amount of each
Interest Drawing honored by the Liquidity Provider under such Liquidity
Facility on or prior to such date which has not been reimbursed or
reinstated as of such date; PROVIDED that, following a Downgrade Drawing, a
Non-Extension Drawing or a Final Drawing under such Liquidity Facility, the
Available Amount of such Liquidity Facility shall be zero.
"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 Houston,
Texas, New York, New York, or, so long as any Certificate is outstanding,
the city and state in which any Trustee, the Subordination Agent or any
Mortgagee maintains its Corporate Trust Office or receives and disburses
funds, and that, solely with respect to draws under any Liquidity Facility,
also is a "Business Day" as defined in such Liquidity Facility.
"CASH COLLATERAL ACCOUNT" means the Class A Cash Collateral Account,
the Class B Cash Collateral Account or the Class C Cash Collateral Account,
as applicable.
"CERTIFICATE" means a Class A Certificate, a Class B Certificate or a
Class C Certificate, as applicable.
"CERTIFICATEHOLDER" means any holder of one or more Certificates.
"CLASS" has the meaning assigned to such term in the preliminary
statements to this Agreement.
"CLASS A CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in
the name of the Subordination Agent maintained at an Eligible Institution,
which shall be the Subordination Agent if it shall so qualify, into which
all amounts drawn under the Class A Liquidity Facility pursuant to Section
3.6(c), 3.6(d) or 3.6(i) shall be deposited.
"CLASS A CERTIFICATEHOLDER" means, at any time, any holder of one or
more Class A Certificates.
<PAGE>
"CLASS A CERTIFICATES" means the certificates issued by the Class A
Trust, substantially in the form of Exhibit A to the Class A Trust
Agreement, and authenticated by the Class A Trustee, representing
fractional undivided interests in the Class A Trust, and any certificates
issued in exchange therefor or replacement thereof pursuant to the terms of
the Class A Trust Agreement.
"CLASS A LIQUIDITY FACILITY" means, initially, the Revolving Credit
Agreement dated as of the date hereof between the Subordination Agent, as
agent and trustee for the Class A Trustee, and the Class A Liquidity
Provider, and, from and after the replacement of such Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case
as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"CLASS A LIQUIDITY PROVIDER" means ABN AMRO, together with any
Replacement Liquidity Provider that has issued a Replacement Liquidity
Facility to replace the Class A Liquidity Facility pursuant to Section
3.6(e).
"CLASS A TRUST" means Continental Airlines Pass Through Trust, Series
1997-3A created and administered pursuant to the Class A Trust Agreement.
"CLASS A TRUST AGREEMENT" means the Pass Through Trust Agreement dated
as of September 25, 1997, between Continental and the Class A Trustee, as
supplemented by the Trust Supplement No. 1997-3A thereto dated September
25, 1997, governing the creation and administration of the Continental
Airlines Pass Through Trust Series 1997-3A and the issuance of the Class A
Certificates, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"CLASS A TRUSTEE" means WTC, not in its individual capacity except as
expressly set forth in the Class A Trust Agreement, but solely as trustee
under the Class A Trust Agreement, together with any successor trustee
appointed pursuant thereto.
"CLASS B CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in
the name of the Subordination Agent maintained at an Eligible Institution,
which shall be the Subordination Agent if it shall so qualify, into which
all amounts drawn under the Class B Liquidity Facility pursuant to Section
3.6(c), 3.6(d) or 3.6(i) shall be deposited.
"CLASS B CERTIFICATEHOLDER" means, at any time, any holder of one or
more Class B Certificates.
"CLASS B CERTIFICATES" means the certificates issued by the Class B
Trust, substantially in the form of Exhibit A to the Class B Trust
Agreement, and authenticated by the Class B Trustee, representing
fractional undivided interests in the Class B Trust, and any certificates
issued in exchange therefor or replacement thereof pursuant to the terms of
the Class B Trust Agreement.
<PAGE>
"CLASS B LIQUIDITY FACILITY" means, initially, the Revolving Credit
Agreement dated as of the date hereof between the Subordination Agent, as
agent and trustee for the Class B Trustee, and the Class B Liquidity
Provider, and, from and after the replacement of such Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case
as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"CLASS B LIQUIDITY PROVIDER" means ABN AMRO, together with any
Replacement Liquidity Provider that has issued a Replacement Liquidity
Facility to replace the Class B Liquidity Facility pursuant to Section
3.6(e).
"CLASS B TRUST" means Continental Airlines Pass Through Trust, Series
1997-3B created and administered pursuant to the Class B Trust Agreement.
"CLASS B TRUST AGREEMENT" means the Pass Through Trust Agreement dated
as of September 25, 1997, between Continental and the Class B Trustee, as
supplemented by the Trust Supplement No. 1997-3B thereto dated September
25, 1997, governing the creation and administration of the Continental
Airlines Pass Through Trust Series 1997-3B and the issuance of the Class B
Certificates, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"CLASS B TRUSTEE" means WTC, not in its individual capacity except as
expressly set forth in the Class B Trust Agreement, but solely as trustee
under the Class B Trust Agreement, together with any successor trustee
appointed pursuant thereto.
"CLASS C CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in
the name of the Subordination Agent and maintained at an Eligible
Institution, which shall be the Subordination Agent if it shall so qualify,
into which all amounts drawn under the Class C Liquidity Facility pursuant
to Section 3.6(c), 3.6(d) or 3.6(i) shall be deposited.
"CLASS C CERTIFICATEHOLDER" means, at any time, any holder of one or
more Class C Certificates.
"CLASS C CERTIFICATES" means the certificates issued by the Class C
Trust, substantially in the form of Exhibit A to the Class C Trust
Agreement, and authenticated by the Class C Trustee, representing
fractional undivided interests in the Class C Trust, and any certificates
issued in exchange therefor or in replacement thereof pursuant to the terms
of the Class C Trust Agreement.
"CLASS C LIQUIDITY FACILITY" means, initially, the Revolving Credit
Agreement dated as of the date hereof between the Subordination Agent, as
agent and trustee for the Class C Trustee, and the Class C Liquidity
Provider and, from and after the replacement of such Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case
as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
<PAGE>
"CLASS C LIQUIDITY PROVIDER" means ABN AMRO, together with any
Replacement Liquidity Provider that has issued a Replacement Liquidity
Facility to replace the Class C Liquidity Facility pursuant to Section
3.6(e).
"CLASS C TRUST" means Continental Airlines Pass Through Trust, Series
1997-3C created and administered pursuant to the Class C Trust Agreement.
"CLASS C TRUST AGREEMENT" means the Pass Through Trust Agreement dated
as of September 25, 1997, between Continental and the Class C Trustee, as
supplemented by the Trust Supplement No. 1997-3C thereto dated September
25, 1997, governing the creation and administration of the Continental
Airlines Pass Through Trust, Series 1997-3C and the issuance of the Class C
Certificates, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"CLASS C TRUSTEE" means WTC, not in its individual capacity except as
expressly set forth in the Class C Trust Agreement, but solely as trustee
under the Class C Trust Agreement, together with any successor trustee
appointed pursuant thereto.
"CLOSING DATE" means September 25, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the Treasury Regulations promulgated thereunder.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by
the Subordination Agent pursuant to Section 2.2 which the Subordination
Agent shall make deposits in and withdrawals from in accordance with this
Agreement.
"CONTINENTAL" means Continental Airlines, Inc., a Delaware
corporation, and its successors and assigns.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation
of any of the following:
(a) Continental shall consent to the appointment of or the taking
of possession by a receiver, trustee or liquidator of itself or of a
substantial part of its property, or Continental shall admit in
writing its inability to pay its debts generally as they come due, or
does not pay its debts generally as they become due or shall make a
general assignment for the benefit of creditors, or Continental shall
file a voluntary petition in bankruptcy or a voluntary petition or an
answer seeking reorganization, liquidation or other relief in a case
under any bankruptcy laws or other insolvency laws (as in effect at
such time) or an answer admitting the material allegations of a
petition filed against Continental in any such case, or Continental
shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar law providing for
the reorganization or winding-up of corporations (as in effect at such
time) or Continental shall seek an agreement, composition, extension
<PAGE>
or adjustment with its creditors under such laws, or Continental's
board of directors shall adopt a resolution authorizing corporate
action in furtherance of any of the foregoing; or
(b) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Continental,
a receiver, trustee or liquidator of Continental or of any substantial
part of its property, or any substantial part of the property of
Continental shall be sequestered, or granting any other relief in
respect of Continental as a debtor under any bankruptcy laws or other
insolvency laws (as in effect at such time), and any such order,
judgment or decree of appointment or sequestration shall remain in
force undismissed, unstayed and unvacated for a period of 60 days
after the date of entry thereof; or
(c) a petition against Continental in a case under any bankruptcy
laws or other insolvency laws (as in effect at such time) is filed and
not withdrawn or dismissed within 60 days thereafter, or if, under the
provisions of any law providing for reorganization or winding-up of
corporations which may apply to Continental, any court of competent
jurisdiction assumes jurisdiction, custody or control of Continental
or of any substantial part of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and
unterminated for a period of 60 days.
"CONTINENTAL PROVISIONS" has the meaning assigned to such term in
Section 9.1(a).
"CONTROLLING PARTY" means the Person entitled to act as such pursuant
to the terms of Section 2.6.
"CORPORATE TRUST OFFICE" means, with respect to any Trustee, the
Subordination Agent or any Mortgagee, the office of such Person in the city
at which, at any particular time, its corporate trust business shall be
principally administered.
"CURRENT DISTRIBUTION DATE" means a Distribution Date specified as a
reference date for calculating the Expected Distributions or the Adjusted
Expected Distributions with respect to the Certificates of any Trust as of
such Distribution Date.
"DESIGNATED REPRESENTATIVES" means the Subordination Agent
Representatives, the Trustee Representatives and the LP Representatives
identified under Section 2.5.
"DISTRIBUTION DATE" means a Regular Distribution Date or a Special
Distribution Date.
"DOLLARS" or "$" means United States dollars.
"DOWNGRADE DRAWING" has the meaning assigned to such term in Section
3.6(c).
"DOWNGRADED FACILITY" has the meaning assigned to such term in Section
3.6(c).
<PAGE>
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the
laws of the United States of America or any one of the states thereof or
the District of Columbia (or any U.S. branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository institution
has a long-term unsecured debt rating from each Rating Agency of at least
A-3 or its equivalent. An Eligible Deposit Account may be maintained with a
Liquidity Provider so long as such Liquidity Provider is an Eligible
Institution; PROVIDED that such Liquidity Provider shall have waived all
rights of setoff and counterclaim with respect to such account; and
PROVIDED FURTHER that no Cash Collateral Account may be maintained with a
Liquidity Provider at any time Continental holds any participation in the
related Liquidity Facility unless written confirmation shall have been
received from each Rating Agency prior to such time to the effect that such
maintenance of the Cash Collateral Account with the Liquidity Provider will
not result in a withdrawal or downgrading of the ratings of the
Certificates.
"ELIGIBLE INSTITUTION" means (a) the corporate trust department of the
Subordination Agent or any Trustee, as applicable, or (b) a depository
institution organized under the laws of the United States of America or any
one of the states thereof or the District of Columbia (or any U.S. branch
of a foreign bank), which has a long-term unsecured debt rating from each
Rating Agency of at least A-3 or its equivalent; PROVIDED that a Liquidity
Provider shall not qualify as an Eligible Institution at any time
Continental holds any participation in the related Liquidity Facility
unless written confirmation shall have been received from each Rating
Agency to the effect that such Liquidity Provider's status as an Eligible
Institution will not result in a withdrawal or downgrading of the ratings
of the Certificates.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the United States Government having maturities no later than
90 days following the date of such investment, (b) investments in open
market commercial paper of any corporation incorporated under the laws of
the United States of America or any state thereof with a short-term
unsecured debt rating issued by Moody's and Standard & Poor's of at least
A-1 and P-1, respectively, and having maturities no later than 90 days
following the date of such investment or (c) investments in negotiable
certificates of deposit, time deposits, banker's acceptances, commercial
paper or other direct obligations of, or obligations guaranteed by,
commercial banks organized under the laws of the United States or of any
political subdivision thereof (or any U.S. branch of a foreign bank) with
issuer ratings of at least B/C by Thomson Bankwatch, having maturities no
later than 90 days following the date of such investment; PROVIDED,
HOWEVER, that (x) all Eligible Investments that are bank obligations shall
be denominated in U.S. dollars; and (y) the aggregate amount of Eligible
Investments at any one time that are bank obligations issued by any one
<PAGE>
bank shall not be in excess of 5% of such bank's capital surplus; PROVIDED
FURTHER that (1) any investment of the types described in clauses (a), (b)
and (c) above may be made through a repurchase agreement in commercially
reasonable form with a bank or other financial institution qualifying as an
Eligible Institution so long as such investment is held by a third party
custodian also qualifying as an Eligible Institution, and (2) all such
investments set forth in clause (a), (b) or (c) above mature no later than
the Business Day immediately preceding the next Regular Distribution Date;
PROVIDED FURTHER, HOWEVER, that in the case of any Eligible Investment
issued by a domestic branch of a foreign bank, the income from such
investment shall be from sources within the United States for purposes of
the Code. Notwithstanding the foregoing, no investment of the types
described in clause (b) or (c) above which is issued or guaranteed by a
Liquidity Provider or Continental or any of their respective Affiliates,
and no investment in the obligations of any one bank in excess of
$10,000,000, shall be an Eligible Investment at any time Continental holds
any participation in the related Liquidity Facility unless written
confirmation shall have been received from each Rating Agency that the
making of such investment will not result in a withdrawal or downgrading of
the ratings of the Certificates.
"EQUIPMENT NOTES" means, at any time, the Series A Equipment Notes,
the Series B Equipment Notes and the Series C Equipment Notes,
collectively, and in each case, any Equipment Notes issued in exchange
therefor or replacement thereof pursuant to the terms of the Indentures.
"ESCROWED FUNDS", with respect to the Certificates of any Class, has
the meaning assigned to such term in the Trust Agreement for such Class.
"ESCROWED FUNDS INTEREST DISTRIBUTION" means, with respect to the
Certificates of any Class, the interest component of any distribution to
the Certificateholders of such Class on account of Escrowed Funds for such
Class of Certificates, earnings thereon or payments by Continental pursuant
to the third paragraph of Section 2.02(b) of the Trust Agreement for such
Class of Certificates.
"EXPECTED DISTRIBUTIONS" means, with respect to the Certificates of
any Trust on any Current Distribution Date, the sum of (x) accrued and
unpaid interest on such Certificates (after giving effect to any Escrowed
Funds Interest Distribution to be made on such Current Distribution Date
with respect to such Certificates) and (y) the difference between (A) the
Pool Balance of such Certificates as of the immediately preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, the original aggregate face amount of the Certificates
of such Trust), less (if applicable) the aggregate amount of Escrowed Funds
for such Class of Certificates as of such immediately preceding
Distribution Date (or, if the Current Distribution Date is the first
Distribution Date, as of the Closing Date) thereafter distributed to the
Certificateholders of such Class (instead of being used to purchase
Postponed Notes) pursuant to the Trust Agreement for such Class (excluding
the interest component of any such distribution), and (B) the Pool Balance
<PAGE>
of such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Equipment Notes held in such Trust has
been paid when due (whether at stated maturity or upon redemption,
prepayment, purchase or Acceleration or otherwise) and such payments have
been distributed to the holders of such Certificates and (ii) the principal
of any Equipment Notes formerly held in such Trust which have been sold
pursuant to the terms hereof have been paid in full and such payments have
been distributed to the holders of such Certificates. For purposes of
calculating Expected Distributions with respect to the Certificates of any
Trust, any premium paid on the Equipment Notes held in such Trust which has
not been distributed to the Certificateholders of such Trust (other than
such premium or a portion thereof applied to the payment of interest on the
Certificates of such Trust or the reduction of the Pool Balance of such
Trust) shall be added to the amount of such Expected Distributions.
"EXPIRY DATE" with respect to any Liquidity Facility, shall have the
meaning set forth in such Liquidity Facility.
"FEE LETTER" means, collectively, the Fee Letter dated September 25,
1997 between ABN AMRO, Rolls-Royce and the Subordination Agent with respect
to the Liquidity Facilities and any fee letter entered into between the
Subordination Agent and any Replacement Liquidity Provider.
"FINAL DISTRIBUTIONS" means, with respect to the Certificates of any
Trust on any Distribution Date, the sum of (a) the aggregate amount of all
accrued and unpaid interest on such Certificates and (b) the Pool Balance
of such Certificates as of the immediately preceding Distribution Date. For
purposes of calculating Final Distributions with respect to the
Certificates of any Trust, any premium paid on the Equipment Notes held in
such Trust which has not been distributed to the Certificateholders of such
Trust (other than such premium or a portion thereof applied to the payment
of interest on the Certificates of such Trust or the reduction of the Pool
Balance of such Trust) shall be added to the amount of such Final
Distributions.
"FINAL DRAWING" has the meaning assigned to such term in Section
3.6(i).
"FINAL LEGAL DISTRIBUTION DATE" means, (i) with respect to the Class A
Certificates, September 24, 2014, (ii) with respect to the Class B
Certificates, December 24, 2008, and (iii) with respect to the Class C
Certificates, September 24, 2006.
"FINANCING AGREEMENTS" means each of the Participation Agreements.
"INDENTURE" means each of the Trust Indentures entered into by an
Owner Trustee and the Mortgagee, initially with respect to the aircraft set
forth on Schedule I hereto, in each case as the same may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
<PAGE>
"INDENTURE DEFAULT" means, with respect to any Indenture, any Event of
Default (as such term is defined in such Indenture) thereunder.
"INTEREST DRAWING" has the meaning assigned to such term in Section
3.6(a).
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in
the Trust Accounts net of losses and investment expenses of the
Subordination Agent in making such investments.
"LEASE" means, with respect to each Indenture, the "Lease" referred to
therein.
"LENDING OFFICE" means, with respect to any Liquidity Facility of the
initial Liquidity Provider, the lending office of such Liquidity Provider
presently located at Chicago, Illinois, or such other lending office as
such Liquidity Provider from time to time shall notify the applicable
Trustee as its lending office under any such Liquidity Facility; PROVIDED
that such Liquidity Provider shall not change its Lending Office to a
Lending Office outside the United States of America except in accordance
with Section 3.01, 3.02 or 3.03 of any such Liquidity Facility.
"LIEN" means any mortgage, pledge, lien, charge, claim, disposition of
title, encumbrance, lease, sublease, sub-sublease or security interest of
any kind, including, without limitation, any thereof arising under any
conditional sales or other title retention agreement.
"LIQUIDITY EVENT OF DEFAULT" means the occurrence of either (i) an
Acceleration of all the Equipment Notes or (ii) a Continental Bankruptcy
Event.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i)
the principal amount of any Drawings under the Liquidity Facilities and
(ii) any interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, at any time, the Class A Liquidity
Facility, the Class B Liquidity Facility or the Class C Liquidity Facility,
as applicable.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Providers under the Liquidity Facilities,
Section 9.1 of the Participation Agreements or the Fee Letter.
"LIQUIDITY PROVIDER" means, at any time, the Class A Liquidity
Provider, the Class B Liquidity Provider or the Class C Liquidity Provider,
as applicable.
"LP INCUMBENCY CERTIFICATE" has the meaning assigned to such term in
Section 2.5(b).
"LP REPRESENTATIVES" has the meaning assigned to such term in Section
2.5(b).
<PAGE>
"LTV APPRAISAL" means a current fair market appraisal (which may be a
"desktop" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed
and willing seller under no compulsion to sell and both having knowledge of
all relevant facts.
"LTV COLLATERAL AMOUNT" of any Aircraft for any Class of Certificates
on any Distribution Date means the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of
such Aircraft (or with respect to any such Aircraft which has suffered an
Event of Loss under and as defined in the Lease, the amount of insurance
proceeds paid to the Mortgagee under the related Indenture in respect
thereof to the extent then held by such Mortgagee (and/or on deposit in the
Special Payments Account) or payable to such Mortgagee in respect thereof)
and (ii) the outstanding principal amount of the Equipment Notes secured by
such Aircraft after giving effect to any principal payments of such
Equipment Notes on or before such Distribution Date.
"LTV RATIO" means for the Class A Certificates, 41.6%, for the Class B
Certificates, 56.6% and for the Class C Certificates, 67.6%.
"MAXIMUM AVAILABLE COMMITMENT", with respect to any Liquidity
Facility, has the meaning assigned to such term in such Liquidity Facility.
"MINIMUM SALE PRICE" means, with respect to any Aircraft or the
Equipment Notes issued in respect of such Aircraft, at any time, the lesser
of (a) 75% of the Appraised Current Market Value of such Aircraft and (b)
the aggregate outstanding principal amount of such Equipment Notes, plus
accrued and unpaid interest thereon.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGEE" means, with respect to any Indenture, the indenture
trustee thereunder.
"NON-CONTROLLING PARTY" means, at any time, any Trustee or Liquidity
Provider which is not the Controlling Party at such time.
"NON-EXTENDED FACILITY" has the meaning assigned to such term in
Section 3.6(d).
"NON-EXTENSION DRAWING" has the meaning assigned to such term in
Section 3.6(d).
"NON-PERFORMING EQUIPMENT NOTE" means an Equipment Note issued
pursuant to an Indenture that is not a Performing Equipment Note.
"OFFICER'S CERTIFICATE" of any Person means a certification signed by
a Responsible Officer of such Person.
<PAGE>
"OPERATIVE AGREEMENTS" means this Agreement, the Liquidity Facilities,
the Indentures, the Trust Agreements, the Underwriting Agreement, the
Leases, the Participation Agreements, the Fee Letter, the Equipment Notes
and the Certificates, together with all exhibits and schedules included
with any of the foregoing.
"OUTSTANDING" means, when used with respect to each Class of
Certificates, as of the date of determination, all Certificates of such
Class theretofore authenticated and delivered under the related Trust
Agreement, except:
(i) Certificates of such Class theretofore cancelled by the
Registrar (as defined in such Trust Agreement) or delivered to the
Trustee thereunder or such Registrar for cancellation;
(ii) Certificates of such Class for which money in the full
amount required to make the final distribution with respect to such
Certificates pursuant to Section 11.01 of such Trust Agreement has
been theretofore deposited with the related Trustee in trust for the
holders of such Certificates as provided in Section 4.01 of such Trust
Agreement pending distribution of such money to such
Certificateholders pursuant to such final distribution payment; and
(iii) Certificates of such Class in exchange for or in lieu of
which other Certificates have been authenticated and delivered
pursuant to such Trust Agreement;
PROVIDED, HOWEVER, that in determining whether the holders of the requisite
Outstanding amount of such Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, any
Certificates owned by Continental or any of its Affiliates shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether such Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Certificates that such Trustee knows to be so owned shall be so
disregarded. Certificates so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction
of the applicable Trustee the pledgee's right so to act with respect to
such Certificates and that the pledgee is not Continental or any of its
Affiliates.
"OVERDUE SCHEDULED PAYMENT" means any Scheduled Payment which is not
in fact received by the Subordination Agent within five days after the
Scheduled Payment Date relating thereto.
"OWNER TRUSTEE" means, with respect to any Indenture, the Owner
Trustee (as defined therein) not in its individual capacity but solely as
trustee under the related owner trust agreement, together with any
successor trustee appointed pursuant to such owner trust agreement.
"PARTICIPATION AGREEMENT" means, with respect to each Indenture, the
"Participation Agreement" referred to therein.
<PAGE>
"PAYEE" has the meaning assigned to such term in Section 2.4(e).
"PERFORMING EQUIPMENT NOTE" means an Equipment Note issued pursuant to
an Indenture with respect to which no payment default has occurred and is
continuing (without giving effect to any Acceleration); PROVIDED that in
the event of a bankruptcy proceeding involving Continental under Title 11
of the United States Code (the "BANKRUPTCY CODE"), (i) any payment default
existing during the 60-day period under Section 1110(a)(1)(A) of the
Bankruptcy Code (or such longer period as may apply under Section 1110(b)
of the Bankruptcy Code) (the "SECTION 1110 PERIOD") shall not be taken into
consideration, unless during the Section 1110 Period the trustee in such
proceeding or Continental refuses to assume or agree to perform its
obligations under the Lease related to such Equipment Note and (ii) any
payment default occurring after the date of the order of relief in such
proceeding shall not be taken into consideration if such payment default is
cured under Section 1110(a)(1)(B) of the Bankruptcy Code before the later
of 30 days after the date of such default or the expiration of the Section
1110 Period.
"PERFORMING NOTE DEFICIENCY" means any time that less than 65% of the
then aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes.
"PERSON" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, trustee, unincorporated organization or government or any agency or
political subdivision thereof.
"POOL BALANCE" means, with respect to each Trust or the Certificates
issued by any Trust, as of any date, (i) the original aggregate face amount
of the Certificates of such Trust LESS (ii) the aggregate amount of all
payments made in respect of the Certificates of such Trust other than
payments made in respect of interest or premium thereon or reimbursement of
any costs and expenses in connection therewith. The Pool Balance for each
Trust or the Certificates issued by any Trust as of any Distribution Date
shall be computed after giving effect to the payment of principal, if any,
on the Equipment Notes or other Trust Property held in such Trust and the
distribution thereof to be made on such date.
"POSTPONED NOTES", with respect to the Certificates of any Class, has
the meaning assigned to such term in the Trust Agreement for such Class.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PTC EVENT OF DEFAULT" means, with respect to each Trust Agreement,
the failure to pay within 10 Business Days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of Certificates on the
Final Legal Distribution Date for such Class or (ii) interest due on such
Certificates on any Distribution Date (unless the Subordination Agent shall
have made an Interest Drawing, or a withdrawal from the Cash Collateral
<PAGE>
Account, with respect thereto in an aggregate amount sufficient to pay such
interest and shall have distributed such amount to the Trustee entitled
thereto).
"RATING AGENCIES" means, collectively, at any time, each nationally
recognized rating agency which shall have been requested to rate the
Certificates and which shall then be rating the Certificates. Initially,
the Rating Agencies shall consist of Moody's and Standard & Poor's.
"RATINGS CONFIRMATION" means, with respect to any action proposed to
be taken, a written confirmation from each of the Rating Agencies that such
action would not result in (i) a reduction of the rating for any Class of
Certificates below the then current rating for such Class of Certificates
or (ii) a withdrawal or suspension of the rating of any Class of
Certificates.
"REGULAR DISTRIBUTION DATES" means each March 24, June 24, September
24 and December 24, commencing on December 24, 1997; PROVIDED, HOWEVER,
that, if any such day shall not be a Business Day, the related distribution
shall be made on the next succeeding Business Day without additional
interest.
"REPLACEMENT LIQUIDITY FACILITY" means, for any Liquidity Facility,
one or more irrevocable revolving credit agreements issued by one or more
Persons in substantially the form of the initial Liquidity Facility for
such Trust, including reinstatement provisions, or in such other form
(which may include a letter of credit) as shall permit the Rating Agencies
to confirm in writing their respective ratings then in effect for each
Class of Certificates (before the downgrading of such ratings, if any, as a
result of the downgrading of the replaced Liquidity Provider), in an
aggregate face amount (together with the face amount of any Liquidity
Facility of the same Class which will continue to be outstanding after the
issuance of such Replacement Liquidity Facility and the amount in the Cash
Collateral Account of such Class) equal to the Required Amount for such
Liquidity Facility and issued by one or more Persons having short-term
unsecured debt ratings issued by each Rating Agency that are equal to or
higher than the Threshold Rating. Without limitation of the form that a
Replacement Liquidity Facility otherwise may have pursuant to the preceding
sentence, a Replacement Liquidity Facility for any Class of Certificates
may have a stated expiration date earlier than 15 days after the Final
Maturity Date of such Class of Certificates so long as such Replacement
Liquidity Facility provides for a Non-Extension Drawing as contemplated by
Section 3.6(d) hereof.
"REPLACEMENT LIQUIDITY PROVIDER" means a Person who issues a
Replacement Liquidity Facility.
"REQUIRED AMOUNT" means, with respect to each Liquidity Facility, or
the Cash Collateral Account, for any Class, for any day, the sum of the
aggregate amount of interest, calculated at the rate per annum equal to the
Stated Interest Rate for the related Class of Certificates, that would be
payable on such Class of Certificates on each of the six successive Regular
Distribution Dates immediately following such day or, if such day is a
Regular Distribution Date, on such day and the succeeding five Regular
<PAGE>
Distribution Dates, in each case calculated on the basis of the Pool
Balance of such Class of Certificates on such date and without regard to
expected future payments of principal on such Class of Certificates.
"RESPONSIBLE OFFICER" means (i) with respect to the Subordination
Agent and each of the Trustees, any officer in the corporate trust
administration department of the Subordination Agent or such Trustee or any
other officer customarily performing functions similar to those performed
by the Persons who at the time shall be such officers, respectively, or to
whom any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject and (ii) with respect to each
Liquidity Provider, any authorized officer of such Liquidity Provider.
"ROLLS-ROYCE" means Rolls-Royce plc, an English corporation.
"SCHEDULED PAYMENT" means, with respect to any Equipment Note, (i) any
payment of principal or interest on such Equipment Note (other than an
Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment
of interest on the corresponding Class of Certificates with funds drawn
under any Liquidity Facility, which payment represents the installment of
principal at the stated maturity of such installment of principal on such
Equipment Note, the payment of regularly scheduled interest accrued on the
unpaid principal amount of such Equipment Note, or both; PROVIDED that any
payment of principal of, premium, if any, or interest resulting from the
redemption or purchase of any Equipment Note shall not constitute a
Scheduled Payment.
"SCHEDULED PAYMENT DATE" means, with respect to any Scheduled Payment,
the date on which such Scheduled Payment is scheduled to be made.
"SERIES A EQUIPMENT NOTES" means the 7.160% Series A Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee and
authenticated by the Mortgagee thereunder, and any such Equipment Notes
issued in exchange therefor or replacement thereof pursuant to the terms of
such Indenture.
"SERIES B EQUIPMENT NOTES" means the 7.140% Series B Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee and
authenticated by the Mortgagee thereunder, and any such Equipment Notes
issued in exchange therefor or replacement thereof pursuant to the terms of
such Indenture.
"SERIES C EQUIPMENT NOTES" means the 7.121% Series C Equipment Notes
issued pursuant to each Indenture by the related Owner Trustee and
authenticated by the Mortgagee thereunder, and any such Equipment Notes
issued in exchange therefor or replacement thereof pursuant to the terms of
such Indenture.
"SPECIAL DISTRIBUTION DATE" means, with respect to any Special
Payment, the date chosen by the Subordination Agent pursuant to Section
2.4(a) for the distribution of such Special Payment in accordance with this
Agreement.
<PAGE>
"SPECIAL PAYMENT" means any payment (other than a Scheduled Payment)
in respect of, or any proceeds of, any Equipment Note or Trust Indenture
Estate (as defined in each Indenture).
"SPECIAL PAYMENTS ACCOUNT" means the Eligible Deposit Account created
pursuant to Section 2.2 as a sub-account to the Collection Account.
"STANDARD & POOR'S" means Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies Inc.
"STATED AMOUNT" with respect to any Liquidity Facility, means the
Maximum Commitment (as defined in such Liquidity Facility) of the
applicable Liquidity Provider thereunder.
"STATED EXPIRATION DATE" has the meaning assigned to such term in
Section 3.6(d).
"STATED INTEREST RATE" means (i) with respect to the Class A
Certificates, 7.160% per annum, (ii) with respect to the Class B
Certificates, 7.140% per annum, and (iii) with respect to the Class C
Certificates, 7.121% per annum.
"SUBORDINATION AGENT" has the meaning assigned to it in the
preliminary statements to this Agreement.
"SUBORDINATION AGENT INCUMBENCY CERTIFICATE" has the meaning assigned
to such term in Section 2.5(a).
"SUBORDINATION AGENT REPRESENTATIVES" has the meaning assigned to such
term in Section 2.5(a).
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, loss, damage, liability, expense, additions to tax and
additional amounts or costs incurred or imposed with respect thereto)
imposed or otherwise assessed by the United States of America or by any
state, local or foreign government (or any subdivision or agency thereof)
or other taxing authority, including, without limitation: taxes or other
charges on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment
compensation, or net worth and similar charges; taxes or other charges in
the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TAX LETTER" means, collectively, the Fee Letter dated September 25,
1997 between ABN AMRO and Rolls-Royce with respect to the Liquidity
Facilities and any fee letter entered into between Continental or
Rolls-Royce, on the one hand, and any Replacement Liquidity Provider, on
the other.
<PAGE>
"TERMINATION NOTICE" with respect to any Liquidity Facility has the
meaning assigned to such term in such Liquidity Facility.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1
by Moody's and A-1 by Standard & Poor's.
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"TRIGGERING EVENT" means (x) the occurrence of an Indenture Default
under all of the Indentures resulting in a PTC Event of Default with
respect to the most senior Class of Certificates then Outstanding, (y) the
Acceleration of, or a failure to pay at final maturity, all of the
outstanding Equipment Notes or (z) the occurrence of a Continental
Bankruptcy Event.
"TRUST" means any of the Class A Trust, the Class B Trust or the Class
C Trust.
"TRUST ACCOUNTS" has the meaning assigned to such term in Section
2.2(a).
"TRUST AGREEMENT" means any of the Class A Trust Agreement, Class B
Trust Agreement or Class C Trust Agreement.
"TRUST PROPERTY", with respect to any Trust, has the meaning set forth
in the Trust Agreement for such Trust.
"TRUSTEE" means any of the Class A Trustee, the Class B Trustee or the
Class C Trustee.
"TRUSTEE INCUMBENCY CERTIFICATE" has the meaning assigned to such term
in Section 2.5(a).
"TRUSTEE REPRESENTATIVES" has the meaning assigned to such term in
Section 2.5(a).
"UNDERWRITERS" means Morgan Stanley & Co. Incorporated and Citicorp
Securities, Inc.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
September 12, 1997, among the Underwriters, Rolls-Royce and Continental,
relating to the purchase of the Certificates by the Underwriters, as the
same may be amended, supplemented or otherwise modified from time to time
in accordance with its terms.
"WRITTEN NOTICE" means, from the Subordination Agent, any Trustee or
Liquidity Provider, a written instrument executed by the Designated
<PAGE>
Representative of such Person. An invoice delivered by a Liquidity Provider
pursuant to Section 3.1 in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning assigned to it in the preliminary statements to
this Agreement.
ARTICLE II
TRUST ACCOUNTS; CONTROLLING PARTY
SECTION 2.1 AGREEMENT TO TERMS OF SUBORDINATION; PAYMENTS FROM MONIES
RECEIVED ONLY. (a) Each Trustee hereby acknowledges and agrees to the terms of
subordination set forth in this Agreement in respect of each Class of
Certificates and agrees to enforce such provisions and cause all payments in
respect of the Equipment Notes and the Liquidity Facilities to be applied in
accordance with the terms of this Agreement. In addition, each Trustee hereby
agrees to cause the Equipment Notes purchased by the related Trust to be
registered in the name of the Subordination Agent or its nominee, as agent and
trustee for such Trustee, to be held in trust by the Subordination Agent solely
for the purpose of facilitating the enforcement of the subordination and other
provisions of this Agreement.
(b) Except as otherwise expressly provided in the next succeeding
sentence of this Section 2.1, all payments to be made by the Subordination Agent
hereunder shall be made only from amounts received by it that constitute
Scheduled Payments, Special Payments or payments under Section 9.1 of the
Participation Agreements, and only to the extent that the Subordination Agent
shall have received sufficient income or proceeds therefrom to enable it to make
such payments in accordance with the terms hereof. Each of the Trustees and the
Subordination Agent hereby agrees and, as provided in each Trust Agreement, each
Certificateholder, by its acceptance of a Certificate, and each Liquidity
Provider, by entering into the Liquidity Facility to which it is a party, has
agreed to look solely to such amounts to the extent available for distribution
to it as provided in this Agreement and that none of the Trustees, Owner
Trustees, Mortgagees, Owner Participants nor the Subordination Agent is
personally liable to any of them for any amounts payable or any liability under
this Agreement, any Trust Agreement, any Liquidity Facility or such Certificate,
except (in the case of the Subordination Agent) as expressly provided herein or
(in the case of the Trustees) as expressly provided in each Trust Agreement or
(in the case of the Owner Trustees and the Mortgagees) as expressly provided in
any Operative Agreement.
SECTION 2.2 TRUST ACCOUNTS. (a) Upon the execution of this Agreement,
the Subordination Agent shall establish and maintain in its name (i) the
Collection Account as an Eligible Deposit Account, bearing a designation clearly
indicating that the funds deposited therein are held in trust for the benefit of
the Trustees, the Certificateholders and the Liquidity Providers and (ii) as a
sub-account in the Collection Account, the Special Payments Account as an
Eligible Deposit Account, bearing a designation clearly indicating that the
funds deposited therein are held in trust for the benefit of the Trustees, the
Certificateholders and the Liquidity Providers. The Subordination Agent shall
establish and maintain the Cash Collateral Accounts pursuant to and under the
circumstances set forth in Section 3.6(f) hereof. Upon such establishment and
<PAGE>
maintenance under Section 3.6(f) hereof, the Cash Collateral Accounts shall,
together with the Collection Account, constitute the "TRUST ACCOUNTS" hereunder.
(b) Funds on deposit in the Trust Accounts shall be invested and
reinvested by the Subordination Agent in Eligible Investments selected by the
Subordination Agent if such investments are reasonably available and have
maturities no later than the earlier of (i) 90 days following the date of such
investment and (ii) the Business Day immediately preceding the Regular
Distribution Date or the date of the related distribution pursuant to Section
2.4 hereof, as the case may be, next following the date of such investment;
PROVIDED, HOWEVER, that following the making of a Downgrade Drawing or a
Non-Extension Drawing under any Liquidity Facility, the Subordination Agent
shall invest and reinvest such amounts in Eligible Investments at the direction
of the Liquidity Provider with respect to such Liquidity Facility; PROVIDED
FURTHER, HOWEVER, that upon the occurrence and during the continuation of a
Triggering Event, the Subordination Agent shall invest and reinvest such amounts
in accordance with the written instructions of the Controlling Party. Unless
otherwise expressly provided in this Agreement (including, without limitation,
with respect to Investment Earnings on deposit in the Cash Collateral Accounts,
Section 3.6(f) hereof), any Investment Earnings shall be deposited in the
Collection Account when received by the Subordination Agent and shall be applied
by the Subordination Agent in the same manner as the other amounts on deposit in
the Collection Account are to be applied and any losses shall be charged against
the principal amount invested, in each case net of the Subordination Agent's
reasonable fees and expenses in making such investments. The Subordination Agent
shall not be liable for any loss resulting from any investment, reinvestment or
liquidation required to be made under this Agreement other than by reason of its
willful misconduct or gross negligence. Eligible Investments and any other
investment required to be made hereunder shall be held to their maturities
except that any such investment may be sold (without regard to its maturity) by
the Subordination Agent without instructions whenever such sale is necessary to
make a distribution required under this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(c) The Subordination Agent shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (including all income thereon, except as otherwise provided
herein with respect to Investment Earnings). The Trust Accounts shall be held in
trust by the Subordination Agent under the sole dominion and control of the
Subordination Agent for the benefit of the Trustees, the Certificateholders and
the Liquidity Providers, as the case may be. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the Subordination Agent shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days,
to which each Rating Agency may consent) establish a new Collection Account,
Special Payments Account or Cash Collateral Account, as the case may be, as an
Eligible Deposit Account and shall transfer any cash and/or any investments to
such new Collection Account, Special Payments Account or Cash Collateral
Account, as the case may be. So long as WTC is an Eligible Institution, the
Trust Accounts shall be maintained with it as Eligible Deposit Accounts.
<PAGE>
SECTION 2.3 DEPOSITS TO THE COLLECTION ACCOUNT AND SPECIAL PAYMENTS
ACCOUNT. (a) The Subordination Agent shall, upon receipt thereof, deposit in the
Collection Account all Scheduled Payments received by it.
(b) The Subordination Agent shall, on each date when one or more
Special Payments are made to the Subordination Agent as holder of the Equipment
Notes, deposit in the Special Payments Account the aggregate amount of such
Special Payments.
SECTION 2.4 DISTRIBUTIONS OF SPECIAL PAYMENTS. (a) NOTICE OF SPECIAL
PAYMENT. Except as provided in Section 2.4(e) below, upon receipt by the
Subordination Agent, as registered holder of the Equipment Notes, of any notice
of a Special Payment (or, in the absence of any such notice, upon receipt by the
Subordination Agent of a Special Payment), the Subordination Agent shall
promptly give notice thereof to each Trustee and the Liquidity Providers. The
Subordination Agent shall promptly calculate the amount of the redemption or
purchase of Equipment Notes or the amount of any Overdue Scheduled Payment, as
the case may be, comprising such Special Payment under the applicable Indenture
or Indentures and shall promptly send to each Trustee a Written Notice of such
amount and the amount allocable to each Trust. Such Written Notice shall also
set the distribution date for such Special Payment (a "SPECIAL DISTRIBUTION
DATE"), which shall be the Business Day which immediately follows the later to
occur of (x) the 15th day after the date of such Written Notice or (y) the date
the Subordination Agent has received or expects to receive such Special Payment.
Amounts on deposit in the Special Payments Account shall be distributed in
accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable.
(b) (i) REDEMPTIONS AND PURCHASES OF EQUIPMENT NOTES. So long as no
Triggering Event shall have occurred (whether or not continuing), the
Subordination Agent shall make distributions pursuant to this Section 2.4(b) of
amounts on deposit in the Special Payments Account on account of the redemption,
purchase (including, without limitation, a purchase resulting from a sale of the
Equipment Notes permitted by Article IV hereof) or pre-payment of all of the
Equipment Notes issued pursuant to an Indenture on the Special Distribution Date
for such Special Payment in the following order of priority:
FIRST, such amount as shall be required to pay (A) all accrued and unpaid
Liquidity Expenses then in arrears PLUS (B) the product of (x) the
aggregate amount of all accrued and unpaid Liquidity Expenses not in
arrears to such Special Payment Date MULTIPLIED BY (y) a fraction, the
numerator of which is the aggregate outstanding principal amount of
Equipment Notes being redeemed, purchased or prepaid on such Special
Payment Date and the denominator of which is the aggregate outstanding
principal amount of all Equipment Notes, shall be distributed to the
Liquidity Providers PARI PASSU on the basis of the amount of Liquidity
Expenses owed to each Liquidity Provider;
SECOND, such amount as shall be required to pay (A) all accrued and unpaid
interest then in arrears on all Liquidity Obligations (including interest
accrued and unpaid on any Interest Drawing or any Applied Provider Advance
(as defined in any Liquidity Facility)) PLUS (B) the product of (x) the
<PAGE>
aggregate amount of all accrued and unpaid interest on all Liquidity
Obligations not in arrears to such Special Payment Date (at the rate
provided in the applicable Liquidity Facility) MULTIPLIED BY (y) a
fraction, the numerator of which is the aggregate outstanding principal
amount of Equipment Notes being redeemed, purchased or prepaid on such
Special Payment Date and the denominator of which is the aggregate
outstanding principal amount of all Equipment Notes, shall be distributed
to the Liquidity Providers PARI PASSU on the basis of the amount of such
Liquidity Obligations owed to each Liquidity Provider;
THIRD, such amount as shall be required (A) if any Cash Collateral Account
had been previously funded as provided in Section 3.6(f), to fund such Cash
Collateral Account up to its Required Amount shall be deposited in such
Cash Collateral Account, (B) if any Liquidity Facility shall become a
Downgraded Facility or a Non-Extended Facility at a time when unreimbursed
Interest Drawings under such Liquidity Facility have reduced the Maximum
Available Commitment thereunder to zero, to fund the relevant Cash
Collateral Account up to such Cash Collateral Account's Required Amount
shall be deposited in such Cash Collateral Account, and (C) if, with
respect to any particular Liquidity Facility, neither subclause (A) nor
subclause (B) of this clause "third" are applicable, to pay or reimburse
the Liquidity Provider in respect of such Liquidity Facility in an amount
equal to the amount of any unreimbursed Interest Drawings under such
Liquidity Facility shall be distributed to such Liquidity Provider PARI
PASSU on the basis of the amounts of all such deficiencies and/or
unreimbursed Interest Drawings;
FOURTH, if, with respect to any particular Liquidity Facility, any amounts
are to be distributed pursuant to either subclause (A) or (B) of clause
"third" above, then the Liquidity Provider with respect to such Liquidity
Facility shall be paid the excess of (x) the aggregate outstanding amount
of unreimbursed Advances (whether or not then due) under such Liquidity
Facility over (y) the Required Amount for the relevant Class, PARI PASSU on
the basis of such amounts in respect of each Liquidity Provider;
FIFTH, such amount as shall be required to pay in full Expected
Distributions to the holders of Class A Certificates on such Special
Distribution Date shall be distributed to the Class A Trustee;
SIXTH, such amount as shall be required to pay in full Expected
Distributions to the holders of Class B Certificates on such Special
Distribution Date shall be distributed to the Class B Trustee;
SEVENTH, such amount as shall be required to pay in full Expected
Distributions to the holders of Class C Certificates on such Special
Distribution Date shall be distributed to the Class C Trustee; and
EIGHTH, the balance, if any, of such Special Payment shall be transferred
to the Collection Account for distribution in accordance with Section 3.2
hereof.
For the purposes of this Section 2.4(b)(i), clause (x) of the definition of
"Expected Distributions" shall be deemed to read as follows: "(x) accrued, due
<PAGE>
and unpaid interest on such Certificates (after giving effect to any Escrowed
Funds Interest Distribution to be made on such Current Distribution Date with
respect to such Certificates) together with (without duplication) accrued and
unpaid interest on a portion of such Certificates equal to the outstanding
principal amount of Equipment Notes being redeemed, purchased or prepaid
(immediately prior to such redemption, purchase or prepayment)".
(ii) Upon the occurrence of a Triggering Event (whether or not
continuing), the Subordination Agent shall make distributions pursuant to
this Section 2.4(b) of amounts on deposit in the Special Payments Account
on account of the redemption or purchase of all of the Equipment Notes
issued pursuant to an Indenture on the Special Distribution Date for such
Special Payment in accordance with Section 3.3 hereof.
(c) OTHER SPECIAL PAYMENTS. Except as provided in clause (e) below,
any amounts on deposit in the Special Payments Account other than in respect of
amounts to be distributed pursuant to Section 2.4(b) shall be distributed on the
Special Distribution Date therefor in accordance with Article III hereof.
(d) INVESTMENT OF AMOUNTS IN SPECIAL PAYMENTS ACCOUNT. Any amounts on
deposit in the Special Payments Account prior to the distribution thereof
pursuant to Section 2.4(b) or (c) shall be invested in accordance with Section
2.2(b). Investment Earnings on such investments shall be distributed in
accordance with Section 2.4(b) or (c), as the case may be.
(e) CERTAIN PAYMENTS. The Subordination Agent will distribute promptly
upon receipt thereof (i) any indemnity payment received by it from the Owner
Participant, the Owner Trustee, Continental or Rolls-Royce in respect of any
Trustee or any Liquidity Provider (collectively, the "PAYEES") and (ii) any
compensation (including, without limitation, any fees payable to any Liquidity
Provider under Section 2.03 of any Liquidity Facility) received by it from the
Owner Participant, the Owner Trustee, Continental or Rolls-Royce under any
Operative Agreement or the Fee Letter in respect of any Payee, directly to the
Payee entitled thereto.
SECTION 2.5 DESIGNATED REPRESENTATIVES. (a) With the delivery of this
Agreement, the Subordination Agent shall furnish to each Liquidity Provider and
each Trustee, and from time to time thereafter may furnish to each Liquidity
Provider and each Trustee, at the Subordination Agent's discretion, or upon any
Liquidity Provider's or Trustee's request (which request shall not be made more
than one time in any 12-month period), a certificate (a "SUBORDINATION AGENT
INCUMBENCY CERTIFICATE") of a Responsible Officer of the Subordination Agent
certifying as to the incumbency and specimen signatures of the officers of the
Subordination Agent and the attorney-in-fact and agents of the Subordination
Agent (the "SUBORDINATION AGENT REPRESENTATIVES") authorized to give Written
Notices on behalf of the Subordination Agent hereunder. Until each Liquidity
Provider and Trustee receives a subsequent Subordination Agent Incumbency
Certificate, it shall be entitled to rely on the last Subordination Agent
Incumbency Certificate delivered to it hereunder.
(b) With the delivery of this Agreement, each Trustee shall furnish to
the Subordination Agent, and from time to time thereafter may furnish to the
<PAGE>
Subordination Agent, at such Trustee's discretion, or upon the Subordination
Agent's request (which request shall not be made more than one time in any
12-month period), a certificate (a "TRUSTEE INCUMBENCY Certificate") of a
Responsible Officer of such Trustee certifying as to the incumbency and specimen
signatures of the officers of such Trustee and the attorney-in-fact and agents
of such Trustee (the "TRUSTEE REPRESENTATIVES") authorized to give Written
Notices on behalf of such Trustee hereunder. Until the Subordination Agent
receives a subsequent Trustee Incumbency Certificate, it shall be entitled to
rely on the last Trustee Incumbency Certificate delivered to it hereunder.
(c) With the delivery of this Agreement, each Liquidity Provider shall
furnish to the Subordination Agent, and from time to time thereafter may furnish
to the Subordination Agent, at such Liquidity Provider's discretion, or upon the
Subordination Agent's request (which request shall not be made more than one
time in any 12-month period), a certificate (an "LP INCUMBENCY CERTIFICATE") of
any Responsible Officer of such Liquidity Provider certifying as to the
incumbency and specimen signatures of any officer, attorney-in-fact, agent or
other designated representative of such Liquidity Provider (the "LP
REPRESENTATIVES" and, together with the Subordination Agent Representatives and
the Trustee Representatives, the "DESIGNATED REPRESENTATIVES") authorized to
give Written Notices on behalf of such Liquidity Provider hereunder. Until the
Subordination Agent receives a subsequent LP Incumbency Certificate, it shall be
entitled to rely on the last LP Incumbency Certificate delivered to it
hereunder.
SECTION 2.6 CONTROLLING PARTY. (a) The Trustees and the Liquidity
Providers hereby agree that, with respect to any Indenture at any given time,
the Mortgagee thereunder will be directed (i) in taking, or refraining from
taking, any action under such Indenture or with respect to the Equipment Notes
issued thereunder, so long as no Indenture Default has occurred and is
continuing thereunder, by the holders of at least a majority of the outstanding
principal amount of such Equipment Notes (PROVIDED that, for so long as the
Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent shall act with respect to this clause (i) in accordance with
the directions of the Trustees (in the case of each such Trustee, with respect
to the Equipment Notes issued under such Indenture and held as Trust Property of
such Trust) constituting, in the aggregate, directions with respect to such
principal amount of Equipment Notes), and (ii) after the occurrence and during
the continuance of an Indenture Default thereunder (which has not been cured by
the applicable Owner Trustee or the applicable Owner Participant pursuant to
Section 4.03 of such Indenture), in taking, or refraining from taking, any
action under such Indenture or with respect to such Equipment Notes, including
exercising remedies thereunder (including Accelerating the Equipment Notes
issued thereunder or foreclosing the Lien on the Aircraft securing such
Equipment Notes), by the Controlling Party.
(b) The Person who shall be the "CONTROLLING PARTY" with respect to
any Indenture shall be: (x) the Class A Trustee; (y) upon payment of Final
Distributions to the holders of Class A Certificates, the Class B Trustee; and
(z) upon payment of Final Distributions to the holders of Class B Certificates,
the Class C Trustee. For purposes of giving effect to the foregoing, the
Trustees (other than the Controlling Party) irrevocably agree (and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates) that the Subordination Agent, as record holder of the Equipment
Notes, shall exercise its voting rights in respect of the Equipment Notes as
<PAGE>
directed by the Controlling Party and any vote so exercised shall be binding
upon the Trustees and all Certificateholders.
The Subordination Agent shall give written notice to all of the other parties to
this Agreement promptly upon a change in the identity of the Controlling Party.
Each of the parties hereto agrees that it shall not exercise any of the rights
of the Controlling Party at such time as it is not the Controlling Party
hereunder; PROVIDED, HOWEVER, that nothing herein contained shall prevent or
prohibit any Non-Controlling Party from exercising such rights as shall be
specifically granted to such Non-Controlling Party hereunder and under the other
Operative Agreements.
(c) Notwithstanding the foregoing, at any time after 18 months from
the earlier to occur of (i) the date on which the entire Maximum Available
Commitment under any Liquidity Facility shall have been drawn (for any reason
other than a Downgrade Drawing or a Non-Extension Drawing) and remain
unreimbursed, and (ii) the date on which all Equipment Notes shall have been
Accelerated, the Liquidity Provider with the highest outstanding amount of
Liquidity Obligations shall have the right to elect, by Written Notice to the
Subordination Agent and each of the Trustees, to become the Controlling Party
hereunder with respect to any Indenture at any time from and including the last
day of such 18-month period.
(d) The exercise of remedies by the Controlling Party under this
Agreement shall be expressly limited by Section 4.1(a)(ii) hereof.
(e) The Controlling Party shall not be entitled to require or obligate
any Non-Controlling Party to provide funds necessary to exercise any right or
remedy hereunder.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF
AMOUNTS RECEIVED
SECTION 3.1 WRITTEN NOTICE OF DISTRIBUTION. (a) No later than 3:00
P.M. (New York City time) on the Business Day immediately preceding each Regular
Distribution Date (or Special Distribution Date for purposes of Section 2.4(b)
hereof, as the case may be), each of the following Persons shall deliver to the
Subordination Agent a Written Notice setting forth the following information as
at the close of business on such Business Day:
(i) With respect to the Class A Certificates, the Class A Trustee
shall separately set forth the amounts to be paid in accordance with clause
"FIFTH" of Section 3.2 or 2.4(b), as the case may be, hereof;
(ii) With respect to the Class B Certificates, the Class B
Trustee shall separately set forth the amounts to be paid in accordance
with clause "SIXTH" of Section 3.2 or 2.4(b), as the case may be, hereof;
<PAGE>
(iii) With respect to the Class C Certificates, the Class C
Trustee shall separately set forth the amounts to be paid in accordance
with clause "SEVENTH" of Section 3.2 or 2.4(b), as the case may be, hereof;
(iv) With respect to each Liquidity Facility, the Liquidity
Provider thereunder shall separately set forth the amounts to be paid in
accordance with clauses "FIRST", "SECOND", "THIRD" and "FOURTH" of Section
3.2 or 2.4(b), as the case may be, hereof; and
(v) Each Trustee shall set forth the amounts to be paid in
accordance with clause "EIGHTH" of Section 3.2 hereof.
The notices required under this Section 3.1(a) may be in the form of a schedule
or similar document provided to the Subordination Agent by the parties
referenced therein or by any one of them, which schedule or similar document may
state that, unless there has been a prepayment of the Certificates, such
schedule or similar document is to remain in effect until any substitute notice
or amendment shall be given to the Subordination Agent by the party providing
such notice.
(b) Following the occurrence of a Triggering Event, the Subordination
Agent shall request the following information from the following Persons, and
each of the following Persons shall, upon the request of the Subordination
Agent, deliver a Written Notice to the Subordination Agent setting forth for
such Person the following information:
(i) With respect to the Class A Certificates, the Class A Trustee
shall separately set forth the amounts to be paid in accordance with
clauses "FIRST" (to reimburse payments made by the Class A
Certificateholders pursuant to subclause (iii) of clause "FIRST" of Section
3.3 hereof) and "SEVENTH" of Section 3.3 hereof;
(ii) With respect to the Class B Certificates, the Class B
Trustee shall separately set forth the amounts to be paid in accordance
with clauses "FIRST" (to reimburse payments made by the Class B
Certificateholders pursuant to subclause (iii) of clause "FIRST" of Section
3.3 hereof) and "EIGHTH" of Section 3.3 hereof;
(iii) With respect to the Class C Certificates, the Class C
Trustee shall separately set forth the amounts to be paid in accordance
with clauses "FIRST" (to reimburse payments made by the Class C
Certificateholders pursuant to subclause (iii) of clause "FIRST" of Section
3.3 hereof) and "NINTH" of Section 3.3 hereof;
(iv) With respect to each Liquidity Facility, the Liquidity
Provider thereunder shall separately set forth the amounts to be paid to it
in accordance with subclause (iii) of clause "FIRST" of Section 3.3 hereof
and clauses "second", "THIRD", "FOURTH" and "FIFTH" of Section 3.3 hereof;
and
(v) Each Trustee shall set forth the amounts to be paid in
accordance with clause "SIXTH" of Section 3.3 hereof.
<PAGE>
(c) At such time as a Trustee or a Liquidity Provider shall have
received all amounts owing to it (and, in the case of a Trustee, the
Certificateholders for which it is acting) pursuant to Section 2.4, 3.2 or 3.3
hereof, as applicable, and, in the case of a Liquidity Provider, its commitment
under the related Liquidity Facility shall have terminated or expired, such
Person shall, by a Written Notice, so inform the Subordination Agent and each
other party to this Agreement.
(d) As provided in Section 6.5 hereof, the Subordination Agent shall
be fully protected in relying on any of the information set forth in a Written
Notice provided by any Trustee or any Liquidity Provider pursuant to paragraphs
(a) through (c) above and shall have no independent obligation to verify,
calculate or recalculate any amount set forth in any Written Notice delivered in
accordance with such paragraphs.
(e) Any Written Notice delivered by a Trustee or a Liquidity Provider,
as applicable, pursuant to Section 3.1(a), 3.1(b) or 3.1(c) hereof, if made
prior to 10:00 A.M. (New York City time) shall be effective on the date
delivered (or if delivered later shall be effective as of the next Business
Day). Subject to the terms of this Agreement, the Subordination Agent shall as
promptly as practicable comply with any such instructions; PROVIDED, HOWEVER,
that any transfer of funds pursuant to any instruction received after 10:00 A.M.
(New York City time) on any Business Day may be made on the next succeeding
Business Day.
(f) In the event the Subordination Agent shall not receive from any
Person any information set forth in paragraph (a) or (b) above which is required
to enable the Subordination Agent to make a distribution to such Person pursuant
to Section 3.2 or 3.3 hereof, the Subordination Agent shall request such
information and, failing to receive any such information, the Subordination
Agent shall not make such distribution(s) to such Person. In such event, the
Subordination Agent shall make distributions pursuant to clauses "FIRST" through
"NINTH" of Section 3.2 and clauses "FIRST" through "TENTH" of Section 3.3 to the
extent it shall have sufficient information to enable it to make such
distributions, and shall continue to hold any funds remaining, after making such
distributions, until the Subordination Agent shall receive all necessary
information to enable it to distribute any funds so withheld.
(g) On such dates (but not more frequently than monthly) as any
Liquidity Provider or any Trustee shall request, the Subordination Agent shall
send to such party a written statement reflecting all amounts on deposit with
the Subordination Agent pursuant to Section 3.1(f) hereof.
SECTION 3.2 DISTRIBUTION OF AMOUNTS ON DEPOSIT IN THE COLLECTION
ACCOUNT. Except as otherwise provided in Sections 2.4, 3.1(f), 3.3, 3.4 and
3.6(b), amounts on deposit in the Collection Account (or, in the case of any
amount described in Section 2.4(c), on deposit in the Special Payments Account)
shall be promptly distributed on each Regular Distribution Date (or, in the case
of any amount described in Section 2.4(c), on the Special Distribution Date
thereof) in the following order of priority and in accordance with the
information provided to the Subordination Agent pursuant to Section 3.1(a)
hereof:
<PAGE>
FIRST, such amount as shall be required to pay all accrued and unpaid
Liquidity Expenses owed to each Liquidity Provider shall be distributed to
the Liquidity Providers PARI PASSU on the basis of the amount of Liquidity
Expenses owed to each Liquidity Provider;
SECOND, such amount as shall be required to pay in full the aggregate
amount of interest accrued on all Liquidity Obligations (at the rate
provided in the applicable Liquidity Facility) and unpaid shall be
distributed to the Liquidity Providers PARI PASSU on the basis of the
amount of such Liquidity Obligations owed to each Liquidity Provider;
THIRD, such amount as shall be required (A) if any Cash Collateral Account
had been previously funded as provided in Section 3.6(f), to fund such Cash
Collateral Account up to its Required Amount shall be deposited in such
Cash Collateral Account, (B) if any Liquidity Facility shall become a
Downgraded Facility or a Non-Extended Facility at a time when unreimbursed
Interest Drawings under such Liquidity Facility have reduced the Maximum
Available Commitment thereunder to zero, to fund the relevant Cash
Collateral Account up to such Cash Collateral Account's Required Amount
shall be deposited in such Cash Collateral Account, and (C) if, with
respect to any particular Liquidity Facility, neither subclause (A) nor
subclause (B) of this clause "third" are applicable, to pay or reimburse
the Liquidity Provider in respect of such Liquidity Facility in an amount
equal to the amount of all Liquidity Obligations then due under such
Liquidity Facility (other than amounts payable pursuant to clause "first"
or "second" of this Section 3.2) shall be distributed to such Liquidity
Provider, PARI PASSU on the basis of the amounts of all such deficiencies
and/or unreimbursed Liquidity Obligations;
FOURTH, if, with respect to any particular Liquidity Facility, any amounts
are to be distributed pursuant to either subclause (A) or (B) of clause
"third" above, then the Liquidity Provider with respect to such Liquidity
Facility shall be paid the excess of (x) the aggregate outstanding amount
of unreimbursed Advances (whether or not then due) under such Liquidity
Facility over (y) the Required Amount for the relevant Class, PARI PASSU on
the basis of such amounts in respect of each Liquidity Provider;
FIFTH, such amount as shall be required to pay in full Expected
Distributions to the holders of the Class A Certificates on such
Distribution Date shall be distributed to the Class A Trustee;
SIXTH, such amount as shall be required to pay in full Expected
Distributions to the holders of the Class B Certificates on such
Distribution Date shall be distributed to the Class B Trustee;
SEVENTH, such amount as shall be required to pay in full Expected
Distributions to the holders of the Class C Certificates on such
Distribution Date shall be distributed to the Class C Trustee;
EIGHTH, such amount as shall be required to pay in full the aggregate
unpaid amount of fees and expenses payable as of such Distribution Date to
<PAGE>
the Subordination Agent and each Trustee pursuant to the terms of this
Agreement and the Trust Agreements, as the case may be, shall be
distributed to the Subordination Agent and such Trustee; and
NINTH, the balance, if any, remaining thereafter shall be held in the
Collection Account for later distribution in accordance with this Article
III.
SECTION 3.3 DISTRIBUTION OF AMOUNTS ON DEPOSIT FOLLOWING A TRIGGERING
EVENT. (a) Except as otherwise provided in Sections 3.1(f) and 3.6(b) hereof,
upon the occurrence of a Triggering Event and at all times thereafter, all funds
in the Collection Account or the Special Payments Account shall be promptly
distributed by the Subordination Agent in the following order of priority:
FIRST, such amount as shall be required to reimburse (i) the Subordination
Agent for any out-of-pocket costs and expenses actually incurred by it (to
the extent not previously reimbursed) in the protection of, or the
realization of the value of, the Equipment Notes or any Trust Indenture
Estate, shall be applied by the Subordination Agent in reimbursement of
such costs and expenses, (ii) each Trustee for any amounts of the nature
described in clause (i) above actually incurred by it under the applicable
Trust Agreement (to the extent not previously reimbursed), shall be
distributed to such Trustee and (iii) any Liquidity Provider or
Certificateholder for payments, if any, made by it to the Subordination
Agent or any Trustee in respect of amounts described in clause (i) above,
shall be distributed to such Liquidity Provider or to the applicable
Trustee for the account of such Certificateholder, in each such case, PARI
PASSU on the basis of all amounts described in clauses (i) through (iii)
above;
SECOND, such amount remaining as shall be required to pay all accrued and
unpaid Liquidity Expenses shall be distributed to each Liquidity Provider
PARI PASSU on the basis of the amount of Liquidity Expenses owed to each
Liquidity Provider;
THIRD, such amount remaining as shall be required to pay accrued and unpaid
interest on the Liquidity Obligations as provided in the Liquidity
Facilities shall be distributed to each Liquidity Provider PARI PASSU on
the basis of the amount of such accrued and unpaid interest owed to each
Liquidity Provider;
FOURTH, such amount remaining as shall be required (A) if any Cash
Collateral Account had been previously funded as provided in Section
3.6(f), unless (i) a Performing Note Deficiency exists and a Liquidity
Event of Default shall have occurred and be continuing with respect to the
relevant Liquidity Facility or (ii) a Final Drawing shall have occurred
with respect to such Liquidity Facility, to fund such Cash Collateral
Account up to its Required Amount (less the amount of any repayments of
Interest Drawings under such Liquidity Facility while subclause (A)(i)
above is applicable) shall be deposited in such Cash Collateral Account,
(B) if any Liquidity Facility shall become a Downgraded Facility or a
Non-Extended Facility at a time when unreimbursed Interest Drawings under
such Liquidity Facility have reduced the Maximum Available Commitment
thereunder to zero, unless (i) a Performing Note Deficiency exists and a
<PAGE>
Liquidity Event of Default shall have occurred and be continuing with
respect to the relevant Liquidity Facility or (ii) a Final Drawing shall
have occurred with respect to such Liquidity Facility, to fund the relevant
Cash Collateral Account up to such Cash Collateral Account's Required
Amount (less the amount of any repayments of Interest Drawings under such
Liquidity Facility while subclause (B)(i) above is applicable) shall be
deposited in such Cash Collateral Account, and (C) if, with respect to any
particular Liquidity Facility, neither subclause (A) nor subclause (B) of
this clause "fourth" are applicable, to pay in full the outstanding amount
of all Liquidity Obligations then due under such Liquidity Facility (other
than amounts payable pursuant to clause "SECOND" or "THIRD" of this Section
3.3) shall be distributed to such Liquidity Provider, PARI PASSU on the
basis of the amounts of all such deficiencies and/or unreimbursed Liquidity
Obligations;
FIFTH, if, with respect to any particular Liquidity Facility, any amounts
are to be distributed pursuant to either subclause (A) or (B) of clause
"FOURTH" above, then the Liquidity Provider with respect to such Liquidity
Facility shall be paid the excess of (x) the aggregate outstanding amount
of unreimbursed Advances (whether or not then due) under such Liquidity
Facility over (y) the Required Amount for the relevant Class (less the
amount of any repayments of Interest Drawings under such Liquidity Facility
while subclause (A)(i) or (B)(i), as the case may be, of clause "FOURTH"
above is applicable), PARI PASSU on the basis of such amounts in respect of
each Liquidity Provider;
SIXTH, such amount as shall be required to reimburse or pay (i) the
Subordination Agent for any Tax (other than Taxes imposed on compensation
paid hereunder), expense, fee, charge or other loss incurred by or any
other amount payable to the Subordination Agent in connection with the
transactions contemplated hereby (to the extent not previously reimbursed),
shall be applied by the Subordination Agent in reimbursement of such
amount, (ii) each Trustee for any Tax (other than Taxes imposed on
compensation paid under the applicable Trust Agreement), expense, fee,
charge, loss or any other amount payable to such Trustee under the
applicable Trust Agreements (to the extent not previously reimbursed),
shall be distributed to such Trustee and (iii) each Certificateholder for
payments, if any, made by it pursuant to Section 5.2 hereof in respect of
amounts described in clause (i) above, shall be distributed to the
applicable Trustee for the account of such Certificateholder, in each such
case, PARI PASSU on the basis of all amounts described in clauses (i)
through (iii) above;
SEVENTH, such amount remaining as shall be required to pay in full Adjusted
Expected Distributions on the Class A Certificates shall be distributed to
the Class A Trustee;
EIGHTH, such amount remaining as shall be required to pay in full Adjusted
Expected Distributions on the Class B Certificates shall be distributed to
the Class B Trustee;
NINTH, such amount remaining as shall be required to pay in full Adjusted
Expected Distributions on the Class C Certificates shall be distributed to
the Class C Trustee; and
TENTH, such amount remaining shall be retained in the Collection Account
until the immediately succeeding Distribution Date or, if all Classes of
Certificates shall have been paid in full, shall be distributed to the
Owner Trustees.
<PAGE>
SECTION 3.4 OTHER PAYMENTS. (a) Any payments received by the
Subordination Agent for which no provision as to the application thereof is made
in this Agreement shall be distributed by the Subordination Agent (i) in the
order of priority specified in Section 3.3 hereof and (ii) to the extent
received or realized at any time after the Final Distributions for each Class of
Certificates have been made, in the manner provided in clause "FIRST" of Section
3.3 hereof.
(b) Except as otherwise provided in Section 3.3 hereof, if the
Subordination Agent receives any Scheduled Payment after the Scheduled Payment
Date relating thereto, but prior to such payment becoming an Overdue Scheduled
Payment, then the Subordination Agent shall deposit such Scheduled Payment in
the Collection Account and promptly distribute such Scheduled Payment in
accordance with the priority of distributions set forth in Section 3.2 hereof;
PROVIDED that, for the purposes of this Section 3.4(b) only, each reference in
clause "EIGHTH" of Section 3.2 to "Distribution Date" shall be deemed to mean
the actual date of payment of such Scheduled Payment and each reference in
clause "FIFTH", "SIXTH" or "SEVENTH" of Section 3.2 to "Distribution Date" shall
be deemed to refer to such Scheduled Payment Date.
SECTION 3.5 PAYMENTS TO THE TRUSTEES AND THE LIQUIDITY PROVIDERS. Any
amounts distributed hereunder to any Liquidity Provider shall be paid to such
Liquidity Provider by wire transfer of funds to the address such Liquidity
Provider shall provide to the Subordination Agent. The Subordination Agent shall
provide a Written Notice of any such transfer to the applicable Liquidity
Provider, as the case may be, at the time of such transfer. Any amounts
distributed hereunder by the Subordination Agent to any Trustee which shall not
be the same institution as the Subordination Agent shall be paid to such Trustee
by wire transfer funds at the address such Trustee shall provide to the
Subordination Agent.
SECTION 3.6 LIQUIDITY FACILITIES. (a) INTEREST DRAWINGS. If on any
Distribution Date, after giving effect to the subordination provisions of this
Agreement, the Subordination Agent shall not have sufficient funds for the
payment of any amounts due and owing in respect of accrued interest on the Class
A Certificates, the Class B Certificates or the Class C Certificates (at the
Stated Interest Rate for such Class of Certificates), then, prior to 12:00 noon
(New York City time) on the Business Day following such Distribution Date, the
Subordination Agent shall request a drawing (each such drawing, an "INTEREST
DRAWING") under each Liquidity Facility with respect to such Class of
Certificates in an amount equal to the lesser of (i) an amount sufficient to pay
the amount of such accrued interest (at the Stated Interest Rate for such Class
of Certificates) and (ii) the Available Amount under such Liquidity Facility,
and shall pay such amount to the Trustee with respect to such Class of
Certificates in payment of such accrued interest.
(b) APPLICATION OF INTEREST DRAWINGS. Notwithstanding anything to the
contrary contained in this Agreement, (i) all payments received by the
Subordination Agent in respect of an Interest Drawing under the Class A
Liquidity Facility and all amounts withdrawn by the Subordination Agent from the
Class A Cash Collateral Account, and payable in each case to the Class A
Certificateholders, shall be promptly distributed to the Class A Trustee, (ii)
all payments received by the Subordination Agent in respect of an Interest
Drawing under the Class B Liquidity Facility and all amounts withdrawn by the
Subordination Agent from the Class B Cash Collateral Account, and payable in
each case to the Class B Certificateholders, shall be promptly distributed to
<PAGE>
the Class B Trustee and (iii) all payments received by the Subordination Agent
in respect of an Interest Drawing under the Class C Liquidity Facility and all
amounts withdrawn by the Subordination Agent from the Class C Cash Collateral
Account, and payable in each case to the Class C Certificateholders, shall be
promptly distributed to the Class C Trustee.
(c) DOWNGRADE DRAWINGS. If at any time the short-term unsecured debt
rating of any Liquidity Provider issued by either Rating Agency is lower than
the applicable Threshold Rating, within 10 days after receiving notice of such
downgrading (but no later than the expiration date of the Liquidity Facility
issued by the downgraded Liquidity Provider (the "DOWNGRADED FACILITY")), such
Liquidity Provider or Continental may arrange for a Replacement Liquidity
Provider to issue and deliver a Replacement Liquidity Facility to the
Subordination Agent. If a Downgraded Facility has not been replaced in
accordance with the terms of this paragraph, the Subordination Agent shall, on
such 10th day (or if such 10th day is not a Business Day, on the next succeeding
Business Day) (or, if earlier, the expiration date of such Downgraded Facility),
request a drawing in accordance with and to the extent permitted by such
Downgraded Facility (such drawing, a "DOWNGRADE DRAWING") of all available and
undrawn amounts thereunder. Amounts drawn pursuant to a Downgrade Drawing shall
be maintained and invested as provided in Section 3.6(f) hereof. The Liquidity
Provider may also arrange for a Replacement Liquidity Provider to issue and
deliver a Replacement Liquidity Facility at any time after such Downgrade
Drawing so long as such Downgrade Drawing has not been reimbursed in full to the
Liquidity Provider.
(d) NON-EXTENSION DRAWINGS. If any Liquidity Facility with respect to
any Class of Certificates is scheduled to expire on a date (the "STATED
EXPIRATION DATE") prior to the date that is 15 days after the Final Maturity
Date for such Class of Certificates, then, no earlier than the 60th day and no
later than the 40th day prior to the then Stated Expiration Date, the
Subordination Agent shall request that such Liquidity Provider extend the Stated
Expiration Date for a period of 364 days after the Stated Expiration Date
(unless the obligations of such Liquidity Provider thereunder are earlier
terminated in accordance with such Liquidity Facility). The Liquidity Provider
shall advise the Borrower, no earlier than 40 days and no later than 25 days
prior to such Stated Expiration Date, whether, in its sole discretion, it agrees
to so extend the Stated Expiration Date. If, on or before such 25th day, such
Liquidity Facility shall not have been so extended or replaced in accordance
with Section 3.6(e), or if the Liquidity Provider fails irrevocably and
unconditionally to advise the Borrower on or before the 25th day prior to the
Stated Expiration Date then in effect that such Stated Expiration Date shall be
so extended, the Subordination Agent shall, on such 25th day (or as soon as
possible thereafter), in accordance with and to the extent permitted by the
terms of the expiring Liquidity Facility (a "NON-EXTENDED FACILITY"), request a
drawing under such expiring Liquidity Facility (such drawing, a "NON-EXTENSION
DRAWING") of all available and undrawn amounts thereunder. Amounts drawn
pursuant to a Non-Extension Drawing shall be maintained and invested in
accordance with Section 3.6(f) hereof.
(e) ISSUANCE OF REPLACEMENT LIQUIDITY FACILITY. (i) At any time,
Continental may, at its option, with cause or without cause, arrange for a
Replacement Liquidity Facility to replace the Liquidity Facility for any Class
<PAGE>
of Certificates (including any Replacement Liquidity Facility provided pursuant
to Section 3.6(e)(ii) hereof); PROVIDED, HOWEVER, that the initial Liquidity
Provider shall not be replaced by Continental with respect to any Class of
Certificates prior to the fifth anniversary of the Closing Date unless (A) there
shall have become due to the initial Liquidity Provider, or the initial
Liquidity Provider shall have demanded, amounts pursuant to Section 3.1, 3.2 or
3.3 of any Liquidity Facility, or pursuant to the Tax Letter, and the
replacement of the initial Liquidity Provider would reduce or eliminate the
obligation to pay such amounts or Continental determines in good faith that
there is a substantial likelihood that the initial Liquidity Provider will have
the right to claim any such amounts (unless the initial Liquidity Provider
waives, in writing, any right it may have to claim such amounts), which
determination shall be set forth in a certificate delivered by Continental to
the initial Liquidity Provider setting forth the basis for such determination
and accompanied by an opinion of outside counsel selected by Continental and
reasonably acceptable to the initial Liquidity Provider verifying the legal
conclusions, if any, of such certificate relating to such basis, PROVIDED that,
in the case of any likely claim for such amounts based upon any proposed, or
proposed change in, law, rule, regulation, interpretation, directive,
requirement, request or administrative practice, such opinion may assume the
adoption or promulgation of such proposed matter, (B) it shall become unlawful
or impossible for the initial Liquidity Provider (or its Lending Office) to
maintain or fund its LIBOR Advances as described in Section 3.10 of any
Liquidity Facility, (C) the short-term unsecured debt rating of the initial
Liquidity Provider is downgraded by Standard & Poor's from A-1+ to A-1 and there
is a resulting downgrade in the rating by any Rating Agency of any Class of
Certificates, (D) a Downgrade Drawing or a Non-Extension Drawing shall have
occurred under any Liquidity Facility or (E) the initial Liquidity Provider
shall have breached any of its payment (including, without limitation, funding)
obligations under any Liquidity Facility. If such Replacement Liquidity Facility
is provided at any time after a Downgrade Drawing or Non-Extension Drawing has
been made, all funds on deposit in the relevant Cash Collateral Account will be
returned to the Liquidity Provider being replaced.
(ii) If any Liquidity Provider shall determine not to extend any of
its Liquidity Facilities in accordance with Section 3.6(d), then such Liquidity
Provider may, at its option, arrange for a Replacement Liquidity Facility to
replace such Liquidity Facility during the period no earlier than 40 days and no
later than 25 days prior to the then effective Stated Expiration Date of such
Liquidity Facility.
(iii) No Replacement Liquidity Facility arranged by Continental or a
Liquidity Provider in accordance with clause (i) or (ii) above, respectively,
shall become effective and no such Replacement Liquidity Facility shall be
deemed a "Liquidity Facility" under the Operative Agreements (in each case other
than insofar as necessary to permit the repayment of amounts owed to the
replaced Liquidity Provider), unless and until (A) each of the conditions
referred to in clause (iv) below shall have been satisfied, (B) if such
Replacement Liquidity Facility shall materially adversely affect the rights,
remedies, interests or obligations of the Class A Certificateholders, the Class
B Certificateholders or the Class C Certificateholders under any of the
Operative Agreements, the applicable Trustee shall have consented, in writing,
to the execution and issuance of such Replacement Liquidity Facility and (C) in
the case of a Replacement Liquidity Facility arranged by a Liquidity Provider
under Section 3.6(e)(ii), such Replacement Liquidity Facility is acceptable to
Continental.
<PAGE>
(iv) In connection with the issuance of each Replacement Liquidity
Facility, the Subordination Agent shall (x) prior to the issuance of such
Replacement Liquidity Facility, obtain written confirmation from each Rating
Agency that such Replacement Liquidity Facility will not cause a reduction of
the rating then in effect for any Class of Certificates by such Rating Agency
(without regard to any downgrading of any rating of any Liquidity Provider being
replaced pursuant to Section 3.6(c) hereof), (y) pay all Liquidity Obligations
then owing to the replaced Liquidity Provider (which payment shall be made first
from available funds in the Cash Collateral Account as described in clause (vii)
of Section 3.6(f) hereof and thereafter from any other available source,
including, without limitation, a drawing under the Replacement Liquidity
Facility) and (z) cause the issuer of the Replacement Liquidity Facility to
deliver the Replacement Liquidity Facility to the Subordination Agent, together
with a legal opinion opining that such Replacement Liquidity Facility is an
enforceable obligation of such Replacement Liquidity Provider.
(v) Upon satisfaction of the conditions set forth in clauses (iii) and
(iv) of this Section 3.6(e), (w) the replaced Liquidity Facility shall
terminate, (x) the Subordination Agent shall, if and to the extent so requested
by Continental or the Liquidity Provider being replaced, execute and deliver any
certificate or other instrument required in order to terminate the replaced
Liquidity Facility, shall surrender the replaced Liquidity Facility to the
Liquidity Provider being replaced and shall execute and deliver the Replacement
Liquidity Facility and any associated Fee Letter, (y) each of the parties hereto
shall enter into any amendments to this Agreement necessary to give effect to
(1) the replacement of the applicable Liquidity Provider with the applicable
Replacement Liquidity Provider(s) and (2) the replacement of the applicable
Liquidity Facility with the applicable Replacement Liquidity Facility and (z)
each Replacement Liquidity Provider shall be deemed to be a Liquidity Provider
with the rights and obligations of a Liquidity Provider hereunder and under the
other Operative Agreements and each Replacement Liquidity Facility shall be
deemed to be a Liquidity Facility hereunder and under the other Operative
Agreements.
(f) CASH COLLATERAL ACCOUNTS; WITHDRAWALS; INVESTMENTS. In the event
the Subordination Agent shall draw all available amounts under the Class A
Liquidity Facility, the Class B Liquidity Facility or the Class C Liquidity
Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i) hereof, or in the event
amounts are to be deposited in the Cash Collateral Account pursuant to subclause
(B) of clause "THIRD" of Section 2.4(b), subclause (B) of clause "THIRD" of
Section 3.2 or subclause (B) of clause "FOURTH" of Section 3.3, amounts so drawn
or to be deposited, as the case may be, shall be deposited by the Subordination
Agent in the Class A Cash Collateral Account, the Class B Cash Collateral
Account or the Class C Cash Collateral Account, respectively. All amounts on
deposit in each Cash Collateral Account shall be invested and reinvested in
Eligible Investments in accordance with Section 2.2(b) hereof. Investment
Earnings on amounts on deposit in each of the Cash Collateral Accounts shall be
deposited in the Collection Account prior to giving effect to the distributions
below on each Distribution Date commencing on the first Distribution Date after
any such deposit into such Collection Account. The Subordination Agent shall
deliver a written statement to Continental and the Liquidity Provider one day
prior to each Distribution Date setting forth the aggregate amount of Investment
Earnings held in the Cash Collateral Accounts as of such date. In addition, from
<PAGE>
and after the date funds are so deposited, the Subordination Agent shall make
withdrawals from such account as follows:
(i) on each Distribution Date, the Subordination Agent shall, to
the extent it shall not have received funds to pay accrued and unpaid
interest due and owing on the Class A Certificates (at the Stated Interest
Rate for the Class A Certificates) from any other source, withdraw from the
Class A Cash Collateral Account, and pay to the Class A Trustee an amount
equal to the lesser of (x) an amount necessary to pay accrued and unpaid
interest (at the Stated Interest Rate for the Class A Certificates) on such
Class A Certificates and (y) the amount on deposit in the Class A Cash
Collateral Account;
(ii) on each Distribution Date, the Subordination Agent shall, to
the extent it shall not have received funds to pay accrued and unpaid
interest due and owing on the Class B Certificates (at the Stated Interest
Rate for the Class B Certificates) from any other source, withdraw from the
Class B Cash Collateral Account, and pay to the Class B Trustee an amount
equal to the lesser of (x) an amount necessary to pay accrued and unpaid
interest (at the Stated Interest Rate for the Class B Certificates) on such
Class B Certificates and (y) the amount on deposit in the Class B Cash
Collateral Account;
(iii) on each Distribution Date, the Subordination Agent shall,
to the extent it shall not have received funds to pay accrued and unpaid
interest due and owing on the Class C Certificates (at the Stated Interest
Rate for the Class C Certificates) from any other source, withdraw from the
Class C Cash Collateral Account, and pay to the Class C Trustee an amount
equal to the lesser of (x) an amount necessary to pay accrued and unpaid
interest (at the Stated Interest Rate for the Class C Certificates) on such
Class C Certificates and (y) the amount on deposit in the Class C Cash
Collateral Account;
(iv) on each date on which the Pool Balance of the Class A Trust
shall have been reduced by payments made to the Class A Certificateholders
pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall
withdraw from the Class A Cash Collateral Account such amount as is
necessary so that, after giving effect to the reduction of the Pool Balance
on such date (including any such reduction resulting from a prior
withdrawal of amounts on deposit in the Class A Cash Collateral Account on
such date), the Required Amount (with respect to the Class A Liquidity
Facility) will be on deposit in the Class A Cash Collateral Account and
shall FIRST, pay such amount to the Class A Liquidity Provider until the
Liquidity Obligations (with respect to the Class A Certificates) owing to
such Liquidity Provider shall have been paid in full, and SECOND, deposit
any remaining amount in the Collection Account;
(v) on each date on which the Pool Balance of the Class B Trust
shall have been reduced by payments made to the Class B Certificateholders
pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall
withdraw from the Class B Cash Collateral Account such amount as is
necessary so that, after giving effect to the reduction of the Pool Balance
on such date (including any such reduction resulting from a prior
withdrawal of amounts on deposit in the Class B Cash Collateral Account on
<PAGE>
such date), the Required Amount (with respect to the Class B Liquidity
Facility) will be on deposit in the Class B Cash Collateral Account and
shall FIRST, pay such amount to the Class B Liquidity Provider until the
Liquidity Obligations (with respect to the Class B Certificates) owing to
such Liquidity Provider shall have been paid in full, and SECOND, deposit
any remaining amount in the Collection Account;
(vi) on each date on which the Pool Balance of the Class C Trust
shall have been reduced by payments made to the Class C Certificateholders
pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall
withdraw from the Class C Cash Collateral Account such amount as is
necessary so that, after giving effect to the reduction of the Pool Balance
on such date (including any such reduction resulting from a prior
withdrawal of amounts on deposit in the Class C Cash Collateral Account on
such date), the Required Amount (with respect to the Class C Liquidity
Facility) will be on deposit in the Class C Cash Collateral Account and
shall FIRST, pay such amount to the Class C Liquidity Provider until the
Liquidity Obligations (with respect to the Class C Certificates) owing to
such Liquidity Provider shall have been paid in full, and SECOND, deposit
any remaining amount in the Collection Account;
(vii) if a Replacement Liquidity Facility for any Class of
Certificates shall be delivered to the Subordination Agent following the
date on which funds have been deposited into the Cash Collateral Account
for such Class of Certificates, the Subordination Agent shall withdraw all
amounts on deposit in such Cash Collateral Account and shall pay such
amounts to the replaced Liquidity Provider until all Liquidity Obligations
owed to such Person shall have been paid in full, and shall deposit any
remaining amount in the Collection Account; and
(viii) following the payment of Final Distributions with respect
to any Class of Certificates, on the date on which the Subordination Agent
shall have been notified by the Liquidity Provider for such Class of
Certificates that the Liquidity Obligations owed to such Liquidity Provider
have been paid in full, the Subordination Agent shall withdraw all amounts
on deposit in the Cash Collateral Account in respect of such Class of
Certificates and shall deposit such amount in the Collection Account.
(g) REINSTATEMENT. With respect to any Interest Drawing under the
Liquidity Facility for any Trust, upon the reimbursement of the applicable
Liquidity Provider for all or any part of the amount of such Interest Drawing,
together with any accrued interest thereon, the Available Amount of such
Liquidity Facility shall be reinstated by an amount equal to the amount of such
Interest Drawing so reimbursed to the applicable Liquidity Provider but not to
exceed the Stated Amount for such Liquidity Facility; PROVIDED, HOWEVER, that
such Liquidity Facility shall not be so reinstated in part or in full at any
time if (x) both a Performing Note Deficiency exists and a Liquidity Event of
Default shall have occurred and be continuing with respect to the relevant
Liquidity Facility or (y) a Final Drawing shall have occurred with resect to
such Liquidity Facility. In the event that, with respect to any particular
Liquidity Facility, (i) funds are withdrawn from any Cash Collateral Account
<PAGE>
pursuant to clause (i), (ii) or (iii) of Section 3.6(f) hereof or (ii) such
Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility
at a time when unreimbursed Interest Drawings under such Liquidity Facility have
reduced the Maximum Available Commitment thereunder to zero, then funds received
by the Subordination Agent at any time other than (x) any time when a Liquidity
Event of Default shall have occurred and be continuing with respect to such
Liquidity Facility and a Performing Note Deficiency exists or (y) any time after
a Final Drawing shall have occurred with respect to such Liquidity Facility
shall be deposited in such Cash Collateral Account as and to the extent provided
in clause "THIRD" of Section 2.4(b), clause "THIRD" of Section 3.2 or clause
"FOURTH" of Section 3.3, as applicable, and applied in accordance with Section
3.6(f) hereof.
(h) REIMBURSEMENT. The amount of each drawing under the Liquidity
Facilities shall be due and payable, together with interest thereon, on the
dates and at the rates, respectively, provided in the Liquidity Facilities.
(i) FINAL DRAWING. Upon receipt from a Liquidity Provider of a
Termination Notice with respect to any Liquidity Facility, the Subordination
Agent shall, not later than the date specified in such Termination Notice, in
accordance with and to the extent permitted by the terms of such Liquidity
Facility, request a drawing under such Liquidity Facility of all available and
undrawn amounts thereunder (a "FINAL DRAWING"). Amounts drawn pursuant to a
Final Drawing shall be maintained and invested in accordance with Section 3.6(f)
hereof.
(j) REDUCTION OF STATED AMOUNT. Promptly following each date on which
the Required Amount of the Liquidity Facility for a Class of Certificates is
reduced as a result of a distribution to the Certificateholders of such Class of
Certificates, the Subordination Agent shall, if any such Liquidity Facility
provides for reductions of the Stated Amount of such Liquidity Facility and if
such reductions are not automatic, request the Liquidity Provider for such Class
of Certificates to reduce such Stated Amount to an amount equal to the Required
Amount with respect to such Liquidity Facility (as calculated by the
Subordination Agent after giving effect to such payment). Each such request
shall be made in accordance with the provisions of the applicable Liquidity
Facility.
(k) RELATION TO SUBORDINATION PROVISIONS. Interest Drawings under the
Liquidity Facilities and withdrawals from the Cash Collateral Accounts, in each
case, in respect of interest on the Certificates of any Class, will be
distributed to the Trustee for such Class of Certificates, notwithstanding
Sections 3.2, 3.3 and 3.6(h) hereof.
ARTICLE IV
EXERCISE OF REMEDIES
SECTION 4.1 DIRECTIONS FROM THE CONTROLLING PARTY. (a) (i) Following
the occurrence and during the continuation of an Indenture Default under any
Indenture, the Controlling Party shall direct the Subordination Agent, which in
turn shall direct the Mortgagee under such Indenture, in the exercise of
remedies available to the holders of the Equipment Notes issued pursuant to such
Indenture, including, without limitation, the ability to vote all such Equipment
Notes in favor of Accelerating such Equipment Notes in accordance with the
<PAGE>
provisions of such Indenture. Subject to the Owner Trustees' and the Owner
Participants' rights, if any, set forth in the Indentures to purchase the
Equipment Notes and the provisions of the next paragraph, if the Equipment Notes
issued pursuant to any Indenture have been Accelerated following an Indenture
Default with respect thereto, the Controlling Party may sell, assign, contract
to sell or otherwise dispose of and deliver all (but not less than all) of such
Equipment Notes to any Person at public or private sale, at any location at the
option of the Controlling Party, all upon such terms and conditions as it may
reasonably deem advisable in accordance with applicable law.
(ii) Subject to the Owner Trustees' and the Owner Participants'
rights, if any, set forth in the Indentures to purchase the Equipment Notes, and
notwithstanding the foregoing, so long as any Certificates remain Outstanding,
during the period ending on the date which is nine months after the earlier of
(x) the Acceleration of the Equipment Notes issued pursuant to any Indenture or
(y) the occurrence of a Continental Bankruptcy Event, without the consent of
each Trustee, (A) no Aircraft subject to the Lien of such Indenture or such
Equipment Notes may be sold if the net proceeds from such sale would be less
than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (B)
the amount and payment dates of rentals payable by Continental under the Lease
for such Aircraft may not be adjusted, if, as a result of such adjustment, the
discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by Continental under such Lease
before giving effect to such adjustment, in each case, using the weighted
average interest rate of the Equipment Notes issued pursuant to such Indenture
as the discount rate.
(iii) At the request of the Controlling Party, the Subordination Agent
may from time to time during the continuance of an Indenture Default (and before
the occurrence of a Triggering Event) commission LTV Appraisals with respect to
the Aircraft subject to such Indenture.
(iv) After a Triggering Event occurs and any Equipment Note becomes a
Non-Performing Equipment Note, the Subordination Agent shall obtain LTV
Appraisals with respect to all of the Aircraft as soon as practicable and
additional LTV Appraisals on or prior to each anniversary of the date of such
initial LTV Appraisals; PROVIDED that, if the Controlling Party reasonably
objects to the appraised value of the Aircraft shown in any such LTV Appraisals,
the Controlling Party shall have the right to obtain or cause to be obtained
substitute LTV Appraisals (including any LTV Appraisals based upon physical
inspection of the Aircraft).
(b) The Controlling Party shall take such actions as it may reasonably
deem most effectual to complete the sale or other disposition of such Aircraft
or Equipment Notes. In addition, in lieu of any sale, assignment, contract to
sell or other disposition, the Controlling Party may maintain possession of such
Equipment Notes and continue to apply monies received in respect of such
Equipment Notes in accordance with Article III hereof. In addition, in lieu of
such sale, assignment, contract to sell or other disposition, or in lieu of such
maintenance of possession, the Controlling Party may, subject to the terms and
conditions of the related Indenture, instruct the Mortgagee under such Indenture
to foreclose on the Lien on the related Aircraft.
<PAGE>
SECTION 4.2 REMEDIES CUMULATIVE. Each and every right, power and
remedy given to the Trustees, the Liquidity Providers, the Controlling Party or
the Subordination Agent specifically or otherwise in this Agreement shall be
cumulative and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or by
statute, and each and every right, power and remedy whether specifically herein
given or otherwise existing may, subject always to the terms and conditions
hereof, be exercised from time to time and as often and in such order as may be
deemed expedient by any Trustee, any Liquidity Provider, the Controlling Party
or the Subordination Agent, as appropriate, 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 any Trustee, any Liquidity Provider, the
Controlling Party or the Subordination Agent in the exercise of any right,
remedy or power or in the pursuit of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default or to be an
acquiescence therein.
SECTION 4.3 DISCONTINUANCE OF PROCEEDINGS. In case any party to this
Agreement (including the Controlling Party in such capacity) shall have
instituted any Proceeding to enforce any right, power or remedy under this
Agreement by foreclosure, entry or otherwise, and such Proceeding shall have
been discontinued or abandoned for any reason or shall have been determined
adversely to the Person instituting such Proceeding, then and in every such case
each such party shall, subject to any determination in such Proceeding, be
restored to its former position and rights hereunder, and all rights, remedies
and powers of such party shall continue as if no such Proceeding had been
instituted.
SECTION 4.4 RIGHT OF CERTIFICATEHOLDERS TO RECEIVE PAYMENTS NOT TO BE
IMPAIRED. Anything in this Agreement to the contrary notwithstanding but subject
to each Trust Agreement, the right of any Certificateholder or any Liquidity
Provider, respectively, to receive payments hereunder (including pursuant to
Section 2.4, 3.2 or 3.3 hereof) when due, or to institute suit for the
enforcement of any such payment on or after the applicable Distribution Date,
shall not be impaired or affected without the consent of such Certificateholder
or such Liquidity Provider, respectively.
SECTION 4.5 UNDERTAKING FOR COSTS. In any Proceeding for the
enforcement of any right or remedy under this Agreement or in any Proceeding
against any Controlling Party or the Subordination Agent for any action taken or
omitted by it as Controlling Party or Subordination Agent, as the case may be, a
court in its discretion may require the filing by any party litigant in the suit
of an undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. The provisions of
this Section do not apply to a suit instituted by the Subordination Agent, a
Liquidity Provider or a Trustee or a suit by Certificateholders holding more
than 10% of the original principal amount of any Class of Certificates.
<PAGE>
ARTICLE V
DUTIES OF THE SUBORDINATION AGENT;
AGREEMENTS OF TRUSTEES, ETC.
SECTION 5.1 NOTICE OF INDENTURE DEFAULT OR TRIGGERING EVENT. (a) In
the event the Subordination Agent shall have actual knowledge of the occurrence
of an Indenture Default or a Triggering Event, as promptly as practicable, and
in any event within 10 days after obtaining knowledge thereof, the Subordination
Agent shall transmit by mail or courier to the Rating Agencies, the Liquidity
Providers and the Trustees notice of such Indenture Default or Triggering Event,
unless such Indenture Default or Triggering Event shall have been cured or
waived. For all purposes of this Agreement, in the absence of actual knowledge
on the part of a Responsible Officer, the Subordination Agent shall not be
deemed to have knowledge of any Indenture Default or Triggering Event unless
notified in writing by one or more Trustees, one or more Liquidity Providers or
one or more Certificateholders.
(b) OTHER NOTICES. The Subordination Agent will furnish to each
Liquidity Provider and Trustee, promptly upon receipt thereof, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to the Subordination Agent as
registered holder of the Equipment Notes or otherwise in its capacity as
Subordination Agent to the extent the same shall not have been otherwise
directly distributed to such Liquidity Provider or Trustee, as applicable,
pursuant to the express provision of any other Operative Agreement.
SECTION 5.2 INDEMNIFICATION. The Subordination Agent shall not be
required to take any action or refrain from taking any action under Section 5.1
(other than the first sentence thereof) or Article IV hereof unless the
Subordination Agent shall have been indemnified (to the extent and in the manner
reasonably satisfactory to the Subordination Agent) against any liability, cost
or expense (including counsel fees and expenses) which may be incurred in
connection therewith. The Subordination Agent shall not be under any obligation
to take any action under this Agreement and nothing contained in this Agreement
shall require the Subordination Agent to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. The
Subordination Agent shall not be required to take any action under Section 5.1
(other than the first sentence thereof) or Article IV hereof, nor shall any
other provision of this Agreement be deemed to impose a duty on the
Subordination Agent to take any action, if the Subordination Agent shall have
been advised by counsel that such action is contrary to the terms hereof or is
otherwise contrary to law.
SECTION 5.3 NO DUTIES EXCEPT AS SPECIFIED IN INTERCREDITOR AGREEMENT.
The Subordination Agent shall not have any duty or obligation to take or refrain
from taking any action under, or in connection with, this Agreement, except as
expressly provided by the terms of this Agreement; and no implied duties or
obligations shall be read into this Agreement against the Subordination Agent.
The Subordination Agent agrees that it will, in its individual capacity and at
<PAGE>
its own cost and expense (but without any right of indemnity in respect of any
such cost or expense under Section 7.1 hereof), promptly take such action as may
be necessary to duly discharge all Liens on any of the Trust Accounts or any
monies deposited therein which result from claims against it in its individual
capacity not related to its activities hereunder or any other Operative
Agreement.
SECTION 5.4 NOTICE FROM THE LIQUIDITY PROVIDERS AND TRUSTEES. If any
Liquidity Provider or Trustee has notice of an Indenture Default or a Triggering
Event, such Person shall promptly give notice thereof to all other Liquidity
Providers and Trustees and to the Subordination Agent, PROVIDED, HOWEVER, that
no such Person shall have any liability hereunder as a result of its failure to
deliver any such notice.
ARTICLE VI
THE SUBORDINATION AGENT
SECTION 6.1 AUTHORIZATION; ACCEPTANCE OF TRUSTS AND DUTIES. Each of
the Class A Trustee, Class B Trustee and Class C Trustee hereby designates and
appoints the Subordination Agent as the agent and trustee of such Trustee under
the applicable Liquidity Facility and authorizes the Subordination Agent to
enter into the applicable Liquidity Facility as agent and trustee for such
Trustee. Each of the Liquidity Providers and the Trustees hereby designates and
appoints the Subordination Agent as the Subordination Agent under this
Agreement. WTC hereby accepts the duties hereby created and applicable to it as
the Subordination Agent and agrees to perform the same but only upon the terms
of this Agreement and agrees to receive and disburse all monies received by it
in accordance with the terms hereof. The Subordination Agent shall not be
answerable or accountable under any circumstances, except (a) for its own
willful misconduct or gross negligence (or ordinary negligence in the handling
of funds), (b) as provided in Section 2.2 hereof and (c) for liabilities that
may result from the material inaccuracy of any representation or warranty of the
Subordination Agent made in its individual capacity in any Operative Agreement.
The Subordination Agent shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Subordination Agent, unless it is
proved that the Subordination Agent was negligent in ascertaining the pertinent
facts.
SECTION 6.2 ABSENCE OF DUTIES. The Subordination Agent shall have no
duty to see to any recording or filing of this Agreement or any other document,
or to see to the maintenance of any such recording or filing.
SECTION 6.3 NO REPRESENTATIONS OR WARRANTIES AS TO DOCUMENTS. The
Subordination Agent in its individual capacity does not make nor shall be deemed
to have made any representation or warranty as to the validity, legality or
enforceability of this Agreement or any other Operative Agreement or as to the
correctness of any statement contained in any thereof, except for the
representations and warranties of the Subordination Agent, made in its
individual capacity, under any Operative Agreement to which it is a party. The
Certificateholders, the Trustees and the Liquidity Providers make no
representation or warranty hereunder whatsoever.
<PAGE>
SECTION 6.4 NO SEGREGATION OF MONIES; NO INTEREST. Any monies paid to
or retained by the Subordination Agent pursuant to any provision hereof and not
then required to be distributed to any Trustee or any Liquidity Provider as
provided in Articles II and III hereof or deposited into one or more Trust
Accounts need not be segregated in any manner except to the extent required by
such Articles II and III and by law, and the Subordination Agent shall not
(except as otherwise provided in Section 2.2 hereof) be liable for any interest
thereon; PROVIDED, HOWEVER, that any payments received or applied hereunder by
the Subordination Agent shall be accounted for by the Subordination Agent so
that any portion thereof paid or applied pursuant hereto shall be identifiable
as to the source thereof.
SECTION 6.5 RELIANCE; AGENTS; ADVICE OF COUNSEL. The Subordination
Agent shall not incur liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper believed by it to be genuine and
believed by it to be signed by the proper party or parties. As to the Pool
Balance of any Trust as of any date, the Subordination Agent may for all
purposes hereof rely on a certificate signed by any Responsible Officer of the
applicable Trustee, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. As to any fact or matter relating to the Liquidity
Providers or the Trustees the manner of ascertainment of which is not
specifically described herein, the Subordination Agent may for all purposes
hereof rely on a certificate, signed by any Responsible Officer of the
applicable Liquidity Provider or Trustee, as the case may be, as to such fact or
matter, and such certificate shall constitute full protection to the
Subordination Agent for any action taken or omitted to be taken by it in good
faith in reliance thereon. The Subordination Agent shall assume, and shall be
fully protected in assuming, that each of the Liquidity Providers and each of
the Trustees are authorized to enter into this Agreement and to take all action
to be taken by them pursuant to the provisions hereof, and shall not inquire
into the authorization of each of the Liquidity Providers and each of the
Trustees with respect thereto. In the administration of the trusts hereunder,
the Subordination Agent may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys
and may consult with counsel, accountants and other skilled persons to be
selected and retained by it, and the Subordination Agent shall not be liable for
the acts or omissions of any agent appointed with due care or for anything done,
suffered or omitted in good faith by it in accordance with the advice or written
opinion of any such counsel, accountants or other skilled persons.
SECTION 6.6 CAPACITY IN WHICH ACTING. The Subordination Agent acts
hereunder solely as agent and trustee herein and not in its individual capacity,
except as otherwise expressly provided in the Operative Agreements.
SECTION 6.7 COMPENSATION. The Subordination Agent shall be entitled to
reasonable compensation, including expenses and disbursements, for all services
rendered hereunder and shall have a priority claim to the extent set forth in
Article III hereof on all monies collected hereunder for the payment of such
compensation, to the extent that such compensation shall not be paid by others.
The Subordination Agent agrees that it shall have no right against any Trustee
or Liquidity Provider for any fee as compensation for its services as agent
<PAGE>
under this Agreement. The provisions of this Section 6.7 shall survive the
termination of this Agreement.
SECTION 6.8 MAY BECOME CERTIFICATEHOLDER. The institution acting as
Subordination Agent hereunder may become a Certificateholder and have all rights
and benefits of a Certificateholder to the same extent as if it were not the
institution acting as the Subordination Agent.
SECTION 6.9 SUBORDINATION AGENT REQUIRED; ELIGIBILITY. There shall at
all times be a Subordination Agent hereunder which shall be a corporation
organized and doing business under the laws of the United States of America or
of any State or the District of Columbia having a combined capital and surplus
of at least $100,000,000 (or 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 of America, any
State thereof or of the District of Columbia and having a combined capital and
surplus of at least $100,000,000), if there is such an institution willing and
able to perform the duties of the Subordination Agent hereunder upon reasonable
or customary terms. Such corporation shall be a citizen of the United States and
shall be authorized under the laws of the United States or any State thereof or
of the District of Columbia to exercise corporate trust powers and shall be
subject to supervision or examination by federal, state or District of Columbia
authorities. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of any of the aforesaid
supervising or examining authorities, then, for the purposes of this Section
6.9, the combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published.
In case at any time the Subordination Agent shall cease to be eligible in
accordance with the provisions of this Section, the Subordination Agent shall
resign immediately in the manner and with the effect specified in Section 8.1.
SECTION 6.10 MONEY TO BE HELD IN TRUST. All Equipment Notes, monies
and other property deposited with or held by the Subordination Agent pursuant to
this Agreement shall be held in trust for the benefit of the parties entitled to
such Equipment Notes, monies and other property. All such Equipment Notes,
monies or other property shall be held in the Trust Department of the
institution acting as Subordination Agent hereunder.
ARTICLE VII
INDEMNIFICATION OF SUBORDINATION AGENT
SECTION 7.1 SCOPE OF INDEMNIFICATION. The Subordination Agent shall be
indemnified hereunder to the extent and in the manner described in Section 9.1
of the Participation Agreements. The indemnities contained in such Section 9.1
shall survive the termination of this Agreement.
<PAGE>
ARTICLE VIII
SUCCESSOR SUBORDINATION AGENT
SECTION 8.1 REPLACEMENT OF SUBORDINATION AGENT; APPOINTMENT OF
SUCCESSOR. The Subordination Agent may resign at any time by so notifying the
Trustees and the Liquidity Providers. The Controlling Party (or, prior to the
occurrence of a Triggering Event, the Person who would be the Controlling Party
if a Triggering Event had occurred) may remove the Subordination Agent for cause
by so notifying the Subordination Agent and may appoint a successor
Subordination Agent. The Controlling Party (or, prior to the occurrence of a
Triggering Event, the Person who would be the Controlling Party if a Triggering
Event had occurred) shall remove the Subordination Agent if:
(1) the Subordination Agent fails to comply with Section 6.9 hereof;
(2) the Subordination Agent is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Subordination Agent or its property; or
(4) the Subordination Agent otherwise becomes incapable of acting.
If the Subordination Agent resigns or is removed or if a vacancy
exists in the office of Subordination Agent for any reason (the Subordination
Agent in such event being referred to herein as the retiring Subordination
Agent), the Controlling Party (or, prior to the occurrence of a Triggering
Event, the Person who would be the Controlling Party if a Triggering Event had
occurred) shall promptly appoint a successor Subordination Agent.
A successor Subordination Agent shall deliver (x) a written acceptance
of its appointment as Subordination Agent hereunder to the retiring
Subordination Agent and (y) a written assumption of its obligations hereunder
and under each Liquidity Facility to each party hereto, upon which the
resignation or removal of the retiring Subordination Agent shall become
effective, and the successor Subordination Agent shall have all the rights,
powers and duties of the Subordination Agent under this Agreement. The successor
Subordination Agent shall mail a notice of its succession to the Liquidity
Providers and the Trustees. The retiring Subordination Agent shall promptly
transfer its rights under each of the Liquidity Facilities and all of the
property held by it as Subordination Agent to the successor Subordination Agent.
If a successor Subordination Agent does not take office within 60 days
after the retiring Subordination Agent resigns or is removed, the retiring
Subordination Agent or one or more of the Trustees may petition any court of
competent jurisdiction for the appointment of a successor Subordination Agent.
If the Subordination Agent fails to comply with Section 6.9 hereof (to
the extent applicable), one or more of the Trustees or one or more of the
Liquidity Providers may petition any court of competent jurisdiction for the
<PAGE>
removal of the Subordination Agent and the appointment of a successor
Subordination Agent.
Notwithstanding the foregoing, no resignation or removal of the
Subordination Agent shall be effective unless and until a successor has been
appointed. No appointment of a successor Subordination Agent shall be effective
unless and until the Rating Agencies shall have delivered a Ratings
Confirmation.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS
SECTION 9.1 AMENDMENTS, WAIVERS, ETC. (a) This Agreement may not be
supplemented, amended or modified without the consent of each Trustee (acting,
except in the case of any amendment pursuant to Section 3.6(e)(v)(y) hereof and
the last sentence of this Section 9.1(a), with the consent of holders of
Certificates of the related Class evidencing interests in the related Trust
aggregating not less than a majority in interest in such Trust or as otherwise
authorized pursuant to the relevant Trust Agreement), the Subordination Agent
and each Liquidity Provider; provided, however, that this Agreement may be
supplemented, amended or modified without the consent of any Trustee if such
supplement, modification or amendment cures an ambiguity or inconsistency or
does not materially adversely affect such Trustee or the holders of the related
Class of Certificates; PROVIDED FURTHER, HOWEVER, that if such supplement,
amendment or modification would (x) directly or indirectly modify or supersede,
or otherwise conflict with, Section 2.2(b), 3.6(e) or 3.6(f) (other than the
last sentence thereof), the last sentence of this Section 9.1(a) or the second
sentence of Section 10.6 (collectively, together with this proviso, the
"CONTINENTAL PROVISIONS") or (y) otherwise adversely affect the interests of a
potential Replacement Liquidity Provider or of Continental with respect to its
ability to replace any Liquidity Facility or with respect to its payment
obligations under any Participation Agreement or Lease, then such supplement,
amendment or modification shall not be effective without the additional written
consent of Continental. Notwithstanding the foregoing, without the consent of
each Certificateholder and each Liquidity Provider, no supplement, amendment or
modification of this Agreement may (i) reduce the percentage of the interest in
any Trust evidenced by the Certificates issued by such Trust necessary to
consent to modify or amend any provision of this Agreement or to waive
compliance therewith or (ii) modify Section 2.4, 3.2 or 3.3 hereof, relating to
the distribution of monies received by the Subordination Agent hereunder from
the Equipment Notes or pursuant to the Liquidity Facilities. Nothing contained
in this Section shall require the consent of a Trustee at any time following the
payment of Final Distributions with respect to the related Class of
Certificates. If the Replacement Liquidity Facility for any Liquidity Facility
in accordance with Section 3.6(e) hereof is to be comprised of more than one
instrument as contemplated by the definition of the term "Replacement Liquidity
Facility", then each of the parties hereto agrees to amend this Agreement to
incorporate appropriate mechanics for multiple Liquidity Facilities for an
individual Trust.
(b) In the event that the Subordination Agent, as the registered
holder of any Equipment Notes, receives a request for its consent to any
<PAGE>
amendment, modification or waiver under such Equipment Notes, the Indenture
pursuant to which such Equipment Notes were issued, or the related Lease,
Participation Agreement or other related document, (i) if no Indenture Default
shall have occurred and be continuing with respect to such Indenture, the
Subordination Agent shall request directions with respect to each Series of such
Equipment Notes from the Trustee of the Trust which holds such Equipment Notes
and shall vote or consent in accordance with the directions of such Trustee and
(ii) if any Indenture Default (which has not been cured by the applicable Owner
Trustee or the applicable Owner Participant, if applicable, pursuant to Section
4.03 of such Indenture) shall have occurred and be continuing with respect to
such Indenture, the Subordination Agent will exercise its voting rights as
directed by the Controlling Party, subject to Sections 4.1 and 4.4 hereof;
PROVIDED that no such amendment, modification or waiver shall, without the
consent of each Liquidity Provider, reduce the amount of rent, supplemental rent
or stipulated loss values payable by Continental under any Lease.
SECTION 9.2 SUBORDINATION AGENT PROTECTED. If, in the reasonable
opinion of the institution acting as the Subordination Agent hereunder, any
document required to be executed pursuant to the terms of Section 9.1 affects
any right, duty, immunity or indemnity with respect to it under this Agreement
or any Liquidity Facility, the Subordination Agent may in its discretion decline
to execute such document.
SECTION 9.3 EFFECT OF SUPPLEMENTAL AGREEMENTS. Upon the execution of
any amendment, consent or supplement hereto pursuant to the provisions hereof,
this Agreement shall be and be deemed to be and shall be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Agreement of the parties hereto
and beneficiaries hereof shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental agreement shall be and be
deemed to be and shall be part of the terms and conditions of this Agreement for
any and all purposes. In executing or accepting any supplemental agreement
permitted by this Article IX, the Subordination Agent shall be entitled to
receive, and shall be fully protected in relying upon, an opinion of counsel
stating that the execution of such supplemental agreement is authorized or
permitted by this Agreement.
SECTION 9.4 NOTICE TO RATING AGENCIES. Promptly following its receipt
of each amendment, consent, modification, supplement or waiver contemplated by
this Article IX, the Subordination Agent shall send a copy thereof to each
Rating Agency.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 TERMINATION OF INTERCREDITOR AGREEMENT. Following payment
of Final Distributions with respect to each Class of Certificates and the
payment in full of all Liquidity Obligations to the Liquidity Providers and
PROVIDED that there shall then be no other amounts due to the
Certificateholders, the Trustees, the Liquidity Providers and the Subordination
Agent hereunder or under the Trust Agreements, and that the commitment of the
Liquidity Providers under the Liquidity Facilities shall have expired or been
<PAGE>
terminated, this Agreement and the trusts created hereby shall terminate and
this Agreement shall be of no further force or effect. Except as aforesaid or
otherwise provided, this Agreement and the trusts created hereby shall continue
in full force and effect in accordance with the terms hereof.
SECTION 10.2 INTERCREDITOR AGREEMENT FOR BENEFIT OF TRUSTEES,
LIQUIDITY PROVIDERS AND SUBORDINATION AGENT. Subject to the second sentence of
Section 10.6 and the provisions of Section 4.4, nothing in this Agreement,
whether express or implied, shall be construed to give to any Person other than
the Trustees, the Liquidity Providers and the Subordination Agent any legal or
equitable right, remedy or claim under or in respect of this Agreement.
SECTION 10.3 NOTICES. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Agreement to be made, given, furnished or filed shall be in writing, mailed by
certified mail, postage prepaid, or by confirmed telecopy and
(i) if to the Subordination Agent, addressed to at its office at:
WILMINGTON TRUST COMPANY
One Rodney Square
1100 N. Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Telecopy: (302) 651-8882
(ii) if to any Trustee, addressed to it at its office at:
WILMINGTON TRUST COMPANY
One Rodney Square
1100 N. Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Telecopy: (302) 651-8882
(iii) if to any Liquidity Provider, addressed to it at its office at:
ABN AMRO Bank N.V.
Aerospace Department
135 South LaSalle Street, #820
Chicago, IL 60674-9135
Attention: Claudia Heldring, V.P.
Telephone: (312) 904-5031
Telecopy: (312) 606-8428
<PAGE>
with a copy to:
ABN AMRO Bank N.V.
135 South LaSalle Street, #625
Chicago, IL 60674-9135
Attention: Loan Operations
Telephone: (312) 904-2961
Telecopy: (312) 606-6893
Whenever any notice in writing is required to be given by any Trustee or
Liquidity Provider or the Subordination Agent to any of the other of them, such
notice shall be deemed given and such requirement satisfied when such notice is
received. Any party hereto may change the address to which notices to such party
will be sent by giving notice of such change to the other parties to this
Agreement.
SECTION 10.4 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 10.5 NO ORAL MODIFICATIONS OR CONTINUING WAIVERS. No terms or
provisions of this Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party or other Person
against whom enforcement of the change, waiver, discharge or termination is
sought and any other party or other Person whose consent is required pursuant to
this Agreement and any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
SECTION 10.6 SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
parties hereto and the successors and assigns of each, all as herein provided.
In addition, the Continental Provisions shall inure to the benefit of
Continental and its successors and assigns, and (without limitation of the
foregoing) Continental is hereby constituted, and agreed to be, an express third
party beneficiary of the Continental Provisions.
SECTION 10.7 HEADINGS. The headings of the various Articles and
Sections herein and in the table of contents hereto are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
SECTION 10.8 COUNTERPART FORM. 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 agreement.
SECTION 10.9 SUBORDINATION. (a) As between the Liquidity Providers, on
the one hand, and the Trustees and the Certificateholders, on the other hand,
<PAGE>
this Agreement shall be a subordination agreement for purposes of Section 510 of
the United States Bankruptcy Code, as amended from time to time.
(b) Notwithstanding the provisions of this Agreement, if prior to the
payment in full to the Liquidity Providers of all Liquidity Obligations then due
and payable, any party hereto shall have received any payment or distribution in
respect of Equipment Notes or any other amount under the Indentures or other
Operative Agreements which, had the subordination provisions of this Agreement
been properly applied to such payment, distribution or other amount, would not
have been distributed to such Person, then such payment, distribution or other
amount shall be received and held in trust by such Person and paid over or
delivered to the Subordination Agent for application as provided herein.
(c) If any Trustee, any Liquidity Provider or the Subordination Agent
receives any payment in respect of any obligations owing hereunder (or, in the
case of the Liquidity Providers, in respect of the Liquidity Obligations), which
is subsequently invalidated, declared preferential, set aside and/or required to
be repaid to a trustee, receiver or other party, then, to the extent of such
payment, such obligations (or, in the case of the Liquidity Providers, such
Liquidity Obligations) intended to be satisfied shall be revived and continue in
full force and effect as if such payment had not been received.
(d) The Trustees (on behalf of themselves and the holders of
Certificates), the Liquidity Providers and the Subordination Agent confirm that
the payment priorities specified in Sections 2.4, 3.2 and 3.3 shall apply in all
circumstances, notwithstanding the fact that the obligations owed to the
Trustees and the holders of Certificates are secured by certain assets and the
Liquidity Obligations may not be so secured. The Trustees expressly agree (on
behalf of themselves and the holders of Certificates) not to assert priority
over the holders of Liquidity Obligations due to their status as secured
creditors in any bankruptcy, insolvency or other legal proceeding.
(e) Each of the Trustees (on behalf of themselves and the holders of
Certificates), the Liquidity Providers and the Subordination Agent may take any
of the following actions without impairing its rights under this Agreement:
(i) obtain a Lien on any property to secure any amounts owing to
it hereunder, including, in the case of the Liquidity Providers, the
Liquidity Obligations,
(ii) obtain the primary or secondary obligation of any other
obligor with respect to any amounts owing to it hereunder, including, in
the case of the Liquidity Providers, any of the Liquidity Obligations,
(iii) renew, extend, increase, alter or exchange any amounts
owing to it hereunder, including, in the case of the Liquidity Providers,
any of the Liquidity Obligations, or release or compromise any obligation
of any obligor with respect thereto,
(iv) refrain from exercising any right or remedy, or delay in
exercising such right or remedy, which it may have, or
<PAGE>
(v) take any other action which might discharge a subordinated
party or a surety under applicable law;
PROVIDED, HOWEVER, that the taking of any such actions by any of the Trustees,
the Liquidity Providers or the Subordination Agent shall not prejudice the
rights or adversely affect the obligations of any other party under this
Agreement.
SECTION 10.10 GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
SECTION 10.11 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF IMMUNITY. (a) Each of the parties hereto hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Operative Agreement, or
for recognition and enforcement of any judgment in respect hereof or
thereof, to the nonexclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the
Southern District of New York, and the appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form and mail), postage
prepaid, to each party hereto at its address set forth in Section 10.3
hereof, or at such other address of which the other parties shall have been
notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including,
without limitation, contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. Each of the parties warrants and
represents that it has reviewed this waiver with its legal counsel, and that it
knowingly and voluntarily waives its jury trial rights following consultation
with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND CANNOT BE MODIFIED
<PAGE>
EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
(c) The Liquidity Provider hereby waives any immunity it may have from
the jurisdiction of the courts of the United States of America or of any State
and waives any immunity any of its properties located in the United States may
have from attachment or execution upon a judgment entered by any such court
under the United States Foreign Sovereign Immunities Act of 1976 or any similar
successor legislation.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized, as of
the day and year first above written, and acknowledge that this Agreement has
been made and delivered in The City of New York, and this Agreement has become
effective only upon such execution and delivery.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee for each of the
Trusts
By______________________________________
Name:
Title:
SABN AMRO BANK N.V., acting through its
Chicago branch, as Class A Liquidity
Provider, Class B Liquidity Provider
and Class C Liquidity Provider
By______________________________________
Name:
Title:
By______________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, not in its
individual capacity except as
expressly set forth herein but solely
as Subordination Agent and trustee
By______________________________________
Name:
Title:
<PAGE>
Schedule I to
INTERCREDITOR AGREEMENT
-----------------------
<TABLE>
<CAPTION>
AIRCRAFT TYPE REGISTRATION NUMBER
------------- -------------------
<S> <C>
Embraer EMB-145 N14925
Embraer EMB-145 N15926
Embraer EMB-145 N16927
Embraer EMB-145 N17928
Embraer EMB-145 N13929
Embraer EMB-145 N14930
Embraer EMB-145 N14931
Embraer EMB-145 N15932
Embraer EMB-145 N14933
</TABLE>
================================================================================
TRUST AGREEMENT ____
Dated as of September 25, 1997
Between
ICX CORPORATION
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No. 145.___
and U.S. Registration No. N_____
with Two Allison Model AE3007A Engines
Bearing Engine Manufacturer's Serial Nos. _______ and _______
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS................................................ 1
SECTION 2. DECLARATION OF TRUST....................................... 1
SECTION 3. AUTHORIZATION; CONDITIONS PRECEDENT........................ 1
3.1 Authorization........................................ 1
3.2 Conditions Precedent................................. 2
SECTION 4. RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE TRUST ESTATE............................... 3
4.1 Payments from Trust Estate Only...................... 3
4.2 Distribution of Payments............................. 3
4.2.1 Payments to Mortgagee........................ 3
4.2.2 Payments to Owner Trustee, Other Parties..... 3
4.2.3 Certain Distributions to Owner Participant... 4
4.2.4 Excluded Payments............................ 4
4.3 Method of Payments................................... 4
SECTION 5. DUTIES OF OWNER TRUSTEE.................................... 4
5.1 Notice of Event of Default........................... 4
5.2 Action upon Instructions............................. 5
5.3 Limitations on Duties................................ 5
5.4 No Duties except as Specified; No Action except as
Specified............................................ 6
5.4.1 No Duties except as Specified................ 6
5.4.2 No Action except as Specified................ 6
5.5 Satisfaction of Conditions Precedent................. 6
5.6 Fixed Investment Trust............................... 7
SECTION 6. OWNER TRUSTEE.............................................. 7
6.1 Acceptance of Trusts and Duties...................... 7
6.2 Absence of Certain Duties............................ 7
6.3 No Representations or Warranties as to Certain
Matters.............................................. 8
6.4 No Segregation of Monies; Interest................... 9
6.5 Reliance upon Certificates, Counsel and Agents....... 9
6.6 Not Acting in Individual Capacity.................... 10
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
6.7 Fees; Compensation................................... 10
6.8 Tax Returns.......................................... 10
SECTION 7. INDEMNIFICATION OF FIRST SECURITY BY
OWNER PARTICIPANT.......................................... 11
SECTION 8. TRANSFER OF OWNER PARTICIPANT'S INTEREST................... 12
8.1 Transfer of Interest................................. 12
SECTION 9. SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES...................... 12
9.1 Resignation of Owner Trustee; Appointment
of Successor......................................... 12
9.1.1 Resignation or Removal....................... 12
9.1.2 Execution and Delivery of Documents, Etc..... 13
9.1.3 Qualifications............................... 13
9.1.4 Merger, Etc.................................. 13
9.2 Co-Trustees and Separate Trustees.................... 14
SECTION 10. SUPPLEMENTS AND AMENDMENTS TO TRUST
AGREEMENT AND OTHER DOCUMENTS.............................. 15
10.1 Supplements and Amendments and Delivery
Thereof.............................................. 15
10.1.1 Supplements and Amendments................... 15
10.1.2 Delivery of Amendments and Supplements
to Certain Parties........................... 16
10.2 Discretion as to Execution of Documents.............. 16
10.3 Absence of Requirements as to Form................... 16
10.4 Distribution of Documents............................ 16
10.5 No Request Needed as to Lease Supplement and
Trust Indenture Supplement........................... 16
SECTION 11. MISCELLANEOUS.............................................. 16
11.1 Termination of Trust Agreement....................... 16
11.2 Termination at Option of the Owner Participant....... 17
11.3 Owner Participant Has No Legal Title in Trust
Estate............................................... 17
11.4 Assignment, Sale, etc. of Aircraft................... 17
11.5 Trust Agreement for Benefit of Certain Parties Only.. 18
11.6 Citizenship of Owner Participant..................... 18
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
11.7 Notices............................................... 18
11.8 Severability.......................................... 18
11.9 Waivers, Etc.......................................... 19
11.10 Counterparts.......................................... 19
11.11 Binding Effect, Etc................................... 19
11.12 Headings; References.................................. 19
11.13 Governing Law......................................... 19
</TABLE>
<PAGE>
TRUST AGREEMENT ____
This TRUST AGREEMENT ____, dated as of September 25, 1997, between ICX
CORPORATION, an Ohio corporation ("Owner Participant"), and FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association (in its individual
capacity, "First Security" and otherwise not in its individual capacity but
solely as trustee hereunder, "Owner Trustee").
W I T N E S S E T H:
- - - - - - - - - -
SECTION 1. DEFINITIONS
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A to the Lease.
SECTION 2. DECLARATION OF TRUST
First Security hereby declares that it will hold the Trust Estate as
Owner Trustee upon the trusts hereinafter set forth for the use and benefit of
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.
SECTION 3. AUTHORIZATION; CONDITIONS PRECEDENT
3.1 Authorization
In respect of the Aircraft, Owner Participant hereby authorizes and
directs Owner Trustee to, and Owner Trustee agrees for the benefit of Owner
Participant that it will, on and after the Delivery Date, subject (except with
respect to Section 3.1(a)) to due compliance with the terms of Section 3.2:
(a) execute and deliver the Participation Agreement, the Trust
Indenture, the Lease and the other Owner Trustee Agreements (in the respective
forms in which they are delivered from time to time by Owner Participant to
Owner Trustee);
(b) subject to the terms of this Trust Agreement, exercise (i) its
rights and perform its duties under the Participation Agreement, (ii) the rights
and perform the duties of Lessor under the Lease and (iii) its rights and
perform its duties under the Trust Indenture and the other Owner Trustee
Agreements;
(c) execute, issue and deliver to Mortgagee for authentication and
further delivery to the Subordination Agent the Equipment Notes in the amount
and as provided in Section 2 of the Participation Agreement;
(d) purchase the Aircraft pursuant to the Participation Agreement;
<PAGE>
(e) accept from Existing Lessor the delivery of the Aircraft Bill of
Sale, the FAA Bill of Sale and the invoice with respect to such Aircraft;
(f) effect the registration of the Aircraft with the FAA in the name
of Owner Trustee by filing or causing to be filed with the FAA: (i) the FAA Bill
of Sale; (ii) an Aircraft Registration Application in the name of Owner Trustee
(including, without limitation, an affidavit from Owner Trustee in compliance
with the provisions of Section 47.7(c)(2) of the FAA Regulations); and (iii)
this Trust Agreement;
(g) execute and deliver the Financing Statements referred to in
Section 5.1.2 (xxiv) of the Participation Agreement, together with all other
agreements, documents and instruments referred to in Section 5 of the
Participation Agreement to which Owner Trustee is to be a party;
(h) make payment of Lessor's Cost for the Aircraft from the aggregate
amount of the Commitments for the Aircraft of Owner Participant and Loan
Participant, to the extent received by Owner Trustee, in the manner provided in
the Participation Agreement;
(i) execute and deliver Lease Supplement No. 1 covering the Aircraft;
(j) execute and deliver a Trust Indenture Supplement covering the
Aircraft; and
(k) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the direction of
Owner Participant, as Owner Participant may deem necessary or advisable in
connection with the transactions contemplated by this Trust Agreement and the
other Operative Agreements.
3.2 Conditions Precedent
The rights and obligations of Owner Trustee to take the actions
required by Section 3.1 shall be subject to the following conditions precedent:
(a) Owner Trustee shall have received the notice described in Section
5.1.1 of the Participation Agreement, when and as required thereby, or shall
have been deemed to have waived such notice in accordance with Section 5.1.1 of
the Participation Agreement;
(b) Each Participant shall have made the full amount of its Commitment
specified in Section 2.1 of the Participation Agreement available to Owner
Trustee, in immediately available funds, in accordance with Sections 2 and 4 of
the Participation Agreement; and
(c) Owner Participant shall have notified Owner Trustee that the terms
and conditions of Section 5 of the Participation Agreement, insofar as they
relate to conditions precedent to performance by Owner Participant of its
obligations thereunder, have been either fulfilled to the satisfaction of, or
<PAGE>
waived by, Owner Participant. Owner Participant shall, by instructing Owner
Trustee to release the full amount of its Commitment then held by Owner Trustee
as provided in Section 2 of the Participation Agreement, be deemed to have found
satisfactory to it, or waived, all such conditions precedent.
SECTION 4. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE
TRUST ESTATE
4.1 Payments from Trust Estate Only
Except as provided in Section 7, all payments to be made by Owner
Trustee under this Trust Agreement shall be made only from (a) in the case of
funds made available in accordance with Section 4 of the Participation
Agreement, the Commitments (except as otherwise provided in Section 14 of the
Participation Agreement) and (b) in the case of all other payments, the income
from and proceeds of the Trust Estate to the extent that Owner Trustee shall
have received sufficient income or proceeds from the Trust Estate to make such
payments. Owner Participant agrees that it will look solely (y) in the case of
funds made available in accordance with Section 4 of the Participation
Agreement, to the Commitments and any income therefrom (except as otherwise
provided in Section 14 of the Participation Agreement) and (z) in the case of
all other payments, to the income from and proceeds of the Trust Estate to the
extent available for distribution to Owner Participant as provided in this Trust
Agreement. Except as provided in Section 7, Owner Participant agrees that First
Security is neither personally liable to Owner Participant for any amounts
payable nor subject to any other liability under this Trust Agreement.
4.2 Distribution of Payments
4.2.1 Payments to Mortgagee
Until the Trust Indenture shall have been discharged pursuant to
Section 10.01 thereof, all Rent, insurance proceeds and requisition or other
payments of any kind included in the Trust Estate (other than Excluded Payments)
payable to Owner Trustee shall be payable directly to Mortgagee (and, if any of
the same are received by Owner Trustee, shall upon receipt be paid over to
Mortgagee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
PROVIDED, that any payments received by Owner Trustee from (a) Airframe
Manufacturer with respect to Owner Trustee's fees and disbursements or (b) Owner
Participant pursuant to Section 7 shall not be paid over to Mortgagee but shall
be retained by Owner Trustee and applied toward the purpose for which such
payments were made.
4.2.2 Payments to Owner Trustee, Other Parties
After the Trust Indenture shall have been discharged pursuant to
Section 10.01 thereof, any payment of the type referred to in Section 4.2.1
(other than Excluded Payments) received by Owner Trustee, any payment received
from Mortgagee (other than Excluded Payments) and any other amount received as
part of the Trust Estate and for the application or distribution of which no
<PAGE>
provision is made in this Trust Agreement shall be distributed forthwith upon
receipt by Owner Trustee in the following order of priority: FIRST, so much of
such payment as shall be required to reimburse Owner Trustee for any expenses
not otherwise reimbursed as to which Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by Owner Trustee;
SECOND, the amount set forth in Schedule 1 hereto, if any, on a Payment Date
shall be paid to Owner Participant; THIRD, the amount set forth in Schedule 2
hereto shall be paid to Equity Guarantor; and FOURTH, the balance, if any, shall
be paid to Owner Participant.
4.2.3 Certain Distributions to Owner Participant
All amounts from time to time distributable by Mortgagee to Owner
Participant pursuant to the Trust Indenture shall, if paid to Owner Trustee, be
distributed by Owner Trustee to Owner Participant in accordance with the
provisions of Article III of the Trust Indenture; PROVIDED, that any payments
received by Owner Trustee from (a) Lessee with respect to Owner Trustee's fees
and disbursements or (b) Owner Participant pursuant to Section 7 shall not be
paid over to Owner Participant but shall be retained by Owner Trustee and
applied toward the purpose for which such payments were made.
4.2.4 Excluded Payments
Any Excluded Payments received by Owner Trustee shall be paid by 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.
4.3 Method of Payments
Owner Trustee shall make distributions or cause distributions to be
made to Owner Participant pursuant to this Section 4 by transferring the amount
to be distributed by wire transfer in immediately available funds on the day
received (or on the next succeeding Business Day if the funds to be so
distributed shall not have been received by Owner Trustee by 12:00 noon, New
York City time, and which funds Owner Trustee shall not have been reasonably
able to distribute to Owner Participant on the day received) to Owner
Participant's account set forth in Schedule 1 to the Participation Agreement or
to such other account or accounts of Owner Participant as Owner Participant may
designate from time to time in writing to Owner Trustee; PROVIDED, that Owner
Trustee shall use reasonable efforts to invest overnight, in investments that
would be permitted under Section 4.4 of the Lease, all funds received by it at
or later than 12:00 noon, New York City time, and which funds Owner Trustee
shall not have been reasonably able to distribute to Owner Participant on the
day received).
SECTION 5. DUTIES OF OWNER TRUSTEE
5.1 Notice of Event of Default
(a) If Owner Trustee shall have knowledge of a Lease Default or a
Lease Event of Default or an Indenture Default or an Indenture Event of Default,
Owner Trustee shall give to Owner Participant, Mortgagee, Lessee and Equity
<PAGE>
Guarantor prompt telephonic or telex 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 of the type referred to in paragraph (c) or (e) of
Section 4.02 of the Trust Indenture, such notice shall in no event be furnished
later than ten days after Owner Trustee shall first have knowledge of such event
and (ii) in the case of a misrepresentation by Owner Trustee which with the
passage of time would constitute an Indenture Event of Default of the type
referred to in paragraph (d) of Section 4.02 of the Trust Indenture, such notice
shall in no event be furnished later than ten days after Owner Trustee shall
first have knowledge of such event.
(b) Subject to the terms of Section 5.3, 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 Default, Lease
Event of Default, Indenture Default or Indenture Event of Default or other event
as Owner Trustee shall be directed in writing by Owner Participant. For all
purposes of this Trust Agreement, the Lease and the other Operative Agreements,
in the absence of Actual Knowledge of Owner Trustee, Owner Trustee shall not be
deemed to have knowledge of a Lease Default, Lease Event of Default, Indenture
Default or Indenture Event of Default unless notified in writing by Mortgagee,
Owner Participant or Lessee.
5.2 Action upon Instructions
Subject to the terms of Sections 5.1 and 5.3, upon the written
instructions at any time and from time to time of Owner Participant, 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: (a) give such notice or direction or exercise such right, remedy
or power under this Trust Agreement or any of the other Owner Trustee Agreements
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 such
agreements and instruments as shall be necessary under Section 10); (b) take
such action to preserve or protect the Trust Estate (including the discharge of
Liens) as may be specified in such instructions; (c) approve as satisfactory to
it all matters required by the terms of the Lease or the other Operative
Agreements to be satisfactory to Owner Trustee, it being understood that without
written instructions of Owner Participant, Owner Trustee shall not approve any
such matter as satisfactory to it; (d) subject to the rights of Lessee under the
Operative Agreements, after the expiration or earlier termination of the Lease,
convey all of 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; and (e) take or refrain from
taking such other action or actions as may be specified in such instructions.
5.3 Limitations on Duties
Owner Trustee shall not be required to take any action under Section
5.1 (other than the giving of the notices referred to therein) or 5.2 if Owner
Trustee shall reasonably believe such action is not adequately indemnified by
<PAGE>
Owner Participant under Section 7, unless Lessee or Owner Participant agrees to
furnish such additional indemnity as shall reasonably be required, in manner and
form satisfactory to Owner Trustee, 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 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 Owner Trustee in connection
therewith. Owner Trustee shall not be required to take any action under Section
5.1 or 5.2 (other than the giving of the notices referred to therein) if Owner
Trustee shall have been advised by counsel that such action is contrary to the
terms of any of the Owner Trustee Agreements or is otherwise contrary to Law and
Owner Trustee has delivered to Owner Participant written notice of the basis for
its refusal to act.
5.4 No Duties except as Specified; No Action except as Specified
5.4.1 No Duties except as Specified
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 Owner Trustee Agreements, except as
expressly required by the terms of any of the Owner Trustee Agreements, 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 Owner
Participant received pursuant to the terms of Section 5.1 or 5.2, and no implied
duties or obligations shall be read into this Trust Agreement against Owner
Trustee. First Security 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 hereunder or under the Participation Agreement), 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 7.3.1 of the Participation Agreement and
otherwise comply with the terms of said Section binding upon it.
5.4.2 No Action except as Specified
Owner Trustee shall have no power, right or authority to, and 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 (a) as expressly
required by the terms of any of the Owner Trustee Agreements, (b) as expressly
provided by the terms hereof or (c) as expressly provided in written
instructions from Owner Participant pursuant to Section 5.1 or 5.2.
5.5 Satisfaction of Conditions Precedent
Anything in this Trust Agreement to the contrary notwithstanding,
Owner Trustee shall, subject to the satisfaction of special counsel for Owner
Trustee of the occurrence of all the applicable conditions precedent specified
in Section 3.2, comply with the provisions of Section 3.1.
<PAGE>
5.6 Fixed Investment Trust
Notwithstanding anything in this Trust Agreement to the contrary,
Owner Trustee shall not be authorized and shall have no power to "vary the
investment" of Owner Participant within the meaning of Treasury Regulations
Section 301.7701-4(c)(1), it being understood that Owner Trustee shall have the
power and authority to fulfill its obligations under Section 4.3 hereof, Section
4.3.3 of the Participation Agreement and Section 4.4 of the Lease.
SECTION 6. OWNER TRUSTEE
6.1 Acceptance of Trusts and Duties
First Security accepts the trusts hereby created and agrees to perform
the same as Owner Trustee but only upon the terms hereof and the Trust Indenture
applicable to it. Owner Trustee also agrees to receive and disburse all monies
received by it constituting part of the Trust Estate pursuant to the terms
hereof. First Security shall not be answerable or accountable under any
circumstances, except for (a) its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of Owner
Trustee in violation of Section 5.4.2), (b) its failure (in its individual
capacity) to perform its obligations under Section 5.4.1, (c) its or Owner
Trustee's failure to use ordinary care to receive or disburse funds or to comply
with the first sentence of Section 6.8, (d) liabilities that may result from the
inaccuracy of any representation or breach of warranty of it in its individual
capacity (or from the failure by it in its individual capacity to perform any
covenant) in this Trust Agreement, the Trust Indenture, the Lease or the
Participation Agreement or elsewhere in any of the other Operative Agreements,
(e) taxes, fees or other charges on, based on or measured by any fees,
commissions or compensation received by First Security in connection with the
transactions contemplated by this Trust Agreement and the other Operative
Agreements to which it (in its individual capacity or as Owner Trustee) is a
party, (f) its or Owner Trustee's failure to use ordinary care in receiving or
disbursing funds or in connection with its obligation to invest funds pursuant
to Section 4 of the Participation Agreement, Section 4.4 of the Lease or Section
4.3 hereof, (g) any liability on the part of Owner Trustee arising out of its
negligence or willful or negligent misconduct in connection with its obligations
under Section 5.1 (other than the first sentence thereof), 6.8 or 9.2 hereof or
Section 4.01 of the Trust Indenture. First Security shall have no obligation to
advance its individual funds for any purpose, and Owner Trustee shall have no
obligation to distribute to Owner Participant, Lessee or any third party any
amounts to be paid to Owner Trustee until such amounts are collected by Owner
Trustee.
6.2 Absence of Certain Duties
(a) Except in accordance with written instructions furnished pursuant
to Section 5.1 or 5.2 and except as provided in, and without limiting the
generality of, Sections 3.1 and 5.4.1 and the last sentence of Section 9.1.2,
and subject to Section 4.01 of the Trust Indenture, neither Owner Trustee nor
First Security shall have any duty (i) to see to any recording or filing of any
Operative Agreement 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
<PAGE>
the FAA or other governmental agencies, except that of First Security to comply
with the FAA reporting requirements set forth in 14 C.F.R. ss. 47.45 and 14
C.F.R. ss. 47.51, and Owner Trustee shall, to the extent that information for
that purpose is timely supplied by Lessee pursuant to any of the Operative
Agreements, complete and timely submit (and furnish Owner Participant with a
copy of) any and all reports relating to the Aircraft that may from time to time
be required by the FAA or any government or governmental authority having
jurisdiction, (ii) to see to any insurance on the Aircraft or to effect or
maintain any such insurance, whether or not Lessee shall be in default with
respect thereto, other than to forward to Owner Participant copies of all
reports and other written information which Owner Trustee receives from Lessee
pursuant to Section 11 of the Lease, (iii) except as provided in Section 7.3.1
or 7.3.2 of the Participation Agreement, Section 4.01 of the Trust Indenture or
Section 5.4 or 6.1 hereof, 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 or assessed or levied against any part of the Trust
Indenture Estate or the Trust Estate, except as provided in Section 6.3.9 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.
(b) Notwithstanding clause (a), Owner Trustee will furnish to
Mortgagee and Owner Participant, promptly upon receipt thereof, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to Owner Trustee under the Lease or
any other Operative Agreement except to the extent to which a responsible
officer of Owner Trustee reasonably believes (and confirms by telephone call
with Owner Participant) that duplicates or copies thereof have already been
furnished to Owner Participant by some other person.
6.3 No Representations or Warranties as to Certain Matters
NEITHER FIRST SECURITY NOR OWNER TRUSTEE 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, AS TO
THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE
ABSENCE OF ANY STRICT LIABILITY OBLIGATION OR ANY OTHER REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF
WHATSOEVER, except that First Security warrants to Owner Participant that on the
Delivery Date Owner Trustee shall have received whatever title to the Aircraft
that was conveyed to it and that the Aircraft shall, on the Delivery Date and
during the Term, be free of Lessor Liens attributable to First Security or (b)
any representation or warranty as to the validity, legality or enforceability of
this Trust Agreement or any other Operative Agreement to which First Security,
in its individual capacity or as Owner Trustee, is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof except to the extent that any such statement is expressly made
herein or therein by such party as a representation by First Security, in its
individual capacity or as Owner Trustee, as the case may be, and except that
First Security hereby represents and warrants that it has all corporate power
and authority to execute, deliver and perform this Trust Agreement and that this
<PAGE>
Trust Agreement has been, and (assuming due authorization, execution and
delivery by Owner Participant of this Trust Agreement) the other Operative
Agreements to which it or Owner Trustee is a party have been (or at the time of
execution and delivery of any such instrument by it or Owner Trustee under this
Trust Agreement 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 Owner Trustee, as the case may be, and
that this Trust Agreement constitutes the legal, valid and binding obligation of
First Security or Owner Trustee, as the case may be, enforceable against First
Security or Owner Trustee, as the case may be, in accordance with its terms.
6.4 No Segregation of Monies; Interest
Monies received by Owner Trustee under this Trust Agreement need not
be segregated in any manner except to the extent required by Law, or except as
provided in written instructions from Owner Participant, and shall be invested
as provided in Section 4.3 hereof or Section 4.4 of the Lease.
6.5 Reliance upon Certificates, Counsel and Agents
Owner Trustee shall incur no liability to anyone in acting in good
faith in reliance upon and in accordance with 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 in this Trust Agreement,
any request, direction, order or demand of Owner Participant or Lessee mentioned
in this Trust Agreement or in any of the other Owner Trustee Agreements shall be
sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President or any other officer and in the name of
Owner Participant or Lessee, as the case may be. 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 of Directors or Executive 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 in this Trust Agreement,
Owner Trustee may, absent Actual Knowledge to the contrary, for all purposes
rely on a certificate signed by the Chairman of the Board, the President, any
Vice President or any other officer of Lessee, and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of Lessee, as to such fact
or matter, and such certificate shall constitute full protection to Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon and in accordance therewith. In the administration of trusts
under this Trust Agreement, Owner Trustee may execute any of the trusts or
powers and perform its powers and duties under this Trust Agreement 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. Owner Trustee shall not be liable for anything done, suffered or omitted
<PAGE>
in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons.
6.6 Not Acting in Individual Capacity
In acting under this Trust Agreement, First Security acts solely as
Owner Trustee and not in its individual capacity except as otherwise expressly
provided in this Trust Agreement or in the other Operative Agreements to which
it is a party; 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 in this Trust Agreement or
the Trust Indenture, having any claim against 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 provided in Section 6.1 or
otherwise as Owner Trustee shall expressly agree otherwise in writing.
6.7 Fees; Compensation
Airframe Manufacturer shall pay the Transaction Expenses and ongoing
fees of Owner Trustee throughout the Term pursuant to Section 9.2 of the
Participation Agreement. The Trust Estate shall not have any liability for any
such fees and expenses; PROVIDED, that the foregoing shall not limit the
obligations of Owner Participant under Sections 5.3 and 7; PROVIDED, that Owner
Trustee shall have a Lien upon the Trust Estate for any such fee not paid by
Airframe Manufacturer as contemplated by Section 9.2 of the Participation
Agreement and such Lien shall entitle Owner Trustee to priority as to payment
thereof over payment to any other Person under this Trust Agreement; PROVIDED,
that such Lien shall be subject and subordinate in all events to the Lien of the
Trust Indenture; and PROVIDED, FURTHER, that Owner Trustee shall have no right
to exercise, and shall not exercise, any rights or remedies Owner Trustee may
have with respect to such Lien unless and until the Secured Obligations have
been paid and performed in full.
6.8 Tax Returns
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. Owner Participant
shall be responsible for causing to be prepared and filed all income tax returns
required to be filed by Owner Participant. Owner Trustee shall be responsible
for causing to be prepared, at the expense of Airframe Manufacturer, all income
tax returns required to be filed with respect to the trust created hereby and
shall execute and file such returns; PROVIDED, that Owner Trustee shall send
promptly a completed copy of such return to Owner Participant not more than
sixty nor less than fifteen days prior to the due date of the return, PROVIDED,
that Owner Trustee shall have timely received all necessary information to
complete and deliver to Owner Participant such return. Owner Participant, upon
request, will furnish Owner Trustee with all such information as may be
reasonably required from Owner Participant in connection with the preparation of
such income tax returns. Owner Trustee shall keep copies of all returns
delivered to or filed by it.
<PAGE>
SECTION 7. INDEMNIFICATION OF FIRST SECURITY BY OWNER PARTICIPANT
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 and
its successors, assigns, agents and servants, from and against any and all
liabilities, obligations, losses, damages, penalties, taxes (excluding any Taxes
which are not required to be indemnified by Lessee pursuant to Section 9.1 or
9.3 of the Participation Agreement and excluding any taxes payable by First
Security on or measured by any compensation received by First Security for its
services under this Trust Agreement), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, but excluding internal costs and expenses such as salaries and
overhead, 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 (whether or not also indemnified against by Lessee under the Lease or
under the Participation Agreement or also indemnified against by any other
Person; PROVIDED, that Owner Participant shall be subrogated to the rights of
Owner Trustee against Lessee or any other indemnitor) in any way relating to or
arising out of this Trust Agreement or any of the other Operative Agreements or
the enforcement of any of the terms of any thereof, or in any way relating to or
arising out of the manufacture, purchase, acceptance, nonacceptance, rejection,
ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of the 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 Owner Trustee,
under this Trust Agreement, except (a) in the case of gross negligence or
willful misconduct on the part of First Security, in its individual capacity or
as Owner Trustee, in the performance or nonperformance of its duties under this
Trust Agreement or under any of the other Owner Trustee Agreements or (b) those
Claims resulting from the inaccuracy of any representation or warranty of First
Security (or from the failure of First Security to perform any of its covenants)
in Section 6.3, in Section 6.03 of the Trust Indenture, in Section 4 of the
Lease, in Section 6.3 of the Participation Agreement or elsewhere in any of the
other Operative Agreements or (c) as may result from a breach by First Security
of its covenant in the last sentence of Section 5.4.1 or (d) in the case of the
failure to use ordinary care on the part of First Security, in its individual
capacity or as Owner Trustee, in the receipt or disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 4 of the
Participation Agreement, Section 4.4 of the Lease or Section 4.3 hereof or in
compliance with the provisions of the first sentence of Section 6.8 or (e) any
liability on the part of Owner Trustee arising out of its negligence or willful
or negligent misconduct in connection with its obligations under Section 5.1,
6.8 or 9.2 hereof or Section 4.01 of the Trust Indenture, or (f) those claims
arising under any circumstances or upon any terms where Lessee would not have
been required to indemnify First Security pursuant to Section 9.1 or 9.3 of the
Participation Agreement (disregarding for purposes of this paragraph Sections
9.1.2(b) and 9.3.2(j)); PROVIDED, that before asserting its right to
indemnification, if any, pursuant to this Section 7, First Security shall first
demand its corresponding right to indemnification pursuant to Section 9 of the
Participation Agreement (but need not exhaust any or all remedies available
thereunder). The indemnities contained in this Section 7 extend to First
Security only in its individual capacity and shall not be construed as
indemnities of the Trust Indenture Estate or the Trust Estate (except to the
<PAGE>
extent, if any, that First Security has been reimbursed by the Trust Indenture
Estate or the Trust Estate for amounts covered by the indemnities contained in
this Section 7). The indemnities contained in this Section 7 shall survive the
termination of this Trust Agreement. In addition, if necessary, First Security
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 to the extent not reimbursed by Lessee, Owner
Participant or others, but without releasing any of them from their respective
agreements of reimbursement; and, to secure the same First Security shall have a
lien on the Trust Estate, subject to the lien of the Trust Indenture and subject
further to the provisions of Section 6.7, which shall be prior to any interest
therein of Owner Participant. The payor of any indemnity under this Section 7
shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
SECTION 8. TRANSFER OF OWNER PARTICIPANT'S INTEREST
8.1 Transfer of Interest
All provisions of Section 10 of the Participation Agreement shall
(with the same force and effect as if set forth in full in this Section 8.1) be
applicable to any assignment, conveyance or other transfer by Owner Participant
of any of its right, title or interest in and to the Participation Agreement,
the Trust Estate or this Trust Agreement.
SECTION 9. SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
9.1 Resignation of Owner Trustee; Appointment of Successor
9.1.1 Resignation or Removal
Owner Trustee or any successor Owner Trustee (a) shall resign if
required to do so pursuant to Section 13.3 of the Participation Agreement or
upon obtaining Actual Knowledge of any facts that would cast doubt upon its
continuing status as a Citizen of the United States and (b) may resign at any
time without cause by giving at least 60 days' prior written notice to Owner
Participant, Mortgagee and Lessee, such resignation to be effective upon the
assumption of the trusts hereunder by the successor Owner Trustee under Section
9.1.2. In addition, Owner Participant may at any time remove Owner Trustee, with
or without cause by a notice in writing delivered to Owner Trustee, Mortgagee
and Lessee, such removal to be effective upon the assumption of the trusts
hereunder by the successor Owner Trustee under Section 9.1.2, PROVIDED, that, in
the case of a removal without cause, unless a Lease Event of Default shall have
occurred and be continuing, such removal shall be subject to the consent of
Lessee (which consent shall not be unreasonably withheld). In the case of the
resignation or removal of Owner Trustee, Owner Participant may appoint a
successor Owner Trustee by an instrument signed by Owner Participant, with,
unless a Lease Event of Default shall have occurred and be continuing, the
consent of Lessee (which consent shall not be unreasonably withheld). If a
successor Owner Trustee shall not have been appointed within 30 days after such
notice of resignation or removal, Owner Trustee, any Owner Participant, Lessee
<PAGE>
or Mortgagee may apply to any court of competent jurisdiction to appoint a
successor Owner Trustee to act until such time, if any, as a successor shall
have been appointed as above provided. Any successor Owner Trustee so appointed
by such court shall immediately and without further act be superseded by any
successor Owner Trustee appointed as above provided within one year from the
date of the appointment by such court.
9.1.2 Execution and Delivery of Documents, Etc.
Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee, with a copy to Owner Participant,
Lessee and Mortgagee, an instrument accepting such appointment and assuming the
obligations of Owner Trustee, in its individual capacity and as Owner Trustee,
under the Owner Trustee Agreements, 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
under this Trust Agreement with like effect as if originally named Owner Trustee
in this Trust Agreement; 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
under this Section 9.1, 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 required to cause registration of the Aircraft included in the Trust Estate
to be transferred upon the records of the FAA, or other governmental authority
having jurisdiction, into the name of the successor Owner Trustee.
9.1.3 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 $100,000,000, if there be such an institution willing, able
and legally qualified to perform the duties of Owner Trustee under this Trust
Agreement upon reasonable or customary terms. No such successor Owner Trustee
shall be located in a jurisdiction which creates material adverse consequences
for Lessee (unless such material adverse consequences would be created by
substantially all jurisdictions where major banking or trust institutions are
located).
9.1.4 Merger, Etc.
Any corporation into which First Security 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 shall be a party, or
any corporation to which substantially all the corporate trust business of First
Security may be transferred, shall, subject to the terms of Section 9.1.3, be
<PAGE>
Owner Trustee under this Trust Agreement without further act, PROVIDED, that
such corporation shall not also be the Mortgagee.
9.2 Co-Trustees and Separate Trustees
(a) 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 Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of Owner Participant or Owner
Trustee, or Owner Trustee shall have been directed to do so by Owner
Participant, 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 or all of which shall be a Citizen of the United States) approved by Owner
Trustee and Owner Participant, either to act as co-trustee, jointly with Owner
Trustee, or to act as separate trustee under this Trust Agreement (any such
co-trustee or separate trustee being herein sometimes referred to as an
"additional trustee"). In the event 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 Owner Trustee so to do, or in case a Lease
Event of Default or Indenture Event of Default shall occur and be continuing,
Owner Trustee may act under the foregoing provisions of this Section 9.2 without
the concurrence of Owner Participant; and Owner Participant hereby appoints
Owner Trustee its agent and attorney-in-fact to act for it under the foregoing
provisions of this Section 9.2 in either of such contingencies.
(b) Every additional trustee under this Trust Agreement shall, to the
extent permitted by Law, be appointed and act, and Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(i) All powers, duties, obligations and rights conferred upon Owner
Trustee in respect of the custody, control and management of monies, the
Aircraft or documents authorized to be delivered under this Trust Agreement
or under the Participation Agreement shall be exercised solely by Owner
Trustee;
(ii) All other rights, powers, duties and obligations conferred or
imposed upon Owner Trustee shall be conferred or imposed upon and exercised
or performed by 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) 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;
(iii) No power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised under this
Trust Agreement by such additional trustee, except jointly with, or with
the consent in writing of, Owner Trustee;
(iv) No trustee under this Trust Agreement shall be personally liable
by reason of any action or omission of any other trustee under this Trust
Agreement;
<PAGE>
(v) Owner Participant, at any time, by an instrument in writing may
remove any such additional trustee. In the event that Owner Participant
shall not have joined in the execution of any such instrument within ten
days after the receipt of a written request from Owner Trustee so to do,
Owner Trustee shall have the power to remove any such additional trustee
without the concurrence of Owner Participant; and Owner Participant hereby
appoints Owner Trustee its agent and attorney-in-fact to act for it in such
connection in such contingency; and
(vi) No appointment of, or action by, any additional trustee will
relieve Owner Trustee of any of its obligations under, or otherwise affect
any of the terms of, the Trust Indenture or affect the interests of
Mortgagee or the Note Holders in the Trust Indenture Estate.
(c) In case any separate trustee under this Section 9.2 shall die,
become incapable of acting, resign or be removed, the title to the Trust Estate
and all rights and duties of such separate trustee shall, so far as permitted by
Law, vest in and be exercised by Owner Trustee, without the appointment of a
successor to such separate trustee.
SECTION 10. SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER
DOCUMENTS
10.1 Supplements and Amendments and Delivery Thereof
10.1.1 Supplements and Amendments
Subject to Section 7.2.2 of the Participation Agreement, this Trust
Agreement may not be amended, supplemented or otherwise modified except by an
instrument in writing signed by Owner Trustee and Owner Participant. Subject to
Section 10.2, Section 9.01 of the Trust Indenture and Section 7.6.7 of the
Participation Agreement, Owner Trustee will execute any amendment, supplement or
other modification of this Trust Agreement or of any other Owner Trustee
Agreement which it is requested in writing to execute by Owner Participant,
except that 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
Owner Participant, (a) no such supplement, amendment or modification shall (i)
modify any of the provisions of Section 4 or this Section 10.1, (ii) reduce,
modify or amend any indemnities in favor of Owner Participant as set forth in
Section 9 of the Participation Agreement or in the Tax Indemnity Agreement,
(iii) reduce the amount or extend the time of payment of Basic Rent,
Supplemental Rent, Stipulated Loss Value or Termination Value as set forth in
the Lease (except in accordance with Section 3 of the Lease) or (iv) modify any
of the rights of Owner Participant under the Trust Indenture and (b) no such
supplement, amendment or modification shall require 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 Owner
Participant with respect to any agreement or obligation.
<PAGE>
10.1.2 Delivery of Amendments and Supplements to Certain Parties
A signed copy of each amendment or supplement referred to in Section
10.1.1 to which Lessee is not a party shall be delivered promptly by Owner
Trustee to Lessee, and a signed copy of each amendment or supplement referred to
in Section 10.1.1 shall be delivered promptly by Owner Trustee to Mortgagee.
10.2 Discretion as to Execution of Documents
Prior to executing any document required to be executed by it pursuant
to the terms of Section 10.1, Owner Trustee shall be entitled to receive an
opinion of its counsel to the effect that the execution of such document is
authorized under this Trust Agreement. If in the opinion of Owner Trustee any
such document adversely affects any right, duty, immunity or indemnity in favor
of Owner Trustee under this Trust Agreement or under any other Owner Trustee
Agreement, Owner Trustee may in its discretion decline to execute such document
unless Owner Trustee is furnished with indemnification from Lessee or any other
party upon terms and in amounts reasonably satisfactory to Owner Trustee to
protect the Trust Estate and the Owner Trustee against any and all liabilities,
costs and expenses arising out of the execution of such documents.
10.3 Absence of Requirements as to Form
It shall not be necessary for any written request furnished pursuant
to Section 10.1 to specify the particular form of the proposed documents to be
executed pursuant to such Section 10.1, but it shall be sufficient if such
request shall indicate the substance thereof.
10.4 Distribution of Documents
Promptly after the execution by Owner Trustee of any document entered
into pursuant to Section 10.1, Owner Trustee shall mail, by certified mail,
postage prepaid, a conformed copy thereof to Owner Participant, but the failure
of Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
10.5 No Request Needed as to Lease Supplement and Trust Indenture
Supplement
No written request pursuant to Section 10.1 shall be required to
enable Owner Trustee to enter into, pursuant to Section 3.1 and the Lease or the
Trust Indenture, as the case may be, the Lease Supplement with Lessee and the
Trust Indenture Supplement.
SECTION 11. MISCELLANEOUS
11.1 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 and the sale or other final
<PAGE>
disposition by Owner Trustee of all property constituting part of the Trust
Estate and the final distribution by Owner Trustee of all monies or other
property or proceeds constituting part of the Trust Estate in accordance with
Section 4, PROVIDED, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement or (b) 21 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 clause (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 terms hereof. Except as expressly set forth in
Section 11.2, this Trust Agreement and the trusts created hereby may not be
revoked by Owner Participant.
11.2 Termination at Option of the Owner Participant
Notwithstanding Section 11.1 hereof, this Agreement and trust created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Agreement shall be of no further force and effect, upon
the election of the Owner Participant by notice to the Owner Trustee, if such
notice shall be accompanied by the written agreement (in form and substance
satisfactory to the Owner Trustee) of the Owner Participant assuming all
obligations of the Owner Trustee under or contemplated by the Operative
Agreements or incurred by it as trustee hereunder and releasing the Owner
Trustee therefrom; provided, however, that such notice may be given only after
the time the Lien of the Trust Indenture is discharged under Section 10.01 of
the Trust Indenture and after the Lease shall no longer be in effect.
11.3 Owner Participant Has No Legal Title in Trust Estate
Owner Participant shall not have legal title to any part of the Trust
Estate. No transfer, by operation of Law or otherwise, of any right, title and
interest of Owner Participant in and to the Trust Estate under this Trust
Agreement shall operate to terminate this Trust Agreement or the trusts under
this Trust Agreement or entitle any successors or transferees of Owner
Participant to an accounting or to the transfer of legal title to any part of
the Trust Estate.
11.4 Assignment, Sale, etc. of Aircraft
Any assignment, sale, transfer or other conveyance of the Aircraft by
Owner Trustee made pursuant to the terms of this Trust Agreement or of the Lease
or the Participation Agreement shall bind Owner Participant and shall be
effective to transfer or convey all right, title and interest of Owner Trustee
and Owner Participant in and to the Aircraft. No purchaser or other grantee
<PAGE>
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 Owner Trustee.
11.5 Trust Agreement for Benefit of Certain Parties Only
Except for the terms of Section 10 of the Participation Agreement
incorporated in Section 8 and except as otherwise provided in Sections 5.1, 6.7,
9, 10.1 and 11.1, nothing in this Trust Agreement, whether express or implied,
shall be construed to give any person other than Owner Trustee and Owner
Participant any legal or equitable right, remedy or claim under or in respect of
this Trust Agreement; and this Trust Agreement shall be held to be for the sole
and exclusive benefit of Owner Trustee and Owner Participant.
11.6 Citizenship of Owner Participant
Reserved.
11.7 Notices
Unless otherwise expressly permitted by the terms of this Trust
Agreement, all notices, requests, demands, authorizations, directions, consents,
waivers and other communications required or permitted to be made, given,
furnished or filed under this Trust Agreement shall be in writing, shall refer
specifically to this Trust Agreement and shall be personally delivered, sent by
telecopy, telex or other means of electronic facsimile or telecommunication
transmission, sent by registered mail or certified mail, return receipt
requested, postage prepaid, or sent by overnight courier service, in each case
to the respective telex, telecopy or other number or address set forth for such
party in Schedule 1 to the Participation Agreement, or to such other telex,
telecopy or other number or address as each party hereto may hereafter specify
by notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by telecopy
or other means of electronic facsimile or telecommunication transmission, when
confirmed, or (b) by registered or certified mail, three Business Days after
being deposited, properly addressed, in the U.S. mail.
11.8 Severability
If any provision of this Trust Agreement shall be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the extent
permitted by Law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction. If, however, any Law pursuant to which
such provisions are held invalid, illegal or unenforceable may be waived, such
Law is hereby waived by the parties hereto to the full extent permitted, to the
end that this Trust Agreement shall be deemed to be a valid and binding
agreement in all respects, enforceable in accordance with its terms.
<PAGE>
11.9 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 Section 10; and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.
11.10 Counterparts
This Trust Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.
11.11 Binding Effect, Etc.
All covenants and agreements contained in this Trust Agreement shall
be binding upon, and inure to the benefit of, Owner Trustee and its successors
and assigns, and Owner Participant and its successors and, to the extent
permitted by Section 8, assigns. Any request, notice, direction, consent, waiver
or other instrument or action by Owner Participant shall bind its successors and
assigns.
11.12 Headings; References
The headings and the table of contents used in this Trust Agreement
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof and shall not in any way affect the construction of,
or be taken into consideration in interpreting, this Trust Agreement.
11.13 Governing Law
THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
ICX CORPORATION
By______________________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION
By______________________________________
Name:
Title:
TRUST AGREEMENT ____
Dated as of September 25, 1997
Between
METLIFE CAPITAL CREDIT L.P.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No. 145.___
and U.S. Registration No. N_____
with Two Allison Model AE3007A Engines
Bearing Engine Manufacturer's
Serial Nos. _________ and _________
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
Section 1. Definitions.............................................. 1
Section 2. Declaration Of Trust..................................... 1
Section 3. Authorization; Conditions Precedent...................... 1
3.1 Authorization............................................ 1
3.2 Conditions Precedent..................................... 2
3.3 Limitations on Control................................... 3
Section 4. Receipt, Distribution And Application Of Income From
The Trust Estate......................................... 4
4.1 Payments from Trust Estate Only.......................... 4
4.2 Distribution of Payments................................. 4
4.2.1 Payments to Mortgagee........................... 4
4.2.2 Payments to Owner Trustee, Other Parties........ 4
4.2.3 Certain Distributions to Owner Participant...... 5
4.2.4 Excluded Payments............................... 5
4.3 Method of Payments....................................... 5
Section 5. Duties Of Owner Trustee.................................. 5
5.1 Notice of Event of Default............................... 5
5.2 Action upon Instructions................................. 6
5.3 Limitations on Duties.................................... 6
5.4 No Duties except as Specified; No Action except
as Specified............................................. 7
5.4.1 No Duties except as Specified................... 7
5.4.2 No Action except as Specified................... 7
5.5 Satisfaction of Conditions Precedent..................... 7
5.6 Fixed Investment Trust................................... 7
Section 6. Owner Trustee............................................ 7
6.1 Acceptance of Trusts and Duties.......................... 7
6.2 Absence of Certain Duties................................ 8
6.3 No Representations or Warranties as to Certain Matters... 9
6.4 No Segregation of Monies; Interest....................... 9
6.5 Reliance upon Certificates, Counsel and Agents........... 9
6.6 Not Acting in Individual Capacity........................ 10
6.7 Fees; Compensation....................................... 10
6.8 Tax Returns.............................................. 11
Section 7. Indemnification Of First Security By Owner Participant... 11
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
Section 8. Transfer Of Owner Participant's Interest.................. 12
8.1 Transfer of Interest...................................... 12
Section 9. Successor Owner Trustees; Co-Trustees..................... 12
9.1 Resignation of Owner Trustee; Appointment of Successor.... 12
9.1.1 Resignation or Removal........................... 12
9.1.2 Execution and Delivery of Documents, Etc......... 13
9.1.3 Qualifications................................... 14
9.1.4 Merger, Etc...................................... 14
9.2 Co-Trustees and Separate Trustees......................... 14
Section 10. Supplements And Amendments To Trust Agreement And Other
Documents................................................ 15
10.1 Supplements and Amendments and Delivery Thereof.......... 15
10.1.1 Supplements and Amendments...................... 15
10.1.2 Delivery of Amendments and Supplements to
Certain Parties................................. 16
10.2 Discretion as to Execution of Documents.................. 16
10.3 Absence of Requirements as to Form....................... 16
10.4 Distribution of Documents................................ 18
10.5 No Request Needed as to Lease Supplement and Trust
Indenture Supplement..................................... 17
Section 11. Miscellaneous............................................ 17
11.1 Termination of Trust Agreement........................... 17
11.2 Termination at Option of the Owner Participant........... 17
11.3 Owner Participant Has No Legal Title in Trust Estate..... 18
11.4 Assignment, Sale, etc. of Aircraft....................... 18
11.5 Trust Agreement for Benefit of Certain Parties Only...... 18
11.6 Citizenship of Owner Participant......................... 18
11.7 Notices.................................................. 18
11.8 Severability............................................. 18
11.9 Waivers, Etc............................................. 19
11.10 Counterparts............................................. 19
11.11 Binding Effect, Etc...................................... 19
11.12 Headings; References..................................... 19
11.13 Governing Law............................................ 19
</TABLE>
<PAGE>
TRUST AGREEMENT ____
This TRUST AGREEMENT ____, dated as of September 25, 1997, between
METLIFE CAPITAL CREDIT L.P., a Delaware limited partnership ("Owner
Participant"), and FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association (in its individual capacity, "First Security" and otherwise not in
its individual capacity but solely as trustee hereunder, "Owner Trustee").
W I T N E S S E T H:
- - - - - - - - - -
Section 1. DEFINITIONS. Capitalized terms used but not defined herein
shall have the respective meanings set forth or incorporated by reference, and
shall be construed and interpreted in the manner described, in Annex A to the
Lease.
Section 2. DECLARATION OF TRUST. First Security hereby declares that
it will hold the Trust Estate as Owner Trustee upon the trusts hereinafter set
forth for the use and benefit of 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.
Section 3. Authorization; Conditions Precedent
3.1 AUTHORIZATION. In respect of the Aircraft, Owner Participant
hereby authorizes and directs Owner Trustee to, and Owner Trustee agrees for the
benefit of Owner Participant that it will, on and after the Delivery Date,
subject (except with respect to Section 3.1(a)) to due compliance with the terms
of Section 3.2:
(a) execute and deliver the Participation Agreement, the Trust
Indenture, the Lease and the other Owner Trustee Agreements (in the
respective forms in which they are delivered from time to time by Owner
Participant to Owner Trustee);
(b) subject to the terms of this Trust Agreement, exercise (i) its
rights and perform its duties under the Participation Agreement, (ii) the
rights and perform the duties of Lessor under the Lease and (iii) its
rights and perform its duties under the Trust Indenture and the other Owner
Trustee Agreements;
(c) execute, issue and deliver to Mortgagee for authentication and
further delivery to the Subordination Agent the Equipment Notes in the
amount and as provided in Section 2 of the Participation Agreement;
(d) purchase the Aircraft pursuant to the Participation Agreement;
(e) accept from Existing Lessor the delivery of the Aircraft Bill of
Sale, the FAA Bill of Sale and the invoice with respect to such Aircraft;
(f) effect the registration of the Aircraft with the FAA in the name
of Owner Trustee by filing or causing to be filed with the FAA: (i) the FAA
Bill of Sale; (ii) an Aircraft Registration Application in the name of
Owner Trustee (including, without limitation, an affidavit from Owner
<PAGE>
Trustee in compliance with the provisions of Section 47.7(c)(2) of the FAA
Regulations); and (iii) this Trust Agreement;
(g) execute and deliver the Financing Statements referred to in
Section 5.1.2 (xxiv) of the Participation Agreement, together with all
other agreements, documents and instruments referred to in Section 5 of the
Participation Agreement to which Owner Trustee is to be a party;
(h) make payment of Lessor's Cost for the Aircraft from the aggregate
amount of the Commitments for the Aircraft of Owner Participant and Loan
Participant, to the extent received by Owner Trustee, in the manner
provided in the Participation Agreement;
(i) execute and deliver Lease Supplement No. 1 covering the Aircraft;
(j) execute and deliver a Trust Indenture Supplement covering the
Aircraft; and
(k) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the
direction of Owner Participant, as Owner Participant may deem necessary or
advisable in connection with the transactions contemplated by this Trust
Agreement and the other Operative Agreements.
3.2 CONDITIONS PRECEDENT. The rights and obligations of Owner Trustee
to take the actions required by Section 3.1 shall be subject to the following
conditions precedent:
(a) Owner Trustee shall have received the notice described in Section
5.1.1 of the Participation Agreement, when and as required thereby, or
shall have been deemed to have waived such notice in accordance with
Section 5.1.1 of the Participation Agreement;
(b) Each Participant shall have made the full amount of its Commitment
specified in Section 2.1 of the Participation Agreement available to Owner
Trustee, in immediately available funds, in accordance with Sections 2 and
4 of the Participation Agreement; and
(c) Owner Participant shall have notified Owner Trustee that the terms
and conditions of Section 5 of the Participation Agreement, insofar as they
relate to conditions precedent to performance by Owner Participant of its
obligations thereunder, have been either fulfilled to the satisfaction of,
or waived by, Owner Participant. Owner Participant shall, by instructing
Owner Trustee to release the full amount of its Commitment then held by
Owner Trustee as provided in Section 2 of the Participation Agreement, be
deemed to have found satisfactory to it, or waived, all such conditions
precedent.
<PAGE>
3.3 LIMITATIONS ON CONTROL.
(a) Notwithstanding any other provision of this Trust Agreement, but
subject to paragraph (b) of this Section 3.3, the Owner Participant will
have no rights or powers to direct, influence or control the Owner Trustee
in the performance of the Owner Trustee's duties under this Trust Agreement
in connection with matters involving the ownership and operation of the
Aircraft by the Owner Trustee. In all matters involving the ownership and
operation of the Aircraft by the Owner Trustee, the Owner Trustee shall
have absolute and complete discretion in connection therewith and shall be
free of any kind of influence or control whatsoever by the Owner
Participant, and the Owner Trustee shall exercise its duties under this
Trust Agreement in connection with matters involving the ownership and
operation of the Aircraft by the Owner Trustee as it, in its discretion,
shall deem necessary to protect the interests of the United States,
notwithstanding any countervailing interest of any foreign power which, or
whose citizens may have a direct or indirect interest in the Owner
Participant and any such action by the Owner Trustee shall not be
considered malfeasance or in breach of any obligation which the Owner
Trustee might otherwise have to the Owner Participant; PROVIDED, HOWEVER,
that subject to the foregoing limitations, the Owner Trustee shall exercise
its discretion in all matters involving the ownership and operation of the
Aircraft by the Owner Trustee with due regard for the interests of the
Owner Participant. In exercising any of its rights and duties under this
Trust Agreement in connection with matters which may arise not relating to
the ownership and operation of the Aircraft, the Owner Trustee shall be
permitted to seek the advice of the Owner Participant before taking, or
refraining from taking, any action with respect thereto. The Owner Trustee
shall notify the Owner Participant of its exercise of rights and duties
under this Trust Agreement in connection with matters involving the
ownership and operation of the Aircraft by the Owner Trustee.
(b) Subject to the requirements of the preceding paragraph (a), the
Owner Trustee agrees that it will not, without the prior written consent of
the Owner Participant, (i) sell, mortgage, pledge or otherwise dispose of
the Aircraft or other assets held in the Trust Estate relating thereto
except as otherwise expressly provided for herein, or (ii) amend the Lease,
any Permitted Sublease or other Operative Agreements or give any consents
thereunder.
(c) The purpose of this Section 3.3 is to give the Owner Trustee the
power to manage and control the Aircraft with respect to matters involving
the ownership and operation of the Aircraft by the Owner Trustee in the
event that the Owner Trustee becomes the owner of the Aircraft or is deemed
to be the owner of the Aircraft pursuant to Law so as to assure that (i)
the Aircraft shall be controlled with respect to such matters by a Citizen
of the United States, (ii) the Owner Participant shall have no power to
influence or control the exercise of the Owner Trustee's authority with
respect to such matters and (iii) the Owner Trustee shall be able to give
the affidavit required by Section 47.7(c)(2)(iii) of the Federal Aviation
Regulations, 14 C.F.R. 47.7(c)(2)(iii). This Section 3.3 shall be construed
in furtherance of the foregoing purpose.
<PAGE>
Section 4. Receipt, Distribution And Application Of Income From The
Trust Estate
4.1 PAYMENTS FROM TRUST ESTATE ONLY. Except as provided in Section 7,
all payments to be made by Owner Trustee under this Trust Agreement shall be
made only from (a) in the case of funds made available in accordance with
Section 4 of the Participation Agreement, the Commitments (except as otherwise
provided in Section 14 of the Participation Agreement) and (b) in the case of
all other payments, the income from and proceeds of the Trust Estate to the
extent that Owner Trustee shall have received sufficient income or proceeds from
the Trust Estate to make such payments. Owner Participant agrees that it will
look solely (y) in the case of funds made available in accordance with Section 4
of the Participation Agreement, to the Commitments and any income therefrom
(except as otherwise provided in Section 14 of the Participation Agreement) and
(z) in the case of all other payments, to the income from and proceeds of the
Trust Estate to the extent available for distribution to Owner Participant as
provided in this Trust Agreement. Except as provided in Section 7, Owner
Participant agrees that First Security is neither personally liable to Owner
Participant for any amounts payable nor subject to any other liability under
this Trust Agreement.
<PAGE>
4.2 Distribution of Payments.
4.2.1 PAYMENTS TO MORTGAGEE. Until the Trust Indenture shall have
been discharged pursuant to Section 10.01 thereof, all Rent, insurance
proceeds and requisition or other payments of any kind included in the
Trust Estate (other than Excluded Payments) payable to Owner Trustee shall
be payable directly to Mortgagee (and, if any of the same are received by
Owner Trustee, shall upon receipt be paid over to Mortgagee without
deduction, set-off or adjustment of any kind) for distribution in
accordance with the provisions of Article III of the Trust Indenture;
PROVIDED, that any payments received by Owner Trustee from (a) Airframe
Manufacturer with respect to Owner Trustee's fees and disbursements or (b)
Owner Participant pursuant to Section 7 shall not be paid over to Mortgagee
but shall be retained by Owner Trustee and applied toward the purpose for
which such payments were made.
4.2.2 PAYMENTS TO OWNER TRUSTEE, OTHER PARTIES. After the Trust
Indenture shall have been discharged pursuant to Section 10.01 thereof, any
payment of the type referred to in Section 4.2.1 (other than Excluded
Payments) received by Owner Trustee, any payment received from Mortgagee
(other than Excluded Payments) and any other amount received as part of the
Trust Estate and for the application or distribution of which no provision
is made in this Trust Agreement shall be distributed forthwith upon receipt
by Owner Trustee in the following order of priority: FIRST, so much of such
payment as shall be required to reimburse Owner Trustee for any expenses
not otherwise reimbursed as to which Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by Owner
Trustee; SECOND, the amount set forth in Schedule 1 hereto, if any, on a
Payment Date shall be paid to Owner Participant; THIRD, the amount set
forth in Schedule 2 hereto shall be paid to Equity Guarantor; and FOURTH,
the balance, if any, shall be paid to Owner Participant.
<PAGE>
4.2.3 CERTAIN DISTRIBUTIONS TO OWNER PARTICIPANT. All amounts
from time to time distributable by Mortgagee to Owner Participant pursuant
to the Trust Indenture shall, if paid to Owner Trustee, be distributed by
Owner Trustee to Owner Participant in accordance with the provisions of
Article III of the Trust Indenture; PROVIDED, that any payments received by
Owner Trustee from (a) Lessee with respect to Owner Trustee's fees and
disbursements or (b) Owner Participant pursuant to Section 7 shall not be
paid over to Owner Participant but shall be retained by Owner Trustee and
applied toward the purpose for which such payments were made.
4.2.4 EXCLUDED PAYMENTS. Any Excluded Payments received by Owner
Trustee shall be paid by 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.
4.3 METHOD OF PAYMENTS. Owner Trustee shall make distributions or
cause distributions to be made to Owner Participant pursuant to this Section 4
by transferring the amount to be distributed by wire transfer in immediately
available funds on the day received (or on the next succeeding Business Day if
the funds to be so distributed shall not have been received by Owner Trustee by
12:00 noon, New York City time, and which funds Owner Trustee shall not have
been reasonably able to distribute to Owner Participant on the day received) to
Owner Participant's account set forth in Schedule 1 to the Participation
Agreement or to such other account or accounts of Owner Participant as Owner
Participant may designate from time to time in writing to Owner Trustee;
PROVIDED, that Owner Trustee shall use reasonable efforts to invest overnight,
in investments that would be permitted under Section 4.4 of the Lease, all funds
received by it at or later than 12:00 noon, New York City time, and which funds
Owner Trustee shall not have been reasonably able to distribute to Owner
Participant on the day received).
Section 5.Duties Of Owner Trustee.
5.1 NOTICE OF EVENT OF DEFAULT
(a) If Owner Trustee shall have knowledge of a Lease Default or a
Lease Event of Default or an Indenture Default or an Indenture Event of
Default, Owner Trustee shall give to Owner Participant, Mortgagee, Lessee
and Equity Guarantor prompt telephonic or telex 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 of the type referred to in
paragraph (c) or (e) of Section 4.02 of the Trust Indenture, such notice
shall in no event be furnished later than ten days after Owner Trustee
shall first have knowledge of such event and (ii) in the case of a
misrepresentation by Owner Trustee which with the passage of time would
constitute an Indenture Event of Default of the type referred to in
paragraph (d) of Section 4.02 of the Trust Indenture, such notice shall in
no event be furnished later than ten days after Owner Trustee shall first
have knowledge of such event.
(b) Subject to the terms of Section 5.3, Owner Trustee shall take such
action or shall refrain from taking such action, not inconsistent with the
<PAGE>
provisions of the Trust Indenture, with respect to such Lease Default,
Lease Event of Default, Indenture Default or Indenture Event of Default or
other event as Owner Trustee shall be directed in writing by Owner
Participant. For all purposes of this Trust Agreement, the Lease and the
other Operative Agreements, in the absence of Actual Knowledge of Owner
Trustee, Owner Trustee shall not be deemed to have knowledge of a Lease
Default, Lease Event of Default, Indenture Default or Indenture Event of
Default unless notified in writing by Mortgagee, Owner Participant or
Lessee.
5.2 ACTION UPON INSTRUCTIONS. Subject to the terms of Sections 5.1 and
5.3, upon the written instructions at any time and from time to time of Owner
Participant, 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: (a) give such notice or direction or exercise
such right, remedy or power under this Trust Agreement or any of the other Owner
Trustee Agreements 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 such agreements and instruments as shall be necessary under
Section 10); (b) take such action to preserve or protect the Trust Estate
(including the discharge of Liens) as may be specified in such instructions; (c)
approve as satisfactory to it all matters required by the terms of the Lease or
the other Operative Agreements to be satisfactory to Owner Trustee, it being
understood that without written instructions of Owner Participant, Owner Trustee
shall not approve any such matter as satisfactory to it; (d) subject to the
rights of Lessee under the Operative Agreements, after the expiration or earlier
termination of the Lease, convey all of 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; and (e) take or refrain from taking such other action or actions
as may be specified in such instructions.
5.3 LIMITATIONS ON DUTIES. Owner Trustee shall not be required to take
any action under Section 5.1 (other than the giving of the notices referred to
therein) or 5.2 if Owner Trustee shall reasonably believe such action is not
adequately indemnified by Owner Participant under Section 7, unless Lessee or
Owner Participant agrees to furnish such additional indemnity as shall
reasonably be required, in manner and form satisfactory to Owner Trustee, 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
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 Owner Trustee in connection therewith. Owner Trustee shall not be
required to take any action under Section 5.1 or 5.2 (other than the giving of
the notices referred to therein) if Owner Trustee shall have been advised by
counsel that such action is contrary to the terms of any of the Owner Trustee
Agreements or is otherwise contrary to Law and Owner Trustee has delivered to
Owner Participant written notice of the basis for its refusal to act.
<PAGE>
5.4 No Duties except as Specified; No Action except as Specified.
5.4.1 NO DUTIES EXCEPT AS SPECIFIED. 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 Owner Trustee Agreements, except as expressly required by
the terms of any of the Owner Trustee Agreements, 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 Owner
Participant received pursuant to the terms of Section 5.1 or 5.2, and no
implied duties or obligations shall be read into this Trust Agreement
against Owner Trustee. First Security 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 hereunder or under the
Participation Agreement), 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 7.3.1 of the Participation Agreement and otherwise comply with the
terms of said Section binding upon it.
5.4.2 NO ACTION EXCEPT AS SPECIFIED. Owner Trustee shall have no
power, right or authority to, and 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 (a) as expressly required by the terms of any of
the Owner Trustee Agreements, (b) as expressly provided by the terms hereof
or (c) as expressly provided in written instructions from Owner Participant
pursuant to Section 5.1 or 5.2.
5.5 SATISFACTION OF CONDITIONS PRECEDENT. Anything in this Trust
Agreement to the contrary notwithstanding, Owner Trustee shall, subject to the
satisfaction of special counsel for Owner Trustee of the occurrence of all the
applicable conditions precedent specified in Section 3.2, comply with the
provisions of Section 3.1.
5.6 FIXED INVESTMENT TRUST. Notwithstanding anything in this Trust
Agreement to the contrary, Owner Trustee shall not be authorized and shall have
no power to "vary the investment" of Owner Participant within the meaning of
Treasury Regulations Section 301.7701-4(c)(1), it being understood that Owner
Trustee shall have the power and authority to fulfill its obligations under
Section 4.3 hereof, Section 4.3.3 of the Participation Agreement and Section 4.4
of the Lease.
Section 6. Owner Trustee.
6.1 ACCEPTANCE OF TRUSTS AND DUTIES. First Security accepts the trusts
hereby created and agrees to perform the same as Owner Trustee but only upon the
terms hereof and the Trust Indenture applicable to it. Owner Trustee also agrees
to receive and disburse all monies received by it constituting part of the Trust
Estate pursuant to the terms hereof. First Security shall not be answerable or
accountable under any circumstances, except for (a) its own willful misconduct
or gross negligence (including, without limitation, in connection with any
activities of Owner Trustee in violation of Section 5.4.2), (b) its failure (in
its individual capacity) to perform its obligations under Section 5.4.1, (c) its
<PAGE>
or Owner Trustee's failure to use ordinary care to receive or disburse funds or
to comply with the first sentence of Section 6.8, (d) liabilities that may
result from the inaccuracy of any representation or breach of warranty of it in
its individual capacity (or from the failure by it in its individual capacity to
perform any covenant) in this Trust Agreement, the Trust Indenture, the Lease or
the Participation Agreement or elsewhere in any of the other Operative
Agreements, (e) taxes, fees or other charges on, based on or measured by any
fees, commissions or compensation received by First Security in connection with
the transactions contemplated by this Trust Agreement and the other Operative
Agreements to which it (in its individual capacity or as Owner Trustee) is a
party, (f) its or Owner Trustee's failure to use ordinary care in receiving or
disbursing funds or in connection with its obligation to invest funds pursuant
to Section 4 of the Participation Agreement, Section 4.4 of the Lease or Section
4.3 hereof, (g) any liability on the part of Owner Trustee arising out of its
negligence or willful or negligent misconduct in connection with its obligations
under Section 5.1 (other than the first sentence thereof), 6.8 or 9.2 hereof or
Section 4.01 of the Trust Indenture. First Security shall have no obligation to
advance its individual funds for any purpose, and Owner Trustee shall have no
obligation to distribute to Owner Participant, Lessee or any third party any
amounts to be paid to Owner Trustee until such amounts are collected by Owner
Trustee.
6.2 ABSENCE OF CERTAIN DUTIES.
(a) Except in accordance with written instructions furnished pursuant
to Section 5.1 or 5.2 and except as provided in, and without limiting the
generality of, Sections 3.1 and 5.4.1 and the last sentence of Section
9.1.2, and subject to Section 4.01 of the Trust Indenture, neither Owner
Trustee nor First Security shall have any duty (i) to see to any recording
or filing of any Operative Agreement 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 FAA or other governmental agencies, except that
of First Security to comply with the FAA reporting requirements set forth
in 14 C.F.R. ss. 47.45 and 14 C.F.R. ss. 47.51, and Owner Trustee shall, to
the extent that information for that purpose is timely supplied by Lessee
pursuant to any of the Operative Agreements, complete and timely submit
(and furnish Owner Participant with a copy of) any and all reports relating
to the Aircraft that may from time to time be required by the FAA or any
government or governmental authority having jurisdiction, (ii) to see to
any insurance on the Aircraft or to effect or maintain any such insurance,
whether or not Lessee shall be in default with respect thereto, other than
to forward to Owner Participant copies of all reports and other written
information which Owner Trustee receives from Lessee pursuant to Section 11
of the Lease, (iii) except as provided in Section 7.3.1 or 7.3.2 of the
Participation Agreement, Section 4.01 of the Trust Indenture or Section 5.4
or 6.1 hereof, 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 or assessed or levied against any part of the Trust Indenture
Estate or the Trust Estate, except as provided in Section 6.3.9 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.
(b) Notwithstanding clause (a), Owner Trustee will furnish to
Mortgagee and Owner Participant, promptly upon receipt thereof, duplicates
<PAGE>
or copies of all reports, notices, requests, demands, certificates,
financial statements and other instruments furnished to Owner Trustee under
the Lease or any other Operative Agreement except to the extent to which a
responsible officer of Owner Trustee reasonably believes (and confirms by
telephone call with Owner Participant) that duplicates or copies thereof
have already been furnished to Owner Participant by some other person.
6.3 NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS. NEITHER
FIRST SECURITY NOR OWNER TRUSTEE 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, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE ABSENCE OF ANY STRICT
LIABILITY OBLIGATION OR ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF WHATSOEVER, except
that First Security warrants to Owner Participant that on the Delivery Date
Owner Trustee shall have received whatever title to the Aircraft that was
conveyed to it and that the Aircraft shall, on the Delivery Date and during the
Term, be free of Lessor Liens attributable to First Security or (b) any
representation or warranty as to the validity, legality or enforceability of
this Trust Agreement or any other Operative Agreement to which First Security,
in its individual capacity or as Owner Trustee, is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof except to the extent that any such statement is expressly made
herein or therein by such party as a representation by First Security, in its
individual capacity or as Owner Trustee, as the case may be, and except that
First Security hereby represents and warrants that it has all corporate power
and authority to execute, deliver and perform this Trust Agreement and that this
Trust Agreement has been, and (assuming due authorization, execution and
delivery by Owner Participant of this Trust Agreement) the other Operative
Agreements to which it or Owner Trustee is a party have been (or at the time of
execution and delivery of any such instrument by it or Owner Trustee under this
Trust Agreement 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 Owner Trustee, as the case may be, and
that this Trust Agreement constitutes the legal, valid and binding obligation of
First Security or Owner Trustee, as the case may be, enforceable against First
Security or Owner Trustee, as the case may be, in accordance with its terms.
6.4 NO SEGREGATION OF MONIES; INTEREST. Monies received by Owner
Trustee under this Trust Agreement need not be segregated in any manner except
to the extent required by Law, or except as provided in written instructions
from Owner Participant, and shall be invested as provided in Section 4.3 hereof
or Section 4.4 of the Lease.
6.5 RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS. Owner Trustee
shall incur no liability to anyone in acting in good faith in reliance upon and
in accordance with any signature, instrument, notice, resolution, request,
<PAGE>
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 in this Trust Agreement, any request, direction,
order or demand of Owner Participant or Lessee mentioned in this Trust Agreement
or in any of the other Owner Trustee Agreements shall be sufficiently evidenced
by written instruments signed by the Chairman of the Board, the President, any
Vice President or any other officer and in the name of Owner Participant or
Lessee, as the case may be. 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 of Directors or Executive 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 in this Trust Agreement, Owner Trustee may, absent
Actual Knowledge to the contrary, for all purposes rely on a certificate signed
by the Chairman of the Board, the President, any Vice President or any other
officer of Lessee, and the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of Lessee, as to such fact or matter, and such
certificate shall constitute full protection to Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon and in
accordance therewith. In the administration of trusts under this Trust
Agreement, Owner Trustee may execute any of the trusts or powers and perform its
powers and duties under this Trust Agreement 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. 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.
6.6 NOT ACTING IN INDIVIDUAL CAPACITY. In acting under this Trust
Agreement, First Security acts solely as Owner Trustee and not in its individual
capacity except as otherwise expressly provided in this Trust Agreement or in
the other Operative Agreements to which it is a party; 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 in this Trust Agreement or the Trust Indenture,
having any claim against 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 provided in Section 6.1 or otherwise
as Owner Trustee shall expressly agree otherwise in writing.
6.7 FEES; COMPENSATION. Airframe Manufacturer shall pay the
Transaction Expenses and ongoing fees of Owner Trustee throughout the Term
pursuant to Section 9.2 of the Participation Agreement. The Trust Estate shall
not have any liability for any such fees and expenses; PROVIDED, that the
foregoing shall not limit the obligations of Owner Participant under Sections
5.3 and 7; PROVIDED, that Owner Trustee shall have a Lien upon the Trust Estate
for any such fee not paid by Airframe Manufacturer as contemplated by Section
9.2 of the Participation Agreement and such Lien shall entitle Owner Trustee to
priority as to payment thereof over payment to any other Person under this Trust
Agreement; PROVIDED, that such Lien shall be subject and subordinate in all
events to the Lien of the Trust Indenture; and PROVIDED, FURTHER, that Owner
Trustee shall have no right to exercise, and shall not exercise, any rights or
<PAGE>
remedies Owner Trustee may have with respect to such Lien unless and until the
Secured Obligations have been paid and performed in full.
6.8 TAX RETURNS. 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.
Owner Participant shall be responsible for causing to be prepared and filed all
income tax returns required to be filed by Owner Participant. Owner Trustee
shall be responsible for causing to be prepared, at the expense of Airframe
Manufacturer, all income tax returns required to be filed with respect to the
trust created hereby and shall execute and file such returns; PROVIDED, that
Owner Trustee shall send promptly a completed copy of such return to Owner
Participant not more than sixty nor less than fifteen days prior to the due date
of the return, PROVIDED, that Owner Trustee shall have timely received all
necessary information to complete and deliver to Owner Participant such return.
Owner Participant, upon request, will furnish Owner Trustee with all such
information as may be reasonably required from Owner Participant in connection
with the preparation of such income tax returns. Owner Trustee shall keep copies
of all returns delivered to or filed by it.
Section 7. INDEMNIFICATION OF FIRST SECURITY BY OWNER PARTICIPANT.
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 and its
successors, assigns, agents and servants, from and against any and all
liabilities, obligations, losses, damages, penalties, taxes (excluding any Taxes
which are not required to be indemnified by Lessee pursuant to Section 9.1 or
9.3 of the Participation Agreement and excluding any taxes payable by First
Security on or measured by any compensation received by First Security for its
services under this Trust Agreement), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, but excluding internal costs and expenses such as salaries and
overhead, 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 (whether or not also indemnified against by Lessee under the Lease or
under the Participation Agreement or also indemnified against by any other
Person; PROVIDED, that Owner Participant shall be subrogated to the rights of
Owner Trustee against Lessee or any other indemnitor) in any way relating to or
arising out of this Trust Agreement or any of the other Operative Agreements or
the enforcement of any of the terms of any thereof, or in any way relating to or
arising out of the manufacture, purchase, acceptance, nonacceptance, rejection,
ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of the 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 Owner Trustee,
under this Trust Agreement, except (a) in the case of gross negligence or
willful misconduct on the part of First Security, in its individual capacity or
as Owner Trustee, in the performance or nonperformance of its duties under this
Trust Agreement or under any of the other Owner Trustee Agreements or (b) those
Claims resulting from the inaccuracy of any representation or warranty of First
Security (or from the failure of First Security to perform any of its covenants)
in Section 6.3, in Section 6.03 of the Trust Indenture, in Section 4 of the
<PAGE>
Lease, in Section 6.3 of the Participation Agreement or elsewhere in any of the
other Operative Agreements or (c) as may result from a breach by First Security
of its covenant in the last sentence of Section 5.4.1 or (d) in the case of the
failure to use ordinary care on the part of First Security, in its individual
capacity or as Owner Trustee, in the receipt or disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 4 of the
Participation Agreement, Section 4.4 of the Lease or Section 4.3 hereof or in
compliance with the provisions of the first sentence of Section 6.8 or (e) any
liability on the part of Owner Trustee arising out of its negligence or willful
or negligent misconduct in connection with its obligations under Section 5.1,
6.8 or 9.2 hereof or Section 4.01 of the Trust Indenture, or (f) those claims
arising under any circumstances or upon any terms where Lessee would not have
been required to indemnify First Security pursuant to Section 9.1 or 9.3 of the
Participation Agreement (disregarding for purposes of this paragraph Sections
9.1.2(b) and 9.3.2(j)); PROVIDED, that before asserting its right to
indemnification, if any, pursuant to this Section 7, First Security shall first
demand its corresponding right to indemnification pursuant to Section 9 of the
Participation Agreement (but need not exhaust any or all remedies available
thereunder). The indemnities contained in this Section 7 extend to First
Security 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 has been reimbursed by the Trust Indenture
Estate or the Trust Estate for amounts covered by the indemnities contained in
this Section 7). The indemnities contained in this Section 7 shall survive the
termination of this Trust Agreement. In addition, if necessary, First Security
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 to the extent not reimbursed by Lessee, Owner
Participant or others, but without releasing any of them from their respective
agreements of reimbursement; and, to secure the same First Security shall have a
lien on the Trust Estate, subject to the lien of the Trust Indenture and subject
further to the provisions of Section 6.7, which shall be prior to any interest
therein of Owner Participant. The payor of any indemnity under this Section 7
shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
Section 8. Transfer Of Owner Participant's Interest.
8.1 TRANSFER OF INTEREST. All provisions of Section 10 of the
Participation Agreement shall (with the same force and effect as if set forth in
full in this Section 8.1) be applicable to any assignment, conveyance or other
transfer by Owner Participant of any of its right, title or interest in and to
the Participation Agreement, the Trust Estate or this Trust Agreement.
Section 9. Successor Owner Trustees; Co-Trustees.
9.1 RESIGNATION OF OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR
9.1.1 RESIGNATION OR REMOVAL. Owner Trustee or any successor
Owner Trustee (a) shall resign if required to do so pursuant to Section
13.3 of the Participation Agreement or upon obtaining Actual Knowledge of
<PAGE>
any facts that would cast doubt upon its continuing status as a Citizen of
the United States and (b) may resign at any time without cause by giving at
least 60 days' prior written notice to Owner Participant, Mortgagee and
Lessee, such resignation to be effective upon the assumption of the trusts
hereunder by the successor Owner Trustee under Section 9.1.2. In addition,
Owner Participant may at any time remove Owner Trustee, with or without
cause by a notice in writing delivered to Owner Trustee, Mortgagee and
Lessee, such removal to be effective upon the assumption of the trusts
hereunder by the successor Owner Trustee under Section 9.1.2, PROVIDED,
that, in the case of a removal without cause, unless a Lease Event of
Default shall have occurred and be continuing, such removal shall be
subject to the consent of Lessee (which consent shall not be unreasonably
withheld). In the case of the resignation or removal of Owner Trustee,
Owner Participant may appoint a successor Owner Trustee by an instrument
signed by Owner Participant, with, unless a Lease Event of Default shall
have occurred and be continuing, the consent of Lessee (which consent shall
not be unreasonably withheld). If a successor Owner Trustee shall not have
been appointed within 30 days after such notice of resignation or removal,
Owner Trustee, any Owner Participant, Lessee or Mortgagee may apply to any
court of competent jurisdiction to appoint a successor Owner Trustee to act
until such time, if any, as a successor shall have been appointed as above
provided. Any successor Owner Trustee so appointed by such court shall
immediately and without further act be superseded by any successor Owner
Trustee appointed as above provided within one year from the date of the
appointment by such court.
9.1.2 EXECUTION AND DELIVERY OF DOCUMENTS, ETC. Any successor
Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee, with a copy to Owner Participant, Lessee and
Mortgagee, an instrument accepting such appointment and assuming the
obligations of Owner Trustee, in its individual capacity and as Owner
Trustee, under the Owner Trustee Agreements, 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 under this Trust Agreement with like effect as
if originally named Owner Trustee in this Trust Agreement; 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 under this Section 9.1, 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 required to cause registration of the Aircraft
included in the Trust Estate to be transferred upon the records of the FAA,
or other governmental authority having jurisdiction, into the name of the
successor Owner Trustee.
<PAGE>
9.1.3 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 $100,000,000, if
there be such an institution willing, able and legally qualified to perform
the duties of Owner Trustee under this Trust Agreement upon reasonable or
customary terms. No such successor Owner Trustee shall be located in a
jurisdiction which creates material adverse consequences for Lessee (unless
such material adverse consequences would be created by substantially all
jurisdictions where major banking or trust institutions are located).
9.1.4 MERGER, ETC. Any corporation into which First Security 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 shall be a party, or any corporation to which substantially
all the corporate trust business of First Security may be transferred,
shall, subject to the terms of Section 9.1.3, be Owner Trustee under this
Trust Agreement without further act, PROVIDED, that such corporation shall
not also be the Mortgagee.
9.2 CO-TRUSTEES AND SEPARATE TRUSTEES.
(a) 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 Owner Trustee being advised by counsel shall
determine that it is so necessary or prudent in the interest of Owner
Participant or Owner Trustee, or Owner Trustee shall have been directed to
do so by Owner Participant, 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 or all of which shall be a
Citizen of the United States) approved by Owner Trustee and Owner
Participant, either to act as co-trustee, jointly with Owner Trustee, or to
act as separate trustee under this Trust Agreement (any such co-trustee or
separate trustee being herein sometimes referred to as an "additional
trustee"). In the event 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 Owner Trustee so to do, or in case a
Lease Event of Default or Indenture Event of Default shall occur and be
continuing, Owner Trustee may act under the foregoing provisions of this
Section 9.2 without the concurrence of Owner Participant; and Owner
Participant hereby appoints Owner Trustee its agent and attorney-in-fact to
act for it under the foregoing provisions of this Section 9.2 in either of
such contingencies.
(b) Every additional trustee under this Trust Agreement shall, to the
extent permitted by Law, be appointed and act, and Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(i) All powers, duties, obligations and rights conferred upon
Owner Trustee in respect of the custody, control and management of
<PAGE>
monies, the Aircraft or documents authorized to be delivered under
this Trust Agreement or under the Participation Agreement shall be
exercised solely by Owner Trustee;
(ii) All other rights, powers, duties and obligations conferred
or imposed upon Owner Trustee shall be conferred or imposed upon and
exercised or performed by 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) 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;
(iii) No power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised under
this Trust Agreement by such additional trustee, except jointly with,
or with the consent in writing of, Owner Trustee;
(iv) No trustee under this Trust Agreement shall be personally
liable by reason of any action or omission of any other trustee under
this Trust Agreement;
(v) Owner Participant, at any time, by an instrument in writing
may remove any such additional trustee. In the event that Owner
Participant shall not have joined in the execution of any such
instrument within ten days after the receipt of a written request from
Owner Trustee so to do, Owner Trustee shall have the power to remove
any such additional trustee without the concurrence of Owner
Participant; and Owner Participant hereby appoints Owner Trustee its
agent and attorney-in-fact to act for it in such connection in such
contingency; and
(vi) No appointment of, or action by, any additional trustee will
relieve Owner Trustee of any of its obligations under, or otherwise
affect any of the terms of, the Trust Indenture or affect the
interests of Mortgagee or the Note Holders in the Trust Indenture
Estate.
(c) In case any separate trustee under this Section 9.2 shall die,
become incapable of acting, resign or be removed, the title to the Trust
Estate and all rights and duties of such separate trustee shall, so far as
permitted by Law, vest in and be exercised by Owner Trustee, without the
appointment of a successor to such separate trustee.
Section 10. SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER
DOCUMENTS.
10.1 SUPPLEMENTS AND AMENDMENTS AND DELIVERY THEREOF.
10.1.1 SUPPLEMENTS AND AMENDMENTS. Subject to Section 7.2.2 of
the Participation Agreement, this Trust Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing
<PAGE>
signed by Owner Trustee and Owner Participant. Subject to Section 10.2,
Section 9.01 of the Trust Indenture and Section 7.6.7 of the Participation
Agreement, Owner Trustee will execute any amendment, supplement or other
modification of this Trust Agreement or of any other Owner Trustee
Agreement which it is requested in writing to execute by Owner Participant,
except that 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 Owner Participant, (a) no such supplement, amendment or
modification shall (i) modify any of the provisions of Section 4 or this
Section 10.1, (ii) reduce, modify or amend any indemnities in favor of
Owner Participant as set forth in Section 9 of the Participation Agreement
or in the Tax Indemnity Agreement, (iii) reduce the amount or extend the
time of payment of Basic Rent, Supplemental Rent, Stipulated Loss Value or
Termination Value as set forth in the Lease (except in accordance with
Section 3 of the Lease) or (iv) modify any of the rights of Owner
Participant under the Trust Indenture and (b) no such supplement, amendment
or modification shall require 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 Owner Participant
with respect to any agreement or obligation.
10.1.2 DELIVERY OF AMENDMENTS AND SUPPLEMENTS TO CERTAIN PARTIES.
A signed copy of each amendment or supplement referred to in Section 10.1.1
to which Lessee is not a party shall be delivered promptly by Owner Trustee
to Lessee, and a signed copy of each amendment or supplement referred to in
Section 10.1.1 shall be delivered promptly by Owner Trustee to Mortgagee.
10.2 DISCRETION AS TO EXECUTION OF DOCUMENTS. Prior to executing any
document required to be executed by it pursuant to the terms of Section 10.1,
Owner Trustee shall be entitled to receive an opinion of its counsel to the
effect that the execution of such document is authorized under this Trust
Agreement. If in the opinion of Owner Trustee any such document adversely
affects any right, duty, immunity or indemnity in favor of Owner Trustee under
this Trust Agreement or under any other Owner Trustee Agreement, Owner Trustee
may in its discretion decline to execute such document unless Owner Trustee is
furnished with indemnification from Lessee or any other party upon terms and in
amounts reasonably satisfactory to Owner Trustee to protect the Trust Estate and
the Owner Trustee against any and all liabilities, costs and expenses arising
out of the execution of such documents.
10.3 ABSENCE OF REQUIREMENTS AS TO FORM. It shall not be necessary for
any written request furnished pursuant to Section 10.1 to specify the particular
form of the proposed documents to be executed pursuant to such Section 10.1, but
it shall be sufficient if such request shall indicate the substance thereof.
10.4 DISTRIBUTION OF DOCUMENTS. Promptly after the execution by Owner
Trustee of any document entered into pursuant to Section 10.1, Owner Trustee
shall mail, by certified mail, postage prepaid, a conformed copy thereof to
<PAGE>
Owner Participant, but the failure of Owner Trustee to mail such conformed copy
shall not impair or affect the validity of such document.
10.5 NO REQUEST NEEDED AS TO LEASE SUPPLEMENT AND TRUST INDENTURE
SUPPLEMENT. No written request pursuant to Section 10.1 shall be required to
enable Owner Trustee to enter into, pursuant to Section 3.1 and the Lease or the
Trust Indenture, as the case may be, the Lease Supplement with Lessee and the
Trust Indenture Supplement.
Section 11. Miscellaneous.
11.1 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 and the sale or other final disposition by Owner Trustee of all property
constituting part of the Trust Estate and the final distribution by Owner
Trustee of all monies or other property or proceeds constituting part of the
Trust Estate in accordance with Section 4, PROVIDED, that at such time Lessee
shall have fully complied with all of the terms of the Lease and the
Participation Agreement or (b) 21 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
clause (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 terms hereof. Except as
expressly set forth in Section 11.2, this Trust Agreement and the trusts created
hereby may not be revoked by Owner Participant.
11.2 TERMINATION AT OPTION OF THE OWNER PARTICIPANT. Notwithstanding
Section 11.1 hereof, this Agreement and trust created hereby shall terminate and
the Trust Estate shall be distributed to the Owner Participant, and this
Agreement shall be of no further force and effect, upon the election of the
Owner Participant by notice to the Owner Trustee, if such notice shall be
accompanied by the written agreement (in form and substance satisfactory to the
Owner Trustee) of the Owner Participant assuming all obligations of the Owner
Trustee under or contemplated by the Operative Agreements or incurred by it as
trustee hereunder and releasing the Owner Trustee therefrom; provided, however,
that such notice may be given only after the time the Lien of the Trust
Indenture is discharged under Section 10.01 of the Trust Indenture and after the
Lease shall no longer be in effect. Notwithstanding anything in this Trust
Agreement to the contrary, the Owner Participant shall not remove the Owner
Trustee without cause.
<PAGE>
11.3 OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST ESTATE. Owner
Participant shall not have legal title to any part of the Trust Estate. No
transfer, by operation of Law or otherwise, of any right, title and interest of
Owner Participant in and to the Trust Estate under this Trust Agreement shall
operate to terminate this Trust Agreement or the trusts under this Trust
Agreement or entitle any successors or transferees of Owner Participant to an
accounting or to the transfer of legal title to any part of the Trust Estate.
11.4 ASSIGNMENT, SALE, ETC. OF AIRCRAFT. Any assignment, sale,
transfer or other conveyance of the Aircraft by Owner Trustee made pursuant to
the terms of this Trust Agreement or of the Lease or the Participation Agreement
shall bind Owner Participant and shall be effective to transfer or convey all
right, title and interest of Owner Trustee and 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 Owner Trustee.
11.5 TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY. Except for
the terms of Section 10 of the Participation Agreement incorporated in Section 8
and except as otherwise provided in Sections 5.1, 6.7, 9, 10.1 and 11.1, nothing
in this Trust Agreement, whether express or implied, shall be construed to give
any person other than Owner Trustee and Owner Participant any legal or equitable
right, remedy or claim under or in respect of this Trust Agreement; and this
Trust Agreement shall be held to be for the sole and exclusive benefit of Owner
Trustee and Owner Participant.
11.6 CITIZENSHIP OF OWNER PARTICIPANT. Reserved.
11.7 NOTICES. Unless otherwise expressly permitted by the terms of
this Trust Agreement, all notices, requests, demands, authorizations,
directions, consents, waivers and other communications required or permitted to
be made, given, furnished or filed under this Trust Agreement shall be in
writing, shall refer specifically to this Trust Agreement and shall be
personally delivered, sent by telecopy, telex or other means of electronic
facsimile or telecommunication transmission, sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective telex, telecopy or other number
or address set forth for such party in Schedule 1 to the Participation
Agreement, or to such other telex, telecopy or other number or address as each
party hereto may hereafter specify by notice to the other parties hereto. Each
such notice, request, demand, authorization, direction, consent, waiver or other
communication shall be effective when received or, if made, given, furnished or
filed (a) by telecopy or other means of electronic facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
in the U.S. mail.
11.8 SEVERABILITY. If any provision of this Trust Agreement shall be
held invalid, illegal or unenforceable in any respect in any jurisdiction, then,
to the extent permitted by Law, (a) all other provisions hereof shall remain in
full force and effect in such jurisdiction and (b) such invalidity, illegality
or unenforceability shall not affect the validity, legality or enforceability of
<PAGE>
such provision in any other jurisdiction. If, however, any Law pursuant to which
such provisions are held invalid, illegal or unenforceable may be waived, such
Law is hereby waived by the parties hereto to the full extent permitted, to the
end that this Trust Agreement shall be deemed to be a valid and binding
agreement in all respects, enforceable in accordance with its terms.
11.9 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 Section 10; and any waiver of the terms
hereof shall be effective only in the specific instance and for the specific
purpose given.
11.10 COUNTERPARTS. This Trust Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original, and all of
which counterparts, taken together, shall constitute one and the same
instrument.
11.11 BINDING EFFECT, ETC. All covenants and agreements contained in
this Trust Agreement shall be binding upon, and inure to the benefit of, Owner
Trustee and its successors and assigns, and Owner Participant and its successors
and, to the extent permitted by Section 8, assigns. Any request, notice,
direction, consent, waiver or other instrument or action by Owner Participant
shall bind its successors and assigns.
11.12 HEADINGS; REFERENCES. The headings and the table of contents
used in this Trust Agreement are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof and shall not in any way
affect the construction of, or be taken into consideration in interpreting, this
Trust Agreement.
11.13 GOVERNING LAW. THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAWS OF THE STATE OF UTAH, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.
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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.
METLIFE CAPITAL CREDIT L.P.
By _______________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By _______________________________
Name:
Title:
TRUST AGREEMENT ___
Dated as of September 25, 1997
Between
PACIFIC CENTURY LEASING, INC.
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No. 145.___
and U.S. Registration No. N_____
with Two Allison Model AE3007A Engines
Bearing Engine Manufacturer's Serial Nos. _______ and _______
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TABLE OF CONTENTS
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Section 1. Definitions........................................................................ 1
Section 2. Declaration of Trust............................................................... 1
Section 3. Authorization; Conditions Precedent................................................ 1
3.1 Authorization................................................................. 1
3.2 Conditions Precedent.......................................................... 2
Section 4. Receipt, Distribution and Application of Income From the Trust Estate.............. 3
4.1 Payments from Trust Estate Only............................................... 3
4.2 Distribution of Payments...................................................... 3
4.2.1 Payments to Mortgagee............................................... 3
4.2.2 Payments to Owner Trustee, Other Parties............................ 3
4.2.3 Certain Distributions to Owner Participant.......................... 4
4.2.4 Excluded Payments................................................... 4
4.3 Method of Payments............................................................ 4
Section 5. Duties of Owner Trustee............................................................ 4
5.1 Notice of Event of Default.................................................... 4
5.2 Action Upon Instructions...................................................... 5
5.3 Limitations on Duties......................................................... 5
5.4 No Duties Except as Specified; No Action Except as Specified.................. 6
5.4.1 No Duties Except as Specified....................................... 6
5.4.2 No Action Except as Specified....................................... 6
5.5 Satisfaction of Conditions Precedent.......................................... 6
5.6 Fixed Investment Trust........................................................ 7
Section 6. Owner Trustee.......................................................................... 7
6.1 Acceptance of Trusts and Duties............................................... 7
6.2 Absence of Certain Duties..................................................... 7
6.3 No Representations or Warranties as to Certain Matters........................ 8
6.4 No Segregation of Monies; Interest............................................ 9
6.5 Reliance upon Certificates, Counsel and Agents................................ 9
6.6 Not Acting in Individual Capacity............................................. 10
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TABLE OF CONTENTS
(continued)
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6.7 Fees; Compensation............................................................ 10
6.8 Tax Returns................................................................... 10
Section 7. Indemnification of First Security By Owner Participant................................. 11
Section 8. Transfer of Owner Participant's Interest............................................... 12
8.1 Transfer of Interest.......................................................... 12
Section 9. Successor Owner Trustees; Co-Trustees.................................................. 12
9.1 Resignation of Owner Trustee; Appointment of Successor........................ 12
9.1.1 Resignation or Removal............................................. 12
9.1.2 Execution and Delivery of Documents, Etc........................... 13
9.1.3 Qualifications..................................................... 13
9.1.4 Merger, Etc........................................................ 13
9.2 Co-Trustees and Separate Trustees............................................. 14
Section 10. Supplements and Amendments to Trust Agreement and Other Documents..................... 15
10.1 Supplements and Amendments and Delivery Thereof............................... 15
10.1.1 Supplements and Amendments......................................... 15
10.1.2 Delivery of Amendments and Supplements to Certain Parties.......... 16
10.2 Discretion as to Execution of Documents....................................... 16
10.3 Absence of Requirements as to Form............................................ 16
10.4 Distribution of Documents..................................................... 16
10.5 No Request Needed as to Lease Supplement and Trust Indenture Supplement....... 16
Section 11. Miscellaneous......................................................................... 16
11.1 Termination of Trust Agreement................................................ 16
11.2 Termination at Option of the Owner Participant................................ 17
11.3 Owner Participant Has No Legal Title in Trust Estate.......................... 17
11.4 Assignment, Sale, Etc. of Aircraft............................................ 17
11.5 Trust Agreement for Benefit of Certain Parties Only........................... 18
11.6 Citizenship of Owner Participant.............................................. 18
11.7 Notices....................................................................... 18
11.8 Severability.................................................................. 18
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TABLE OF CONTENTS
(continued)
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11.9 Waivers, Etc.................................................................. 19
11.10 Counterparts.................................................................. 19
11.11 Binding Effect, Etc........................................................... 19
11.12 Headings; References.......................................................... 19
11.13 Governing Law................................................................. 19
</TABLE>
<PAGE>
TRUST AGREEMENT ___
This TRUST AGREEMENT ___, dated as of September 25, 1997, between
PACIFIC CENTURY LEASING, INC., a Hawaii corporation ("Owner Participant"), and
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association (in
its individual capacity, "First Security" and otherwise not in its individual
capacity but solely as trustee hereunder, "Owner Trustee").
W I T N E S S E T H:
- - - - - - - - - -
Section 1. DEFINITIONS
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A to the Lease.
Section 2. DECLARATION OF TRUST
First Security hereby declares that it will hold the Trust Estate as
Owner Trustee upon the trusts hereinafter set forth for the use and benefit of
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.
Section 3. AUTHORIZATION; CONDITIONS PRECEDENT
3.1 AUTHORIZATION
In respect of the Aircraft, Owner Participant hereby authorizes and
directs Owner Trustee to, and Owner Trustee agrees for the benefit of Owner
Participant that it will, on and after the Delivery Date, subject (except with
respect to Section 3.1(a)) to due compliance with the terms of Section 3.2:
(a) execute and deliver the Participation Agreement, the Trust
Indenture, the Lease and the other Owner Trustee Agreements (in the respective
forms in which they are delivered from time to time by Owner Participant to
Owner Trustee);
(b) subject to the terms of this Trust Agreement, exercise (i) its
rights and perform its duties under the Participation Agreement, (ii) the rights
and perform the duties of Lessor under the Lease and (iii) its rights and
perform its duties under the Trust Indenture and the other Owner Trustee
Agreements;
(c) execute, issue and deliver to Mortgagee for authentication and
further delivery to the Subordination Agent the Equipment Notes in the amount
and as provided in Section 2 of the Participation Agreement;
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(d) purchase the Aircraft pursuant to the Participation Agreement;
(e) accept from Existing Lessor the delivery of the Aircraft Bill of
Sale, the FAA Bill of Sale and the invoice with respect to such Aircraft;
(f) effect the registration of the Aircraft with the FAA in the name
of Owner Trustee by filing or causing to be filed with the FAA: (i) the FAA Bill
of Sale; (ii) an Aircraft Registration Application in the name of Owner Trustee
(including, without limitation, an affidavit from Owner Trustee in compliance
with the provisions of Section 47.7(c)(2) of the FAA Regulations); and (iii)
this Trust Agreement;
(g) execute and deliver the Financing Statements referred to in
Section 5.1.2 (xxiv) of the Participation Agreement, together with all other
agreements, documents and instruments referred to in Section 5 of the
Participation Agreement to which Owner Trustee is to be a party;
(h) make payment of Lessor's Cost for the Aircraft from the aggregate
amount of the Commitments for the Aircraft of Owner Participant and Loan
Participant, to the extent received by Owner Trustee, in the manner provided in
the Participation Agreement;
(i) execute and deliver Lease Supplement No. 1 covering the Aircraft;
(j) execute and deliver a Trust Indenture Supplement covering the
Aircraft; and
(k) execute and deliver all such other instruments, documents or
certificates and take all such other actions in accordance with the direction of
Owner Participant, as Owner Participant may deem necessary or advisable in
connection with the transactions contemplated by this Trust Agreement and the
other Operative Agreements.
3.2 CONDITIONS PRECEDENT
The rights and obligations of Owner Trustee to take the actions
required by Section 3.1 shall be subject to the following conditions precedent:
(a) Owner Trustee shall have received the notice described in Section
5.1.1 of the Participation Agreement, when and as required thereby, or shall
have been deemed to have waived such notice in accordance with Section 5.1.1 of
the Participation Agreement;
(b) Each Participant shall have made the full amount of its Commitment
specified in Section 2.1 of the Participation Agreement available to Owner
Trustee, in immediately available funds, in accordance with Sections 2 and 4 of
the Participation Agreement; and
(c) Owner Participant shall have notified Owner Trustee that the terms
and conditions of Section 5 of the Participation Agreement, insofar as they
relate to conditions precedent to performance by Owner Participant of its
<PAGE>
obligations thereunder, have been either fulfilled to the satisfaction of, or
waived by, Owner Participant. Owner Participant shall, by instructing Owner
Trustee to release the full amount of its Commitment then held by Owner Trustee
as provided in Section 2 of the Participation Agreement, be deemed to have found
satisfactory to it, or waived, all such conditions precedent.
Section 4. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE
4.1 PAYMENTS FROM TRUST ESTATE ONLY
Except as provided in Section 7, all payments to be made by Owner
Trustee under this Trust Agreement shall be made only from (a) in the case of
funds made available in accordance with Section 4 of the Participation
Agreement, the Commitments (except as otherwise provided in Section 14 of the
Participation Agreement) and (b) in the case of all other payments, the income
from and proceeds of the Trust Estate to the extent that Owner Trustee shall
have received sufficient income or proceeds from the Trust Estate to make such
payments. Owner Participant agrees that it will look solely (y) in the case of
funds made available in accordance with Section 4 of the Participation
Agreement, to the Commitments and any income therefrom (except as otherwise
provided in Section 14 of the Participation Agreement) and (z) in the case of
all other payments, to the income from and proceeds of the Trust Estate to the
extent available for distribution to Owner Participant as provided in this Trust
Agreement. Except as provided in Section 7, Owner Participant agrees that First
Security is neither personally liable to Owner Participant for any amounts
payable nor subject to any other liability under this Trust Agreement.
4.2 DISTRIBUTION OF PAYMENTS
4.2.1 PAYMENTS TO MORTGAGEE
Until the Trust Indenture shall have been discharged pursuant to
Section 10.01 thereof, all Rent, insurance proceeds and requisition or other
payments of any kind included in the Trust Estate (other than Excluded Payments)
payable to Owner Trustee shall be payable directly to Mortgagee (and, if any of
the same are received by Owner Trustee, shall upon receipt be paid over to
Mortgagee without deduction, set-off or adjustment of any kind) for distribution
in accordance with the provisions of Article III of the Trust Indenture;
PROVIDED, that any payments received by Owner Trustee from (a) Airframe
Manufacturer with respect to Owner Trustee's fees and disbursements or (b) Owner
Participant pursuant to Section 7 shall not be paid over to Mortgagee but shall
be retained by Owner Trustee and applied toward the purpose for which such
payments were made.
4.2.2 PAYMENTS TO OWNER TRUSTEE, OTHER PARTIES
After the Trust Indenture shall have been discharged pursuant to
Section 10.01 thereof, any payment of the type referred to in Section 4.2.1
(other than Excluded Payments) received by Owner Trustee, any payment received
from Mortgagee (other than Excluded Payments) and any other amount received as
part of the Trust Estate and for the application or distribution of which no
provision is made in this Trust Agreement shall be distributed forthwith upon
<PAGE>
receipt by Owner Trustee in the following order of priority: FIRST, so much of
such payment as shall be required to reimburse Owner Trustee for any expenses
not otherwise reimbursed as to which Owner Trustee is entitled to be so
reimbursed pursuant to the provisions hereof shall be retained by Owner Trustee;
SECOND, the amount set forth in Schedule 1 hereto, if any, on a Payment Date
shall be paid to Owner Participant; THIRD, the amount set forth in Schedule 2
hereto shall be paid to Equity Guarantor; and FOURTH, the balance, if any, shall
be paid to Owner Participant.
4.2.3 CERTAIN DISTRIBUTIONS TO OWNER PARTICIPANT
All amounts from time to time distributable by Mortgagee to Owner
Participant pursuant to the Trust Indenture shall, if paid to Owner Trustee, be
distributed by Owner Trustee to Owner Participant in accordance with the
provisions of Article III of the Trust Indenture; PROVIDED, that any payments
received by Owner Trustee from (a) Lessee with respect to Owner Trustee's fees
and disbursements or (b) Owner Participant pursuant to Section 7 shall not be
paid over to Owner Participant but shall be retained by Owner Trustee and
applied toward the purpose for which such payments were made.
4.2.4 EXCLUDED PAYMENTS
Any Excluded Payments received by Owner Trustee shall be paid by 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.
4.3 METHOD OF PAYMENTS
Owner Trustee shall make distributions or cause distributions to be
made to Owner Participant pursuant to this Section 4 by transferring the amount
to be distributed by wire transfer in immediately available funds on the day
received (or on the next succeeding Business Day if the funds to be so
distributed shall not have been received by Owner Trustee by 12:00 noon, New
York City time, and which funds Owner Trustee shall not have been reasonably
able to distribute to Owner Participant on the day received) to Owner
Participant's account set forth in Schedule 1 to the Participation Agreement or
to such other account or accounts of Owner Participant as Owner Participant may
designate from time to time in writing to Owner Trustee; PROVIDED, that Owner
Trustee shall use reasonable efforts to invest overnight, in investments that
would be permitted under Section 4.4 of the Lease, all funds received by it at
or later than 12:00 noon, New York City time, and which funds Owner Trustee
shall not have been reasonably able to distribute to Owner Participant on the
day received).
Section 5. DUTIES OF OWNER TRUSTEE
5.1 NOTICE OF EVENT OF DEFAULT
(a) If Owner Trustee shall have knowledge of a Lease Default or a
Lease Event of Default or an Indenture Default or an Indenture Event of Default,
Owner Trustee shall give to Owner Participant, Mortgagee, Lessee and Equity
Guarantor prompt telephonic or telex notice thereof followed by prompt
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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 of the type referred to in paragraph (c) or (e) of
Section 4.02 of the Trust Indenture, such notice shall in no event be furnished
later than ten days after Owner Trustee shall first have knowledge of such event
and (ii) in the case of a misrepresentation by Owner Trustee which with the
passage of time would constitute an Indenture Event of Default of the type
referred to in paragraph (d) of Section 4.02 of the Trust Indenture, such notice
shall in no event be furnished later than ten days after Owner Trustee shall
first have knowledge of such event.
(b) Subject to the terms of Section 5.3, 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 Default, Lease
Event of Default, Indenture Default or Indenture Event of Default or other event
as Owner Trustee shall be directed in writing by Owner Participant. For all
purposes of this Trust Agreement, the Lease and the other Operative Agreements,
in the absence of Actual Knowledge of Owner Trustee, Owner Trustee shall not be
deemed to have knowledge of a Lease Default, Lease Event of Default, Indenture
Default or Indenture Event of Default unless notified in writing by Mortgagee,
Owner Participant or Lessee.
5.2 ACTION UPON INSTRUCTIONS
Subject to the terms of Sections 5.1 and 5.3, upon the written
instructions at any time and from time to time of Owner Participant, 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: (a) give such notice or direction or exercise such right, remedy
or power under this Trust Agreement or any of the other Owner Trustee Agreements
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 such
agreements and instruments as shall be necessary under Section 10); (b) take
such action to preserve or protect the Trust Estate (including the discharge of
Liens) as may be specified in such instructions; (c) approve as satisfactory to
it all matters required by the terms of the Lease or the other Operative
Agreements to be satisfactory to Owner Trustee, it being understood that without
written instructions of Owner Participant, Owner Trustee shall not approve any
such matter as satisfactory to it; (d) subject to the rights of Lessee under the
Operative Agreements, after the expiration or earlier termination of the Lease,
convey all of 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; and (e) take or refrain from
taking such other action or actions as may be specified in such instructions.
5.3 LIMITATIONS ON DUTIES
Owner Trustee shall not be required to take any action under Section
5.1 (other than the giving of the notices referred to therein) or 5.2 if Owner
Trustee shall reasonably believe such action is not adequately indemnified by
Owner Participant under Section 7, unless Lessee or Owner Participant agrees to
<PAGE>
furnish such additional indemnity as shall reasonably be required, in manner and
form satisfactory to Owner Trustee, 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 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 Owner Trustee in connection
therewith. Owner Trustee shall not be required to take any action under Section
5.1 or 5.2 (other than the giving of the notices referred to therein) if Owner
Trustee shall have been advised by counsel that such action is contrary to the
terms of any of the Owner Trustee Agreements or is otherwise contrary to Law and
Owner Trustee has delivered to Owner Participant written notice of the basis for
its refusal to act.
5.4 NO DUTIES EXCEPT AS SPECIFIED; NO ACTION EXCEPT AS SPECIFIED
5.4.1 NO DUTIES EXCEPT AS SPECIFIED
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 Owner Trustee Agreements, except as
expressly required by the terms of any of the Owner Trustee Agreements, 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 Owner
Participant received pursuant to the terms of Section 5.1 or 5.2, and no implied
duties or obligations shall be read into this Trust Agreement against Owner
Trustee. First Security 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 hereunder or under the Participation Agreement), 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 7.3.1 of the Participation Agreement and
otherwise comply with the terms of said Section binding upon it.
5.4.2 NO ACTION EXCEPT AS SPECIFIED
Owner Trustee shall have no power, right or authority to, and 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 (a) as expressly
required by the terms of any of the Owner Trustee Agreements, (b) as expressly
provided by the terms hereof or (c) as expressly provided in written
instructions from Owner Participant pursuant to Section 5.1 or 5.2.
5.5 SATISFACTION OF CONDITIONS PRECEDENT
Anything in this Trust Agreement to the contrary notwithstanding,
Owner Trustee shall, subject to the satisfaction of special counsel for Owner
Trustee of the occurrence of all the applicable conditions precedent specified
in Section 3.2, comply with the provisions of Section 3.1.
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5.6 FIXED INVESTMENT TRUST
Notwithstanding anything in this Trust Agreement to the contrary,
Owner Trustee shall not be authorized and shall have no power to "vary the
investment" of Owner Participant within the meaning of Treasury Regulations
Section 301.7701-4(c)(1), it being understood that Owner Trustee shall have the
power and authority to fulfill its obligations under Section 4.3 hereof, Section
4.3.3 of the Participation Agreement and Section 4.4 of the Lease.
Section 6. OWNER TRUSTEE
6.1 ACCEPTANCE OF TRUSTS AND DUTIES
First Security accepts the trusts hereby created and agrees to perform
the same as Owner Trustee but only upon the terms hereof and the Trust Indenture
applicable to it. Owner Trustee also agrees to receive and disburse all monies
received by it constituting part of the Trust Estate pursuant to the terms
hereof. First Security shall not be answerable or accountable under any
circumstances, except for (a) its own willful misconduct or gross negligence
(including, without limitation, in connection with any activities of Owner
Trustee in violation of Section 5.4.2), (b) its failure (in its individual
capacity) to perform its obligations under Section 5.4.1, (c) its or Owner
Trustee's failure to use ordinary care to receive or disburse funds or to comply
with the first sentence of Section 6.8, (d) liabilities that may result from the
inaccuracy of any representation or breach of warranty of it in its individual
capacity (or from the failure by it in its individual capacity to perform any
covenant) in this Trust Agreement, the Trust Indenture, the Lease or the
Participation Agreement or elsewhere in any of the other Operative Agreements,
(e) taxes, fees or other charges on, based on or measured by any fees,
commissions or compensation received by First Security in connection with the
transactions contemplated by this Trust Agreement and the other Operative
Agreements to which it (in its individual capacity or as Owner Trustee) is a
party, (f) its or Owner Trustee's failure to use ordinary care in receiving or
disbursing funds or in connection with its obligation to invest funds pursuant
to Section 4 of the Participation Agreement, Section 4.4 of the Lease or Section
4.3 hereof, (g) any liability on the part of Owner Trustee arising out of its
negligence or willful or negligent misconduct in connection with its obligations
under Section 5.1 (other than the first sentence thereof), 6.8 or 9.2 hereof or
Section 4.01 of the Trust Indenture. First Security shall have no obligation to
advance its individual funds for any purpose, and Owner Trustee shall have no
obligation to distribute to Owner Participant, Lessee or any third party any
amounts to be paid to Owner Trustee until such amounts are collected by Owner
Trustee.
6.2 ABSENCE OF CERTAIN DUTIES
(a) Except in accordance with written instructions furnished pursuant
to Section 5.1 or 5.2 and except as provided in, and without limiting the
generality of, Sections 3.1 and 5.4.1 and the last sentence of Section 9.1.2,
and subject to Section 4.01 of the Trust Indenture, neither Owner Trustee nor
First Security shall have any duty (i) to see to any recording or filing of any
Operative Agreement 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 FAA or other governmental agencies, except that of First Security to comply
with the FAA reporting requirements set forth in 14 C.F.R. ss. 47.45 and 14
<PAGE>
C.F.R. ss. 47.51, and Owner Trustee shall, to the extent that informatioN for
that purpose is timely supplied by Lessee pursuant to any of the Operative
Agreements, complete and timely submit (and furnish Owner Participant with a
copy of) any and all reports relating to the Aircraft that may from time to time
be required by the FAA or any government or governmental authority having
jurisdiction, (ii) to see to any insurance on the Aircraft or to effect or
maintain any such insurance, whether or not Lessee shall be in default with
respect thereto, other than to forward to Owner Participant copies of all
reports and other written information which Owner Trustee receives from Lessee
pursuant to Section 11 of the Lease, (iii) except as provided in Section 7.3.1
or 7.3.2 of the Participation Agreement, Section 4.01 of the Trust Indenture or
Section 5.4 or 6.1 hereof, 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 or assessed or levied against any part of the Trust
Indenture Estate or the Trust Estate, except as provided in Section 6.3.9 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.
(b) Notwithstanding clause (a), Owner Trustee will furnish to
Mortgagee and Owner Participant, promptly upon receipt thereof, duplicates or
copies of all reports, notices, requests, demands, certificates, financial
statements and other instruments furnished to Owner Trustee under the Lease or
any other Operative Agreement except to the extent to which a responsible
officer of Owner Trustee reasonably believes (and confirms by telephone call
with Owner Participant) that duplicates or copies thereof have already been
furnished to Owner Participant by some other person.
6.3 NO REPRESENTATIONS OR WARRANTIES AS TO CERTAIN MATTERS
NEITHER FIRST SECURITY NOR OWNER TRUSTEE 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, AS TO
THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE
ABSENCE OF ANY STRICT LIABILITY OBLIGATION OR ANY OTHER REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF
WHATSOEVER, except that First Security warrants to Owner Participant that on the
Delivery Date Owner Trustee shall have received whatever title to the Aircraft
that was conveyed to it and that the Aircraft shall, on the Delivery Date and
during the Term, be free of Lessor Liens attributable to First Security or (b)
any representation or warranty as to the validity, legality or enforceability of
this Trust Agreement or any other Operative Agreement to which First Security,
in its individual capacity or as Owner Trustee, is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof except to the extent that any such statement is expressly made
herein or therein by such party as a representation by First Security, in its
individual capacity or as Owner Trustee, as the case may be, and except that
First Security hereby represents and warrants that it has all corporate power
and authority to execute, deliver and perform this Trust Agreement and that this
Trust Agreement has been, and (assuming due authorization, execution and
<PAGE>
delivery by Owner Participant of this Trust Agreement) the other Operative
Agreements to which it or Owner Trustee is a party have been (or at the time of
execution and delivery of any such instrument by it or Owner Trustee under this
Trust Agreement 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 Owner Trustee, as the case may be, and
that this Trust Agreement constitutes the legal, valid and binding obligation of
First Security or Owner Trustee, as the case may be, enforceable against First
Security or Owner Trustee, as the case may be, in accordance with its terms.
6.4 NO SEGREGATION OF MONIES; INTEREST
Monies received by Owner Trustee under this Trust Agreement need not
be segregated in any manner except to the extent required by Law, or except as
provided in written instructions from Owner Participant, and shall be invested
as provided in Section 4.3 hereof or Section 4.4 of the Lease.
6.5 RELIANCE UPON CERTIFICATES, COUNSEL AND AGENTS
Owner Trustee shall incur no liability to anyone in acting in good
faith in reliance upon and in accordance with 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 in this Trust Agreement,
any request, direction, order or demand of Owner Participant or Lessee mentioned
in this Trust Agreement or in any of the other Owner Trustee Agreements shall be
sufficiently evidenced by written instruments signed by the Chairman of the
Board, the President, any Vice President or any other officer and in the name of
Owner Participant or Lessee, as the case may be. 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 of Directors or Executive 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 in this Trust Agreement,
Owner Trustee may, absent Actual Knowledge to the contrary, for all purposes
rely on a certificate signed by the Chairman of the Board, the President, any
Vice President or any other officer of Lessee, and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of Lessee, as to such fact
or matter, and such certificate shall constitute full protection to Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon and in accordance therewith. In the administration of trusts
under this Trust Agreement, Owner Trustee may execute any of the trusts or
powers and perform its powers and duties under this Trust Agreement 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. Owner Trustee shall not be liable for anything done, suffered or omitted
<PAGE>
in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons.
6.6 NOT ACTING IN INDIVIDUAL CAPACITY
In acting under this Trust Agreement, First Security acts solely as
Owner Trustee and not in its individual capacity except as otherwise expressly
provided in this Trust Agreement or in the other Operative Agreements to which
it is a party; 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 in this Trust Agreement or
the Trust Indenture, having any claim against 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 provided in Section 6.1 or
otherwise as Owner Trustee shall expressly agree otherwise in writing.
6.7 FEES; COMPENSATION
Airframe Manufacturer shall pay the Transaction Expenses and ongoing
fees of Owner Trustee throughout the Term pursuant to Section 9.2 of the
Participation Agreement. The Trust Estate shall not have any liability for any
such fees and expenses; PROVIDED, that the foregoing shall not limit the
obligations of Owner Participant under Sections 5.3 and 7; PROVIDED, that Owner
Trustee shall have a Lien upon the Trust Estate for any such fee not paid by
Airframe Manufacturer as contemplated by Section 9.2 of the Participation
Agreement and such Lien shall entitle Owner Trustee to priority as to payment
thereof over payment to any other Person under this Trust Agreement; PROVIDED,
that such Lien shall be subject and subordinate in all events to the Lien of the
Trust Indenture; and PROVIDED, FURTHER, that Owner Trustee shall have no right
to exercise, and shall not exercise, any rights or remedies Owner Trustee may
have with respect to such Lien unless and until the Secured Obligations have
been paid and performed in full.
6.8 TAX RETURNS
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. Owner Participant
shall be responsible for causing to be prepared and filed all income tax returns
required to be filed by Owner Participant. Owner Trustee shall be responsible
for causing to be prepared, at the expense of Airframe Manufacturer, all income
tax returns required to be filed with respect to the trust created hereby and
shall execute and file such returns; PROVIDED, that Owner Trustee shall send
promptly a completed copy of such return to Owner Participant not more than
sixty nor less than fifteen days prior to the due date of the return, PROVIDED,
that Owner Trustee shall have timely received all necessary information to
complete and deliver to Owner Participant such return. Owner Participant, upon
request, will furnish Owner Trustee with all such information as may be
reasonably required from Owner Participant in connection with the preparation of
such income tax returns. Owner Trustee shall keep copies of all returns
delivered to or filed by it.
<PAGE>
Section 7. INDEMNIFICATION OF FIRST SECURITY BY OWNER PARTICIPANT
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 and
its successors, assigns, agents and servants, from and against any and all
liabilities, obligations, losses, damages, penalties, taxes (excluding any Taxes
which are not required to be indemnified by Lessee pursuant to Section 9.1 or
9.3 of the Participation Agreement and excluding any taxes payable by First
Security on or measured by any compensation received by First Security for its
services under this Trust Agreement), claims, actions, suits, costs, expenses or
disbursements (including, without limitation, reasonable legal fees and
expenses, but excluding internal costs and expenses such as salaries and
overhead, 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 (whether or not also indemnified against by Lessee under the Lease or
under the Participation Agreement or also indemnified against by any other
Person; PROVIDED, that Owner Participant shall be subrogated to the rights of
Owner Trustee against Lessee or any other indemnitor) in any way relating to or
arising out of this Trust Agreement or any of the other Operative Agreements or
the enforcement of any of the terms of any thereof, or in any way relating to or
arising out of the manufacture, purchase, acceptance, nonacceptance, rejection,
ownership, delivery, lease, possession, use, operation, condition, sale, return
or other disposition of the 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 Owner Trustee,
under this Trust Agreement, except (a) in the case of gross negligence or
willful misconduct on the part of First Security, in its individual capacity or
as Owner Trustee, in the performance or nonperformance of its duties under this
Trust Agreement or under any of the other Owner Trustee Agreements or (b) those
Claims resulting from the inaccuracy of any representation or warranty of First
Security (or from the failure of First Security to perform any of its covenants)
in Section 6.3, in Section 6.03 of the Trust Indenture, in Section 4 of the
Lease, in Section 6.3 of the Participation Agreement or elsewhere in any of the
other Operative Agreements or (c) as may result from a breach by First Security
of its covenant in the last sentence of Section 5.4.1 or (d) in the case of the
failure to use ordinary care on the part of First Security, in its individual
capacity or as Owner Trustee, in the receipt or disbursement of funds or in
connection with its obligation to invest funds pursuant to Section 4 of the
Participation Agreement, Section 4.4 of the Lease or Section 4.3 hereof or in
compliance with the provisions of the first sentence of Section 6.8 or (e) any
liability on the part of Owner Trustee arising out of its negligence or willful
or negligent misconduct in connection with its obligations under Section 5.1,
6.8 or 9.2 hereof or Section 4.01 of the Trust Indenture, or (f) those claims
arising under any circumstances or upon any terms where Lessee would not have
been required to indemnify First Security pursuant to Section 9.1 or 9.3 of the
Participation Agreement (disregarding for purposes of this paragraph Sections
9.1.2(b) and 9.3.2(j)); PROVIDED, that before asserting its right to
indemnification, if any, pursuant to this Section 7, First Security shall first
demand its corresponding right to indemnification pursuant to Section 9 of the
Participation Agreement (but need not exhaust any or all remedies available
thereunder). The indemnities contained in this Section 7 extend to First
Security only in its individual capacity and shall not be construed as
indemnities of the Trust Indenture Estate or the Trust Estate (except to the
<PAGE>
extent, if any, that First Security has been reimbursed by the Trust Indenture
Estate or the Trust Estate for amounts covered by the indemnities contained in
this Section 7). The indemnities contained in this Section 7 shall survive the
termination of this Trust Agreement. In addition, if necessary, First Security
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 to the extent not reimbursed by Lessee, Owner
Participant or others, but without releasing any of them from their respective
agreements of reimbursement; and, to secure the same First Security shall have a
lien on the Trust Estate, subject to the lien of the Trust Indenture and subject
further to the provisions of Section 6.7, which shall be prior to any interest
therein of Owner Participant. The payor of any indemnity under this Section 7
shall be subrogated to any right of the person indemnified in respect of the
matter as to which such indemnity was paid.
Section 8. TRANSFER OF OWNER PARTICIPANT'S INTEREST
8.1 TRANSFER OF INTEREST
All provisions of Section 10 of the Participation Agreement shall
(with the same force and effect as if set forth in full in this Section 8.1) be
applicable to any assignment, conveyance or other transfer by Owner Participant
of any of its right, title or interest in and to the Participation Agreement,
the Trust Estate or this Trust Agreement.
Section 9. SUCCESSOR OWNER TRUSTEES; CO-TRUSTEES
9.1 RESIGNATION OF OWNER TRUSTEE; APPOINTMENT OF SUCCESSOR
9.1.1 RESIGNATION OR REMOVAL
Owner Trustee or any successor Owner Trustee (a) shall resign if
required to do so pursuant to Section 13.3 of the Participation Agreement or
upon obtaining Actual Knowledge of any facts that would cast doubt upon its
continuing status as a Citizen of the United States and (b) may resign at any
time without cause by giving at least 60 days' prior written notice to Owner
Participant, Mortgagee and Lessee, such resignation to be effective upon the
assumption of the trusts hereunder by the successor Owner Trustee under Section
9.1.2. In addition, Owner Participant may at any time remove Owner Trustee, with
or without cause by a notice in writing delivered to Owner Trustee, Mortgagee
and Lessee, such removal to be effective upon the assumption of the trusts
hereunder by the successor Owner Trustee under Section 9.1.2, PROVIDED, that, in
the case of a removal without cause, unless a Lease Event of Default shall have
occurred and be continuing, such removal shall be subject to the consent of
Lessee (which consent shall not be unreasonably withheld). In the case of the
resignation or removal of Owner Trustee, Owner Participant may appoint a
successor Owner Trustee by an instrument signed by Owner Participant, with,
unless a Lease Event of Default shall have occurred and be continuing, the
consent of Lessee (which consent shall not be unreasonably withheld). If a
successor Owner Trustee shall not have been appointed within 30 days after such
notice of resignation or removal, Owner Trustee, any Owner Participant, Lessee
or Mortgagee may apply to any court of competent jurisdiction to appoint a
<PAGE>
successor Owner Trustee to act until such time, if any, as a successor shall
have been appointed as above provided. Any successor Owner Trustee so appointed
by such court shall immediately and without further act be superseded by any
successor Owner Trustee appointed as above provided within one year from the
date of the appointment by such court.
9.1.2 EXECUTION AND DELIVERY OF DOCUMENTS, ETC.
Any successor Owner Trustee, however appointed, shall execute and
deliver to the predecessor Owner Trustee, with a copy to Owner Participant,
Lessee and Mortgagee, an instrument accepting such appointment and assuming the
obligations of Owner Trustee, in its individual capacity and as Owner Trustee,
under the Owner Trustee Agreements, 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
under this Trust Agreement with like effect as if originally named Owner Trustee
in this Trust Agreement; 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
under this Section 9.1, 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 required to cause registration of the Aircraft included in the Trust Estate
to be transferred upon the records of the FAA, or other governmental authority
having jurisdiction, into the name of the successor Owner Trustee.
9.1.3 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 $100,000,000, if there be such an institution willing, able
and legally qualified to perform the duties of Owner Trustee under this Trust
Agreement upon reasonable or customary terms. No such successor Owner Trustee
shall be located in a jurisdiction which creates material adverse consequences
for Lessee (unless such material adverse consequences would be created by
substantially all jurisdictions where major banking or trust institutions are
located).
9.1.4 MERGER, ETC.
Any corporation into which First Security 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 shall be a party, or
any corporation to which substantially all the corporate trust business of First
Security may be transferred, shall, subject to the terms of Section 9.1.3, be
<PAGE>
Owner Trustee under this Trust Agreement without further act, PROVIDED, that
such corporation shall not also be the Mortgagee.
9.2 CO-TRUSTEES AND SEPARATE TRUSTEES
(a) 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 Owner Trustee being advised by counsel shall determine
that it is so necessary or prudent in the interest of Owner Participant or Owner
Trustee, or Owner Trustee shall have been directed to do so by Owner
Participant, 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 or all of which shall be a Citizen of the United States) approved by Owner
Trustee and Owner Participant, either to act as co-trustee, jointly with Owner
Trustee, or to act as separate trustee under this Trust Agreement (any such
co-trustee or separate trustee being herein sometimes referred to as an
"additional trustee"). In the event 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 Owner Trustee so to do, or in case a Lease
Event of Default or Indenture Event of Default shall occur and be continuing,
Owner Trustee may act under the foregoing provisions of this Section 9.2 without
the concurrence of Owner Participant; and Owner Participant hereby appoints
Owner Trustee its agent and attorney-in-fact to act for it under the foregoing
provisions of this Section 9.2 in either of such contingencies.
(b) Every additional trustee under this Trust Agreement shall, to the
extent permitted by Law, be appointed and act, and Owner Trustee and its
successors shall act, subject to the following provisions and conditions:
(i) All powers, duties, obligations and rights conferred upon
Owner Trustee in respect of the custody, control and management of monies,
the Aircraft or documents authorized to be delivered under this Trust
Agreement or under the Participation Agreement shall be exercised solely by
Owner Trustee;
(ii) All other rights, powers, duties and obligations conferred
or imposed upon Owner Trustee shall be conferred or imposed upon and
exercised or performed by 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) 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;
(iii) No power given to, or which it is provided hereby may be
exercised by, any such additional trustee shall be exercised under this
Trust Agreement by such additional trustee, except jointly with, or with
the consent in writing of, Owner Trustee;
<PAGE>
(iv) No trustee under this Trust Agreement shall be personally
liable by reason of any action or omission of any other trustee under this
Trust Agreement;
(v) Owner Participant, at any time, by an instrument in writing
may remove any such additional trustee. In the event that Owner Participant
shall not have joined in the execution of any such instrument within ten
days after the receipt of a written request from Owner Trustee so to do,
Owner Trustee shall have the power to remove any such additional trustee
without the concurrence of Owner Participant; and Owner Participant hereby
appoints Owner Trustee its agent and attorney-in-fact to act for it in such
connection in such contingency; and
(vi) No appointment of, or action by, any additional trustee will
relieve Owner Trustee of any of its obligations under, or otherwise affect
any of the terms of, the Trust Indenture or affect the interests of
Mortgagee or the Note Holders in the Trust Indenture Estate.
(c) In case any separate trustee under this Section 9.2 shall die,
become incapable of acting, resign or be removed, the title to the Trust Estate
and all rights and duties of such separate trustee shall, so far as permitted by
Law, vest in and be exercised by Owner Trustee, without the appointment of a
successor to such separate trustee.
Section 10. SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT AND OTHER DOCUMENTS
10.1 SUPPLEMENTS AND AMENDMENTS AND DELIVERY THEREOF
10.1.1 SUPPLEMENTS AND AMENDMENTS
Subject to Section 7.2.2 of the Participation Agreement, this Trust
Agreement may not be amended, supplemented or otherwise modified except by an
instrument in writing signed by Owner Trustee and Owner Participant. Subject to
Section 10.2, Section 9.01 of the Trust Indenture and Section 7.6.7 of the
Participation Agreement, Owner Trustee will execute any amendment, supplement or
other modification of this Trust Agreement or of any other Owner Trustee
Agreement which it is requested in writing to execute by Owner Participant,
except that 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
Owner Participant, (a) no such supplement, amendment or modification shall (i)
modify any of the provisions of Section 4 or this Section 10.1, (ii) reduce,
modify or amend any indemnities in favor of Owner Participant as set forth in
Section 9 of the Participation Agreement or in the Tax Indemnity Agreement,
(iii) reduce the amount or extend the time of payment of Basic Rent,
Supplemental Rent, Stipulated Loss Value or Termination Value as set forth in
the Lease (except in accordance with Section 3 of the Lease) or (iv) modify any
of the rights of Owner Participant under the Trust Indenture and (b) no such
supplement, amendment or modification shall require 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 Owner
Participant with respect to any agreement or obligation.
<PAGE>
10.1.2 DELIVERY OF AMENDMENTS AND SUPPLEMENTS TO CERTAIN PARTIES
A signed copy of each amendment or supplement referred to in Section
10.1.1 to which Lessee is not a party shall be delivered promptly by Owner
Trustee to Lessee, and a signed copy of each amendment or supplement referred to
in Section 10.1.1 shall be delivered promptly by Owner Trustee to Mortgagee.
10.2 DISCRETION AS TO EXECUTION OF DOCUMENTS
Prior to executing any document required to be executed by it pursuant
to the terms of Section 10.1, Owner Trustee shall be entitled to receive an
opinion of its counsel to the effect that the execution of such document is
authorized under this Trust Agreement. If in the opinion of Owner Trustee any
such document adversely affects any right, duty, immunity or indemnity in favor
of Owner Trustee under this Trust Agreement or under any other Owner Trustee
Agreement, Owner Trustee may in its discretion decline to execute such document
unless Owner Trustee is furnished with indemnification from Lessee or any other
party upon terms and in amounts reasonably satisfactory to Owner Trustee to
protect the Trust Estate and the Owner Trustee against any and all liabilities,
costs and expenses arising out of the execution of such documents.
10.3 ABSENCE OF REQUIREMENTS AS TO FORM
It shall not be necessary for any written request furnished pursuant
to Section 10.1 to specify the particular form of the proposed documents to be
executed pursuant to such Section 10.1, but it shall be sufficient if such
request shall indicate the substance thereof.
10.4 DISTRIBUTION OF DOCUMENTS
Promptly after the execution by Owner Trustee of any document entered
into pursuant to Section 10.1, Owner Trustee shall mail, by certified mail,
postage prepaid, a conformed copy thereof to Owner Participant, but the failure
of Owner Trustee to mail such conformed copy shall not impair or affect the
validity of such document.
10.5 NO REQUEST NEEDED AS TO LEASE SUPPLEMENT AND TRUST INDENTURE
SUPPLEMENT
No written request pursuant to Section 10.1 shall be required to
enable Owner Trustee to enter into, pursuant to Section 3.1 and the Lease or the
Trust Indenture, as the case may be, the Lease Supplement with Lessee and the
Trust Indenture Supplement.
Section 11. MISCELLANEOUS
11.1 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 and the sale or other final
disposition by Owner Trustee of all property constituting part of the Trust
Estate and the final distribution by Owner Trustee of all monies or other
<PAGE>
property or proceeds constituting part of the Trust Estate in accordance with
Section 4, PROVIDED, that at such time Lessee shall have fully complied with all
of the terms of the Lease and the Participation Agreement or (b) 21 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 clause (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 terms hereof. Except as expressly set forth in
Section 11.2, this Trust Agreement and the trusts created hereby may not be
revoked by Owner Participant.
11.2 TERMINATION AT OPTION OF THE OWNER PARTICIPANT
Notwithstanding Section 11.1 hereof, this Agreement and trust created
hereby shall terminate and the Trust Estate shall be distributed to the Owner
Participant, and this Agreement shall be of no further force and effect, upon
the election of the Owner Participant by notice to the Owner Trustee, if such
notice shall be accompanied by the written agreement (in form and substance
satisfactory to the Owner Trustee) of the Owner Participant assuming all
obligations of the Owner Trustee under or contemplated by the Operative
Agreements or incurred by it as trustee hereunder and releasing the Owner
Trustee therefrom; provided, however, that such notice may be given only after
the time the Lien of the Trust Indenture is discharged under Section 10.01 of
the Trust Indenture and after the Lease shall no longer be in effect.
11.3 OWNER PARTICIPANT HAS NO LEGAL TITLE IN TRUST ESTATE
Owner Participant shall not have legal title to any part of the Trust
Estate. No transfer, by operation of Law or otherwise, of any right, title and
interest of Owner Participant in and to the Trust Estate under this Trust
Agreement shall operate to terminate this Trust Agreement or the trusts under
this Trust Agreement or entitle any successors or transferees of Owner
Participant to an accounting or to the transfer of legal title to any part of
the Trust Estate.
11.4 ASSIGNMENT, SALE, ETC. OF AIRCRAFT
Any assignment, sale, transfer or other conveyance of the Aircraft by
Owner Trustee made pursuant to the terms of this Trust Agreement or of the Lease
or the Participation Agreement shall bind Owner Participant and shall be
effective to transfer or convey all right, title and interest of Owner Trustee
and Owner Participant in and to the Aircraft. No purchaser or other grantee
<PAGE>
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 Owner Trustee.
11.5 TRUST AGREEMENT FOR BENEFIT OF CERTAIN PARTIES ONLY
Except for the terms of Section 10 of the Participation Agreement
incorporated in Section 8 and except as otherwise provided in Sections 5.1, 6.7,
9, 10.1 and 11.1, nothing in this Trust Agreement, whether express or implied,
shall be construed to give any person other than Owner Trustee and Owner
Participant any legal or equitable right, remedy or claim under or in respect of
this Trust Agreement; and this Trust Agreement shall be held to be for the sole
and exclusive benefit of Owner Trustee and Owner Participant.
11.6 CITIZENSHIP OF OWNER PARTICIPANT
Reserved.
11.7 NOTICES
Unless otherwise expressly permitted by the terms of this Trust
Agreement, all notices, requests, demands, authorizations, directions, consents,
waivers and other communications required or permitted to be made, given,
furnished or filed under this Trust Agreement shall be in writing, shall refer
specifically to this Trust Agreement and shall be personally delivered, sent by
telecopy, telex or other means of electronic facsimile or telecommunication
transmission, sent by registered mail or certified mail, return receipt
requested, postage prepaid, or sent by overnight courier service, in each case
to the respective telex, telecopy or other number or address set forth for such
party in Schedule 1 to the Participation Agreement, or to such other telex,
telecopy or other number or address as each party hereto may hereafter specify
by notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by telecopy
or other means of electronic facsimile or telecommunication transmission, when
confirmed, or (b) by registered or certified mail, three Business Days after
being deposited, properly addressed, in the U.S. mail.
11.8 SEVERABILITY
If any provision of this Trust Agreement shall be held invalid,
illegal or unenforceable in any respect in any jurisdiction, then, to the extent
permitted by Law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction. If, however, any Law pursuant to which
such provisions are held invalid, illegal or unenforceable may be waived, such
Law is hereby waived by the parties hereto to the full extent permitted, to the
end that this Trust Agreement shall be deemed to be a valid and binding
agreement in all respects, enforceable in accordance with its terms.
<PAGE>
11.9 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 Section 10; and any waiver of the terms hereof
shall be effective only in the specific instance and for the specific purpose
given.
11.10 COUNTERPARTS
This Trust Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.
11.11 BINDING EFFECT, ETC.
All covenants and agreements contained in this Trust Agreement shall
be binding upon, and inure to the benefit of, Owner Trustee and its successors
and assigns, and Owner Participant and its successors and, to the extent
permitted by Section 8, assigns. Any request, notice, direction, consent, waiver
or other instrument or action by Owner Participant shall bind its successors and
assigns.
11.12 HEADINGS; REFERENCES
The headings and the table of contents used in this Trust Agreement
are for convenience of reference only and shall not define or limit any of the
terms or provisions hereof and shall not in any way affect the construction of,
or be taken into consideration in interpreting, this Trust Agreement.
11.13 GOVERNING LAW
THIS TRUST AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
PACIFIC CENTURY LEASING, INC.
By_______________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION
By_______________________________
Name:
Title:
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| CONFIDENTIAL: SUBJECT TO RESTRICTIONS ON DISSEMINATION |
| SET FORTH IN SECTION 8 OF THIS AGREEMENT |
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================================================================================
PARTICIPATION AGREEMENT ___
Dated as of September 25, 1997
Among
CONTINENTAL AIRLINES, INC.,
Lessee,
PACIFIC CENTURY LEASING, INC.,
Owner Participant,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its individual capacity
except as expressly provided herein,
but solely as Owner Trustee,
Owner Trustee,
WILMINGTON TRUST COMPANY,
Not in its individual capacity
except as expressly provided herein,
but solely as Mortgagee, Subordination Agent
under the Intercreditor Agreement, and Pass Through
Trustee under each of the Pass Through Agreements,
Mortgagee and Loan Participant,
CORCIM, INC.
Existing Lessor,
ROLLS-ROYCE PLC,
Existing Mortgagee
and
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.
Airframe Manufacturer
----------------------------
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No.
and U.S. Registration No. N
with Two Allison Model AE3007A Engines
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION......................................2
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE..........................2
2.1 Participation in Lessor's Cost....................................2
2.2 Nature of Obligations of Participants.............................3
2.3 Termination of Obligation to Participate..........................3
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT....................3
3.1 Sale of Aircraft..................................................3
3.2 Commitment to Lease...............................................6
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST;
POSTPONEMENT OF SCHEDULED CLOSING DATE............................6
4.1 Notices of Scheduled Closing Date.................................6
4.2 Payment of Lessor's Cost..........................................6
4.3 Postponement of Scheduled Closing Date............................7
4.4 Closing...........................................................8
SECTION 5. CONDITIONS PRECEDENT..............................................9
5.1 Conditions Precedent to Obligations of Participants...............9
5.2 Conditions Precedent to Obligations of Owner Trustee.............16
5.3 Conditions Precedent to Obligations of Mortgagee.................16
5.4 Conditions Precedent to Obligations of Lessee....................17
5.5 Conditions Precedent to Obligations of Existing Lessor
and Existing Mortgagee...........................................18
5.6 Post-Registration Opinion........................................18
SECTION 6. REPRESENTATIONS AND WARRANTIES...................................19
6.1 Lessee's Representations and Warranties..........................19
6.2 Owner Participant's Representations and Warranties...............23
6.3 First Security's Representations and Warranties..................25
6.4 WTC's Representations and Warranties.............................28
6.5 Existing Lessor's Representations and Warranties.................32
6.6 Existing Mortgagee's Representations and Warranties..............34
6.7 Airframe Manufacturer's Representations and Warranties...........36
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS...........................39
7.1 Covenants of Lessee..............................................39
7.2 Covenants of Owner Participant...................................41
7.3 Covenants of First Security and Owner Trustee....................44
7.4 Covenants of WTC.................................................46
7.5 Covenants of Note Holders........................................47
7.6 Agreements.......................................................49
SECTION 8. CONFIDENTIALITY..................................................56
SECTION 9. INDEMNIFICATION AND EXPENSES.....................................57
9.1 General Indemnity................................................57
9.2 Expenses.........................................................64
9.3 General Tax Indemnity............................................64
9.4 Payments.........................................................76
9.5 Interest.........................................................77
9.6 Benefit of Indemnities...........................................77
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS..............................77
10.1 Participants, Owner Trustee and Note Holders.....................77
10.2 Effect of Transfer...............................................80
SECTION 11. [RESERVED].......................................................80
SECTION 12. SECTION 1110.....................................................80
SECTION 13. CHANGE OF CITIZENSHIP............................................81
13.1 Generally........................................................81
13.2 Owner Participant................................................81
13.3 Owner Trustee....................................................82
13.4 Mortgagee........................................................82
SECTION 14. CONCERNING OWNER TRUSTEE.........................................82
SECTION 15. MISCELLANEOUS....................................................83
15.1 Amendments.......................................................83
15.2 Severability.....................................................83
15.3 Survival.........................................................83
15.4 Reproduction of Documents........................................84
15.5 Counterparts.....................................................84
15.6 No Waiver........................................................84
15.7 Notices..........................................................85
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.................85
15.9 Third-Party Beneficiary..........................................86
15.10 Entire Agreement.................................................87
15.11 Further Assurances...............................................87
</TABLE>
<PAGE>
ANNEX, SCHEDULES AND EXHIBITS
ANNEX A - Definitions
SCHEDULE 1 - Accounts; Addresses
SCHEDULE 2 - Commitments
SCHEDULE 3 - Certain Terms
SCHEDULE 4 - Lessor Rent
EXHIBIT A - Opinion of special counsel to Lessee
EXHIBIT B - Opinion of corporate counsel to Lessee
EXHIBIT C-1 - Opinion of corporate counsel to Airframe Manufacturer
EXHIBIT C-2 - Opinion of special counsel to Airframe Manufacturer
EXHIBIT D - Opinion of special counsel to Owner Trustee
EXHIBIT E - Opinion of special counsel to Mortgagee
EXHIBIT F-1 - Opinion of special counsel to Owner Participant
EXHIBIT F-2 - Opinion of local counsel to Owner Participant
EXHIBIT G - Opinion of special counsel to Existing Lessor
EXHIBIT H - Opinion of special counsel to Existing Mortgagee
EXHIBIT I - Opinion of special counsel in Oklahoma City, Oklahoma
EXHIBIT J - Delivery Receipt
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT ____, dated as of September 25, 1997 (this
"Agreement"), among (a) CONTINENTAL AIRLINES, INC., a Delaware corporation
("Lessee"), (b) PACIFIC CENTURY LEASING, INC., a Hawaiian corporation ("Owner
Participant"), (c) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee (this and all other capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto in
Section 1) (in its capacity as Owner Trustee, "Owner Trustee" or "Lessor," and
in its individual capacity, "First Security"), (d) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity, except as
expressly provided herein, but solely as Mortgagee (in its capacity as
Mortgagee, "Mortgagee" and in its individual capacity, "WTC"), (e) WILMINGTON
TRUST COMPANY, not in its individual capacity, except as expressly provided
herein, but solely as Pass Through Trustee under each of the Pass Through Trust
Agreements, (each, a "Pass Through Trustee"), (f) WILMINGTON TRUST COMPANY, not
in its individual capacity, except as expressly provided herein, but solely as
Subordination Agent under the Intercreditor Agreement ("Subordination Agent"),
(g) CORCIM, INC., a Delaware corporation (the "Existing Lessor"), (h)
ROLLS-ROYCE PLC, a corporation organized under the laws of England (the
"Existing Mortgagee"), and (i) EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A., a
company organized under the laws of Brazil ("Airframe Manufacturer").
RECITALS
A. Express and Airframe Manufacturer have entered into the Purchase
Agreement, pursuant to which, among other things, Airframe Manufacturer has
agreed to manufacture and sell to Express and Express has agreed to purchase
from Airframe Manufacturer certain aircraft, including the Aircraft.
B. Prior to the date hereof, in connection with the interim financing of
the Aircraft, (i) certain of Express' rights under the Purchase Agreement with
respect to the Aircraft were assigned to Existing Lessor, (ii) the Aircraft was
purchased by Existing Lessor, leased to Lessee pursuant to the Existing Lease
and subleased to Express pursuant to the Existing Sublease and (iii) the
Existing Lessor granted to Existing Mortgagee a security interest in, among
other things, the Aircraft and the Existing Lease pursuant to the Existing
Mortgage.
C. In order to effectuate the long-term financing of the Aircraft, the
parties hereto intend that (i) the Owner Trustee purchase the Aircraft from the
<PAGE>
Existing Lessor utilizing the proceeds of the sale of the Equipment Notes to the
Pass Through Trustees and the investment by Owner Participant, (ii) the Aircraft
be leased to Lessee and subleased to Express, (iii) Owner Trustee grant a
security interest to Mortgagee in the Aircraft and the Lease for the benefit of
the Note Holders and (iv) the Existing Lease be terminated and the Aircraft
released from the Lien of the Existing Mortgagee.
D. The parties hereto wish to set forth in this Agreement the terms and
conditions upon and subject to which the aforesaid transactions shall be
effected.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the respective
meanings set forth or incorporated by reference, and shall be construed and
interpreted in the manner described, in Annex A.
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE
2.1 PARTICIPATION IN LESSOR'S COST
Subject to the terms and conditions of this Agreement, on the Closing Date,
Owner Participant and each Pass Through Trustee shall participate in the payment
of Lessor's Cost as follows:
(a) Owner Participant shall participate in the payment of Lessor's Cost
for the Aircraft by making an equity investment in the beneficial
ownership of the Aircraft in the amount in Dollars equal to Owner
Participant's Percentage multiplied by Lessor's Cost; and
(b) Each Pass Through Trustee shall make a non-recourse secured loan to
Owner Trustee to finance, in part, the Owner Trustee's payment of
Lessor's Cost in the amount in Dollars equal to such Pass Through
Trustee's PTT Percentage multiplied by Lessor's Cost, such loan to be
evidenced by one or more Equipment Notes, dated the Closing Date,
issued to the Subordination Agent as the registered holder on behalf
of each such Pass Through Trustee for the related Pass Through Trust
<PAGE>
by Owner Trustee in accordance with this Agreement and the Trust
Indenture, in an aggregate principal amount equal to the Commitment of
each such Pass Through Trustee.
2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS
The obligations hereunder of each Participant are several, and not joint,
and a Participant shall have no obligation to make available to Owner Trustee
any portion of any amount not paid hereunder by any other Participant. The
failure by any Participant to perform its obligations hereunder shall not affect
the obligations of Lessee toward the other Participants, except to the extent
provided in Section 5.4.
2.3 TERMINATION OF OBLIGATION TO PARTICIPATE
Notwithstanding any other provision of this Agreement, if the Closing does
not occur on or before the Commitment Termination Date, the Commitment of each
Participant and its obligation to participate in the payment of Lessor's Cost
shall expire and be of no further force and effect; PROVIDED, that the liability
of any Participant that has defaulted in the payment of its Commitment shall not
be released.
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT
3.1 SALE OF AIRCRAFT
Subject to the terms and conditions hereof, at the Closing, Existing Lessor
hereby agrees to sell to Owner Trustee and Owner Trustee hereby agrees to
purchase from Existing Lessor the Aircraft, on the following terms:
3.1.1 DELIVERY
The Aircraft shall be delivered by Existing Lessor to Owner Trustee at such
place as may be designated by Lessee and approved by Existing Lessor (which
approval shall not be unreasonably withheld). Upon Existing Lessor's delivery of
the Aircraft to Owner Trustee, Owner Trustee shall execute and deliver to
Existing Lessor a Delivery Receipt therefor in the form annexed hereto as
Exhibit J. This purchase and sale shall not be effective as to the Aircraft
unless and until the Aircraft is concurrently delivered under the Lease.
3.1.2 PURCHASE PRICE
The full purchase price for the Aircraft in the amount of Lessor's Cost
shall be paid to Existing Lessor in immediately available funds on delivery of
the Aircraft.
<PAGE>
3.1.3 DISCLAIMER
Existing Lessor does not make, has not made and shall not be deemed to have
made, and expressly disclaims, any representation or warranty, express or
implied, as to:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH
RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF, WHETHER OR NOT
DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY
ENGINE OR ANY PART THEREOF.
The foregoing disclaimer shall in no way affect or limit (i) Existing
Lessor's obligations under the Operative Agreements, or (ii) Existing Lessor's
representations and warranties in Section 6.5 of this Agreement, in the Aircraft
Bill of Sale, including without limitation the warranty of good title, or any
other express representation or warranty in any Operative Agreement.
3.1.4 TERMINATION OF EXISTING FINANCING AGREEMENTS
(a) The Existing Lease and Existing Sublease for the Aircraft shall be
terminated, and each of the Existing Lessor and Lessee shall take such action to
evidence such termination as Owner Trustee or Mortgagee shall reasonably
request, including execution and delivery of a termination agreement for the
Existing Lease and Existing Sublease in form and substance reasonably acceptable
to Owner Trustee and satisfactory for filing with the FAA, and UCC-3 termination
statements with respect to the termination of the Existing Lease and Existing
Sublease.
<PAGE>
(b) The Aircraft, Aircraft Documents and other collateral shall be released
from the Lien of the Existing Mortgage, and the Existing Lessor and Existing
Mortgagee shall take such action to evidence such release as Owner Trustee,
Mortgagee or Lessee shall reasonably request, including the execution and
delivery of a Lien release with respect to the Existing Mortgage in form and
substance reasonably acceptable to Owner Trustee, Mortgagee and Lessee and
satisfactory for filing with the FAA, and UCC-3 termination statements with
respect to the release of the Aircraft from the Lien of the Existing Mortgage.
(c) The Existing Participation Agreement shall be terminated, effective as
of the Closing, and the parties thereto shall have no further obligation
thereunder except for Sections 7, 10, 11 and 12 thereof and for any breach of
such Agreement arising prior to the Closing.
(d) Existing Lessor shall refund to Lessee "Basic Rent" (as defined in the
Existing Lease) paid in advance by Lessee attributable to periods on and after
the Closing Date determined by multiplying such Basic Rent by a fraction, the
numerator of which shall be the number of days remaining in the month in which
the Closing Date occurs (from and including the Closing Date) and the
denominator of which shall be the total number of days in such month.
3.1.5 TAXES
Existing Lessor shall pay and discharge all applicable sales, use or
similar Taxes, duties or fees assessed or levied by any federal, state,
provincial or local taxing authority as a result of the sale and delivery of the
Aircraft to Owner Trustee contemplated by this Agreement. Existing Lessor, Owner
Trustee and Lessee will cooperate in order to minimize Taxes applicable to the
sale and delivery of the Aircraft to Owner Trustee contemplated by this
Agreement.
3.2 COMMITMENT TO LEASE
Subject to the terms and conditions of this Agreement, concurrently with
the issuance of the Equipment Notes and the purchase of the Aircraft by the
Owner Trustee on the Closing Date, Owner Trustee shall lease the Aircraft to
Lessee, and Lessee shall lease the Aircraft from Owner Trustee, under the Lease.
<PAGE>
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST;
POSTPONEMENT OF SCHEDULED CLOSING DATE
4.1 NOTICES OF SCHEDULED CLOSING DATE
Existing Mortgagee agrees to give Lessee, Existing Lessor, Participants,
Owner Trustee, and Mortgagee at least five Business Days' written notice of the
Scheduled Closing Date. Each Participant agrees that making available its
respective Commitment shall constitute a waiver of such notice. Owner Trustee
and Mortgagee shall be deemed to have waived such notice if Mortgagee shall have
received from each Participant funds in the full amount of its respective
Commitment.
4.2 PAYMENT OF LESSOR'S COST
(a) Each Participant agrees, subject to the terms and conditions of this
Agreement, to make the Dollar amount of its respective Commitment available, by
wire transfer of immediately available funds to WTC's account no. 0016-1728 at
Citibank, NA, New York, New York ABA# 021-000-089, reference Continental Lease
___, at or before 12:00 Noon, New York City time, on the Scheduled Closing Date.
All such funds made available by each Participant to WTC shall, until payment
thereof to Existing Lessor as provided in Section 4.2(b)(ii) or return thereof
to the respective Participant as provided in Section 4.3.2, be held by WTC in
trust for the benefit of the respective Participant, as the sole and exclusive
property of the respective Participant and not as part of the Trust Estate or
the Trust Indenture Estate.
(b) Subject to the satisfaction or waiver by the applicable party of the
conditions precedent set forth in Section 5, and simultaneously with the receipt
by the parties hereto of all amounts to be paid to them on the Closing Date
pursuant to this Section 4.2, Owner Trustee shall:
(i) purchase, take title to, and accept delivery of the Aircraft, and
in connection therewith execute the Delivery Receipt in the form of Exhibit
J hereto;
(ii) in consideration of the transfer of title to the Aircraft to
Owner Trustee, direct WTC to pay, from the funds made available to WTC
hereunder by the Participants, Lessor's Cost to Existing Lessor by wire
transfer of immediately available funds to Existing Lessor's account set
forth in Schedule 1 or as otherwise directed by Existing Lessor;
<PAGE>
(iii) execute an application for registration of the Aircraft with the
FAA and Lease Supplement No. 1, in each case with respect to the Aircraft;
(iv) execute the Trust Indenture and the initial Trust Indenture
Supplement and issue the Equipment Notes to the Subordination Agent in
accordance with Section 2.1(b);
(v) lease the Aircraft to Lessee pursuant to the Lease; and
(vi) take such other action as may be required to be taken by the
Owner Trustee on the Closing Date by the terms of any Operative Agreement.
4.3 POSTPONEMENT OF SCHEDULED CLOSING DATE
4.3.1 POSTPONEMENT
If for any reason whatsoever the Closing is not consummated on the
Scheduled Closing Date, Existing Mortgagee may by telephonic notice, given by
5:00 p.m., New York City time (such telephonic notice to be promptly confirmed
in writing by personal delivery or facsimile), on the Scheduled Closing Date to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee,
designate a Delayed Closing Date.
4.3.2 RETURN OF FUNDS
If the Closing fails to occur on the Scheduled Closing Date, WTC shall
promptly return to each Participant that makes funds available to it in
accordance with Section 4.2(a) such funds, together with interest or income
earned thereon.
4.3.3 INVESTMENT OF FUNDS; INTEREST
(a) If the Closing fails to occur on the Scheduled Closing Date, WTC shall,
if so instructed in the notice from Existing Mortgagee, use reasonable efforts
to invest, at the risk of Existing Mortgagee, the funds received by it from
Participants in Cash Equivalents. Any such obligations purchased by WTC, whether
directly or through a repurchase agreement, shall be held in trust by WTC for
the benefit of the respective Participants that provided such funds, and not as
part of the Trust Estate or the Trust Indenture Estate.
(b) If the Closing fails to occur on the Scheduled Closing Date, unless WTC
returns all funds to the Participants by 2:00 p.m., New York City time, on the
Scheduled Closing Date, Existing Mortgagee shall, on the Scheduled Closing Date
<PAGE>
or on the date funds are required to be returned to Participants pursuant to
Section 4.3.2, reimburse each Participant that has made funds available pursuant
to Section 4.2 for the loss of the use of its funds, by paying to such
Participant in immediately available funds an amount equal to the excess, if
any, of (i) interest at the Debt Rate on the amount of such funds for the period
from and including the Scheduled Closing Date to but excluding the Closing Date
or, if earlier, the day on which such Participant's funds are returned if such
return is made by 2:00 p.m., New York City time (or to but excluding the next
following Business Day if such return is not made by such time) over (ii) any
amount paid to such Participant in respect of interest or income earned by WTC
pursuant to Section 4.3.3(a).
(c) On the Closing Date or on the date funds are required to be returned to
Participants pursuant to Section 4.3.2, Existing Mortgagee shall reimburse WTC,
for the benefit of Participants that provided funds which are invested by WTC
hereunder, for any losses incurred on such investments. All income and profits
on the investment of such funds shall be for the respective accounts of such
Participants, and WTC shall not be liable for failure to invest such funds or
for any losses incurred on such investments, except for its own negligence or
willful misconduct.
4.4 CLOSING
The Closing shall occur at the offices of Hughes Hubbard & Reed LLP, One
Battery Park Plaza, New York, New York 10004, or such other place as the parties
shall agree.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTICIPANTS
The obligation of each Participant to make the Dollar amount of its
respective Commitment available for payment as directed by the Owner Trustee on
the Closing Date is subject to satisfaction or waiver by each such Participant,
at or prior to the Closing, of the conditions precedent set forth below in this
Section 5.1; provided, that it shall not be a condition precedent to the
obligation of any Participant that any document be produced or action taken that
is to be produced or taken by such Participant or by a Person within such
Participant's control; PROVIDED, FURTHER, that Sections 5.1.2(iii), (xv) and
(xxv) (G) and 5.1.15 shall not be conditions precedent to the obligation of Loan
Participant and Section 5.1.5 shall not be a condition precedent to the
obligation of Owner Participant.
<PAGE>
5.1.1 NOTICE
Such Participant shall have received the notice described in Section 4.1
or, in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.1.2 DELIVERY OF DOCUMENTS
Such Participant shall, except as noted below, have received executed
counterparts of the following agreements, instruments, certificates or
documents, and each of such counterparts (a) shall have been duly authorized,
executed and delivered by the respective party or parties thereto, (b) shall be
reasonably satisfactory in form and substance to such Participant and (c) shall
be in full force and effect:
(i) the Lease; PROVIDED, that only Mortgagee shall receive the sole
executed chattel paper original thereof;
(ii) Lease Supplement No. 1; PROVIDED, that only Mortgagee shall
receive the sole executed chattel paper original thereof;
(iii) the Tax Indemnity Agreement; PROVIDED, that only Owner
Participant and Lessee shall receive copies of the Tax Indemnity Agreement;
(iv) the Trust Agreement;
(v) the Trust Indenture;
(vi) the initial Trust Indenture Supplement;
(vii) the Purchase Agreement Assignment;
(viii) the Consent and Agreement;
(ix) the Equipment Notes dated the Closing Date; PROVIDED, that only
the Subordination Agent shall receive the authenticated Equipment Notes;
(x) an excerpted copy of the Purchase Agreement to the extent relating
to Airframe Manufacturer's warranties or related obligations or any right
in the Purchase Agreement assigned to Owner Trustee pursuant to the
Purchase Agreement Assignment; PROVIDED, that only Owner Trustee and
Mortgagee shall receive copies of such agreements (copies of which may be
inspected by Participants and their respective special counsel on the
Closing Date, but after the Closing Date such copies shall be retained by
Owner Trustee and Mortgagee and may be inspected and reviewed by Owner
<PAGE>
Participant or Loan Participant or their respective counsel if and only if
there shall have occurred and be continuing a Lease Default or Lease Event
of Default);
(xi) the Bills of Sale;
(xii) the Express Sublease;
(xiii) termination agreements with respect to the Existing Lease and
the Existing Sublease and a release of the Aircraft, Aircraft Documents and
other collateral from the Lien of the Existing Mortgage, as contemplated by
Section 3.1.4;
(xiv) the broker's report and insurance certificates required by
Section 11 of the Lease;
(xv) an appraisal or appraisals from an Appraiser, which appraisal or
appraisals shall be reasonably satisfactory in form and substance to Owner
Participant; PROVIDED, that only Owner Participant shall receive a copy of
its appraisal (the "Appraisal");
(xvi) (A) a copy of the Certificate of Incorporation and By-Laws of
Lessee and resolutions of the board of directors of Lessee and/or the
executive committee thereof, in each case certified as of the Closing Date,
by the Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of the Lessee Operative
Agreements required to be executed and delivered by Lessee on or prior to
the Closing Date in accordance with the provisions hereof and thereof; (B)
an incumbency certificate of Lessee, Existing Lessor, Existing Mortgagee,
Airframe Manufacturer, Owner Participant, First Security and WTC as to the
person or persons authorized to execute and deliver the relevant Operative
Agreements on behalf of such party; and (C) a copy of the Certificate of
Incorporation or Articles of Incorporation and By-Laws and general
authorizing resolutions of the boards of directors (or executive
committees) or other satisfactory evidence of authorization of Existing
Lessor, Existing Mortgagee, Airframe Manufacturer, Owner Participant, First
Security and WTC, certified as of the Closing Date by the Secretary or an
Assistant or Attesting Secretary of Existing Lessor, Existing Mortgagee,
Airframe Manufacturer, Owner Participant, First Security and WTC,
respectively, which authorize the execution, delivery and performance by
Existing Lessor, Existing Mortgagee, Airframe Manufacturer, Owner
Participant, First Security and WTC, respectively, of each of the Operative
<PAGE>
Agreements to which it is a party, together with such other documents and
evidence with respect to it as Lessee or any Participant may reasonably
request in order to establish the consummation of the transactions
contemplated by this Agreement and the taking of all corporate proceedings
in connection therewith;
(xvii) an Officer's Certificate of Lessee, dated as of the Closing
Date, stating that its representations and warranties set forth in this
Agreement are true and correct as of the Closing Date (or, to the extent
that any such representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date);
(xviii) an Officer's Certificate of First Security, dated as of the
Closing Date, stating that its representations and warranties, in its
individual capacity and as Owner Trustee, set forth in this Agreement are
true and correct as of the Closing Date (or, to the extent that any such
representation and warranty expressly relates to an earlier date, true and
correct as of such earlier date);
(xix) an Officer's Certificate of Owner Participant, dated as of the
Closing Date, stating that its representations and warranties set forth in
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xx) an Officer's Certificate of WTC, dated as of the Closing Date,
stating that its representations and warranties in its individual capacity
or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case
may be, set forth in this Agreement are true and correct as of the Closing
Date (or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xxi) an Officer's Certificate of Existing Lessor, dated as of the
Closing Date, stating that its representations and warranties set forth in
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxii) an Officer's Certificate of Existing Mortgagee, dated as of the
Closing Date, stating that its representations and warranties set forth in
<PAGE>
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxiii) an application for registration of the Aircraft with the FAA
in the name of Owner Trustee; PROVIDED, that only special counsel in
Oklahoma City, Oklahoma shall receive the sole executed copy thereof for
filing with the FAA;
(xxiv) the Financing Statements;
(xxv) the following opinions of counsel, in each case dated the
Closing Date:
(A) an opinion of Hughes Hubbard & Reed LLP, special counsel to
Lessee, substantially in the form of Exhibit A;
(B) an opinion of Lessee's Legal Department, substantially in the
form of Exhibit B;
(C) an opinion of (x) corporate counsel to Airframe Manufacturer,
substantially in the form of Exhibit C-1, and (y) Condon & Forsyth,
special counsel to Airframe Manufacturer, substantially in the form of
Exhibit C-2;
(D) an opinion of Ray, Quinney & Nebeker, special counsel to
Owner Trustee, substantially in the form of Exhibit D;
(E) an opinion of Morris, James, Hitchens & Williams, special
counsel to Mortgagee and Loan Participant, substantially in the form
of Exhibit E;
(F) an opinion of Special Counsel to Owner Participant and Local
Counsel to Owner Participant (each as defined in Schedule 3 to this
Agreement), substantially in the form of Exhibit F-1 and F-2,
respectively;
(G) an opinion of Special Tax Counsel to Owner Participant (as
defined in Schedule 3 to this Agreement), with respect to certain tax
consequences of the transactions contemplated hereby; PROVIDED, that
only Owner Participant shall receive such opinion;
<PAGE>
(H) an opinion of Condon & Forsyth, special counsel to Existing
Lessor, substantially in the form of Exhibit G;
(I) an opinion of Haight Gardner Holland & Knight, special
counsel to Existing Mortgagee, substantially in the form of Exhibit H;
and
(J) an opinion of Lytle Soule & Curlee, special counsel in
Oklahoma City, Oklahoma, substantially in the form of Exhibit I;
(xxvi) a copy of a current, valid Standard Certificate of
Airworthiness for the Aircraft duly issued by the FAA;
(xxvii) an Officer's Certificate of Airframe Manufacturer, dated as of
the Closing Date, stating that its representations and warranties set forth
in this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date); and
(xxviii) the Participants and their respective counsel shall have
received copies of such documents and papers as such Participants may
reasonably request, other than (A) in the case of Loan Participant, copies
of the Purchase Agreement, provided that special counsel for Loan
Participant may inspect the Purchase Agreement in connection with the
transactions contemplated hereby or as a basis for such counsel's closing
opinion, and (B) in the case of parties other than Owner Participant and
its special counsel, the Tax Indemnity Agreement.
5.1.3 OTHER COMMITMENTS
Each other Participant shall have made available the Dollar amount of its
Commitment in accordance with Section 4.
5.1.4 VIOLATION OF LAW
No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Lessee, Existing Lessor,
Existing Mortgagee, any Participant, Subordination Agent, Owner Trustee or
Mortgagee to execute, deliver and perform the Operative Agreements to which any
of them is a party or (b) any Participant to make the Dollar amount of its
Commitment available or, in the case of any Loan Participant, to acquire an
Equipment Note or to realize the benefits of the security afforded by the Trust
Indenture.
<PAGE>
5.1.5 PERFECTED SECURITY INTEREST
On the Closing Date, after giving effect to the filing of the FAA Filed
Documents and the Financing Statements, Mortgagee shall have received a duly
perfected first priority security interest in all of Owner Trustee's right,
title and interest in the Aircraft and the Lease, subject only to Permitted
Liens.
5.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of each other party to this Agreement
made, in each case, in this Agreement and in any other Operative Agreement to
which it is a party, shall be true and accurate in all material respects as of
the Closing Date (unless any such representation and warranty shall have been
made with reference to a specified date, in which case such representation and
warranty shall be true and accurate as of such specified date) and each other
party to this Agreement shall have performed and observed, in all material
respects, all of its covenants, obligations and agreements in this Agreement and
in any other Operative Agreement to which it is a party to be observed or
performed by it as of the Closing Date.
5.1.7 NO EVENT OF DEFAULT
On the Closing Date, no event shall have occurred and be continuing, or
would result from the sale, mortgage or lease of the Aircraft, which constitutes
a Lease Default or Lease Event of Default, or an Indenture Default or Indenture
Event of Default.
5.1.8 NO EVENT OF LOSS
On the Closing Date, no Event of Loss with respect to the Airframe or any
Engine shall have occurred and no circumstance, condition, act or event that,
with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
5.1.9 TITLE
Owner Trustee shall have good title (subject to filing and recordation of
the FAA Bill of Sale with the FAA) to the Aircraft, free and clear of Liens,
except (a) the rights of Lessee under the Lease and Lease Supplement No. 1, (b)
the Lien created by the Trust Indenture and the initial Trust Indenture
Supplement and (c) other Permitted Liens.
<PAGE>
5.1.10 CERTIFICATION
The Aircraft shall have been duly certificated by the FAA as to type and
airworthiness.
5.1.11 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee of
Owner Trustee under the Trust Indenture), shall be entitled to the benefits of
Section 1110 (as currently in effect) with respect to the right to take
possession of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
5.1.12 FILING
On the Closing Date (a) the FAA Filed Documents shall have been duly filed
for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Act and (b) each Financing
Statement shall have been duly filed (or shall be in the process of being so
duly filed) in the appropriate jurisdiction.
5.1.13 NO PROCEEDINGS
No action or proceeding shall have been instituted, nor shall any action be
threatened in writing, before any Government Entity, nor shall any order,
judgment or decree have been issued or proposed to be issued by any Government
Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.
5.1.14 GOVERNMENTAL ACTION
All appropriate action required to have been taken prior to the Closing
Date by the FAA, or any governmental or political agency, subdivision or
instrumentality of the United States, in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders, permits,
waivers, authorizations, exemptions and approvals of such entities required to
be in effect on the Closing Date in connection with the transactions
contemplated by this Agreement shall have been issued.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER TRUSTEE
The obligation of Owner Trustee to apply the Commitments of the
Participants to pay Lessor's Cost on the Closing Date is subject to satisfaction
<PAGE>
or waiver by Owner Trustee, at or prior to the Closing, of the conditions
precedent set forth below in this Section 5.2.
5.2.1 NOTICE
Owner Trustee shall have received the notice described in Section 4.1 or,
in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.2.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Owner Trustee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Owner Trustee.
5.2.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and 5.1.11
shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Owner Trustee.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF MORTGAGEE
The obligation of Mortgagee to authenticate the Equipment Notes on the
Closing Date is subject to the satisfaction or waiver by Mortgagee, at or prior
to the Closing, of the conditions precedent set forth below in this Section 5.3.
5.3.1 NOTICE
Mortgagee shall have received the notice described in Section 4.1 or, in
the case of a Delayed Closing Date, 4.3, when and as required thereby, or shall
have waived such notice.
5.3.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Mortgagee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Mortgagee.
<PAGE>
5.3.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and 5.1.11
shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Mortgagee.
5.4 CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE
The obligation of Lessee to lease the Aircraft on the Closing Date and to
take the other actions required by this Agreement to be taken by it at the
Closing is subject to the satisfaction or waiver by Lessee, at or prior to the
Closing, of the conditions precedent set forth below in this Section 5.4.
5.4.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Lessee, except
as specifically provided therein, and shall be satisfactory to Lessee, unless
the failure to receive any such agreement, instrument, certificate or document
is the result of any action or inaction by Lessee.
5.4.2 SALES TAX
Lessee shall be satisfied that no sales, use, value added, goods and
services or like tax, and no stamp tax duty, is payable with respect to the
delivery of the Aircraft on the Closing Date to the extent that Lessee has
liability therefor under Section 9.3.
5.4.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.3 (as to all
Participants), 5.1.4, 5.1.6, 5.1.7 (as to Indenture Defaults or Indenture Events
of Default not constituting Lease Defaults or Lease Events of Default,
respectively), 5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13 and 5.1.14 shall
have been satisfied or waived by Lessee, unless the failure of any such
condition to be satisfied is the result of any action or inaction by Lessee.
5.5 CONDITIONS PRECEDENT TO OBLIGATIONS OF EXISTING LESSOR AND EXISTING
MORTGAGEE
The obligation of Existing Lessor to sell and transfer the Aircraft to
Owner Trustee at the time of the Closing and the respective obligations of each
of Existing Lessor and Existing Mortgagee to take the other actions required by
this Agreement to be taken by it at the Closing is subject to the satisfaction
<PAGE>
or waiver by it, at or prior to the Closing, of the conditions precedent set
forth below in this Section 5.5.
5.5.1 TENDER OF LESSOR'S COST
Owner Trustee shall have tendered to Existing Lessor Lessor's Cost pursuant
to Section 4.2, subject to performance by Existing Lessor and Existing Mortgagee
of their respective obligations under this Agreement.
5.5.2 OTHER CONDITIONS PRECEDENT
The condition set forth in Section 5.1.4(a) shall have been satisfied with
respect to it.
5.6 POST-REGISTRATION OPINION
Promptly upon the registration of the Aircraft and the recordation of the
FAA Filed Documents pursuant to the Act, Airframe Manufacturer will cause Lytle
Soule & Curlee, special counsel in Oklahoma City, Oklahoma, to deliver to
Lessee, Existing Lessor, Existing Mortgagee, each Participant, Owner Trustee and
Mortgagee a favorable opinion or opinions addressed to each of them with respect
to such registration and recordation.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to each Participant, Existing Mortgagee,
Existing Lessor, Airframe Manufacturer, Subordination Agent, Owner Trustee and
Mortgagee that:
6.1.1 ORGANIZATION; QUALIFICATION
Lessee is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into and perform its obligations
under the Lessee Operative Agreements. Lessee is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which the
nature and extent of the business conducted by it, or the ownership of its
properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to Lessee.
<PAGE>
6.1.2 CORPORATE AUTHORIZATION
Lessee has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Lessee Operative Agreements,
and the performance of its obligations thereunder.
6.1.3 NO VIOLATION
The execution and delivery by Lessee of the Lessee Operative Agreements,
the performance by Lessee of its obligations thereunder and the consummation by
Lessee on the Closing Date of the transactions contemplated thereby, do not and
will not (a) violate any provision of the Certificate of Incorporation or
By-Laws of Lessee, (b) violate any Law applicable to or binding on Lessee or (c)
violate or constitute any default under (other than any violation or default
that would not result in a Material Adverse Change to Lessee), or result in the
creation of any Lien (other than as permitted under the Lease) upon the Aircraft
under, any indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, lease, loan or other material agreement, instrument or document
to which Lessee is a party or by which Lessee or any of its properties is bound.
6.1.4 APPROVALS
The execution and delivery by Lessee of the Lessee Operative Agreements,
the performance by Lessee of its obligations thereunder and the consummation by
Lessee on the Closing Date of the transactions contemplated thereby do not and
will not require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
Debt of Lessee and (b) any Government Entity, other than the filing of (x) the
FAA Filed Documents and the Financing Statements (and continuation statements
periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.
6.1.5 VALID AND BINDING AGREEMENTS
The Lessee Operative Agreements have been duly authorized, executed and
delivered by Lessee and, assuming the due authorization, execution and delivery
thereof by the other party or parties thereto, constitute the legal, valid and
binding obligations of Lessee and are enforceable against Lessee in accordance
with the respective terms thereof, except as such enforceability may be limited
<PAGE>
by bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar Laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.
6.1.6 LITIGATION
Except as set forth in Lessee's most recent Annual Report on Form 10-K, as
amended, filed by Lessee with the SEC on or prior to the Closing Date, or in any
Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Lessee with
the SEC subsequent to such Form 10-K and on or prior to the Closing Date, no
action, claim or proceeding is now pending or, to the Actual Knowledge of
Lessee, threatened, against Lessee, before any court, governmental body,
arbitration board, tribunal or administrative agency, which is reasonably likely
to be determined adversely to Lessee and if determined adversely to Lessee would
result in a Material Adverse Change.
6.1.7 FINANCIAL CONDITION
The audited consolidated balance sheet of Lessee with respect to Lessee's
most recent fiscal year included in Lessee's most recent Annual Report on Form
10-K, as amended, filed by Lessee with the SEC, and the related consolidated
statements of operations and cash flows for the period then ended have been
prepared in accordance with GAAP and fairly present in all material respects the
financial condition of Lessee and its consolidated subsidiaries as of such date
and the results of its operations and cash flows for such period, and since the
date of such balance sheet, there has been no material adverse change in such
financial condition or operations of Lessee, except for matters disclosed in (a)
the financial statements referred to above, (b) any subsequent Quarterly Report
on Form 10-Q or Current Report on Form 8-K filed by Lessee with the SEC on or
prior to the date hereof, or (c) any prospectus or prospectus supplement filed
by Lessee with the SEC in connection with the offering of the Pass Through
Certificates.
6.1.8 REGISTRATION AND RECORDATION
Except for (a) the registration of the Aircraft with the FAA pursuant to
the Act in the name of Owner Trustee, (b) the filing for recordation (and
recordation) of the FAA Filed Documents, (c) the filing of the Financing
Statements (and continuation statements relating thereto at periodic intervals),
(d) the taking of possession and retention by Mortgagee of the original
counterparts of the Lease and Lease Supplement No. 1 and (e) the affixation of
the nameplates referred to in Section 7.1.3 of the Lease, no further action,
<PAGE>
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the right, title or interest of Owner Trustee, and the
Mortgagee's security interest, in the Aircraft and the Lease, as against Lessee
and any other Person, in each case, in any applicable jurisdiction in the United
States.
6.1.9 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Lessee is located at 2929 Allen Parkway, Houston, Texas 77019.
6.1.10 NO DEFAULT
No event which, if the Aircraft were subject to the Lease, constitutes a
Lease Event of Default has occurred and is continuing.
6.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any Engine,
and, to the Actual Knowledge of Lessee, no circumstance, condition, act or event
has occurred that, with the giving of notice or lapse of time or both gives rise
to or constitutes an Event of Loss with respect to the Airframe or any Engine.
6.1.12 COMPLIANCE WITH LAWS
(a) Lessee is a Citizen of the United States and a U.S. Air Carrier.
(b) Lessee holds all licenses, permits and franchises from the appropriate
Government Entities necessary to authorize Lessee to lawfully engage in air
transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse Change to Lessee.
(c) Lessee is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
6.1.13 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
<PAGE>
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any person in violation of the Securities Act.
6.1.14 BROKER'S FEES
No Person acting on behalf of Lessee is or will be entitled to any broker's
fee, commission or finder's fee in connection with the Transactions.
6.1.15 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee under
the Trust Indenture), is entitled to the benefits of Section 1110 (as currently
in effect) with respect to the right to take possession of the Airframe and
Engines as provided in the Lease in the event of a case under Chapter 11 of the
Bankruptcy Code in which Lessee is a debtor.
6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES
Owner Participant represents and warrants to Lessee, Loan Participant,
Existing Mortgagee, Existing Lessor, Airframe Manufacturer, Subordination Agent,
Owner Trustee and Mortgagee that:
6.2.1 ORGANIZATION, ETC.
Owner Participant is a corporation duly incorporated, validly existing and
in good standing under the Laws of the OP Jurisdiction, has the corporate power
and authority to conduct the business in which it is currently engaged and to
own or hold under lease its properties and to enter into, and perform its
obligations under the Owner Participant Agreements, and has a tangible net worth
(exclusive of goodwill) greater than $25,000,000.
6.2.2 CORPORATE AUTHORIZATION
Owner Participant has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Owner Participant
Agreements, and the performance of its obligations thereunder.
<PAGE>
6.2.3 NO VIOLATION
The execution and delivery by Owner Participant of the Owner Participant
Agreements, the performance by Owner Participant of its obligations thereunder
and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of Owner Participant, (b) violate
any Law applicable to or binding on Owner Participant or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to Owner Participant), or result in the
creation of any Lien (other than as provided for or otherwise permitted in the
Operative Agreements) upon the Trust Estate under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease, loan or
other material agreement, instrument or document to which Owner Participant is a
party or by which Owner Participant or any of its properties is bound.
6.2.4 APPROVALS
The execution and delivery by Owner Participant of the Owner Participant
Agreements, the performance by Owner Participant of its obligations thereunder
and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Owner Participant and
(b) any Government Entity, other than the filing of the FAA Filed Documents and
the Financing Statements.
6.2.5 VALID AND BINDING AGREEMENTS
The Owner Participant Agreements have been duly authorized, executed and
delivered by Owner Participant and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid
and binding obligations of Owner Participant and are enforceable against Owner
Participant in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
<PAGE>
6.2.6 CITIZENSHIP
On the Closing Date, Owner Participant is a Citizen of the United States,
without making use of any voting trust or similar arrangement permitted under 14
C.F.R ss. 47.8.
6.2.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to Owner
Participant in respect of all or any part of the Trust Estate.
6.2.8 INVESTMENT BY OWNER PARTICIPANT
Owner Participant's beneficial interest in the Trust Estate is being
acquired by it for its own account, for investment and not with a view to any
resale or distribution thereof, except that, subject to the restrictions on
transfer set forth in Section 10, the disposition by Owner Participant of its
beneficial interest in the Trust Estate shall at all times be within its
control.
6.2.9 ERISA
No part of the funds to be used by Owner Participant to acquire or hold its
interests in the Trust Estate to be acquired by it under this Agreement directly
or indirectly constitutes assets of a Plan.
6.2.10 LITIGATION
There are no pending or, to the Actual Knowledge of Owner Participant,
threatened actions or proceedings against Owner Participant before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Owner Participant, would materially adversely affect
the ability of Owner Participant to perform its obligations under the Owner
Participant Agreements.
6.2.11 SECURITIES LAWS
Neither Owner Participant nor any person Owner Participant has authorized
to act on its behalf has directly or indirectly offered any beneficial interest
in or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the registration provisions of the
Securities Act or applicable state securities Laws.
<PAGE>
6.2.12 BROKER'S FEES
No Person acting on behalf of Owner Participant is or will be entitled to
any broker's fee, commission or finder's fee in connection with the
Transactions.
6.3 FIRST SECURITY'S REPRESENTATIONS AND WARRANTIES
First Security represents and warrants to Lessee, Owner Participant,
Existing Mortgagee, Existing Lessor, Airframe Manufacturer, Loan Participants,
Subordination Agent and Mortgagee that:
6.3.1 ORGANIZATION, ETC.
First Security is a national banking association duly organized, validly
existing and in good standing under the Laws of the United States, holding a
valid certificate to do business as a national banking association with banking
authority to execute and deliver, and perform its obligations under, the Owner
Trustee Agreements.
6.3.2 CORPORATE AUTHORIZATION
First Security has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by Law or by its Articles of Association or By-Laws) to
authorize the execution and delivery by First Security, in its individual
capacity and as Owner Trustee, of each of the Owner Trustee Agreements, and the
performance of its obligations thereunder.
6.3.3 NO VIOLATION
The execution and delivery by First Security, in its individual capacity
and as Owner Trustee of the Owner Trustee Agreements, the performance by First
Security, in its individual capacity and as Owner Trustee, of its obligations
thereunder and the consummation by First Security in its individual capacity and
as Owner Trustee on the Closing Date of the transactions contemplated thereby,
do not and will not (a) violate any provision of the Articles of Association or
By-Laws of First Security, (b) violate any Law applicable to or binding on Owner
Trustee or First Security or (c) violate or constitute any default under(other
than any violation or default that would not result in a Material Adverse Change
to First Security, in its individual capacity or as Owner Trustee), or result in
the creation of any Lien (other than the lien of the Trust Indenture) upon any
property of First Security, in its individual capacity and as Owner Trustee, or
<PAGE>
any of its subsidiaries under, any indenture, mortgage, chattel mortgage, deed
of trust, conditional sales contract, lease, loan or other material agreement,
instrument or document to which First Security, in its individual capacity and
as Owner Trustee, is a party or by which First Security, in its individual
capacity and as Owner Trustee, or any of its properties is or may be bound or
affected.
6.3.4 APPROVALS
The execution and delivery by First Security, in its individual capacity
and as Owner Trustee, of the Owner Trustee Agreements, the performance by First
Security, in its individual capacity and as Owner Trustee, of its obligations
thereunder and the consummation by First Security, in its individual capacity
and as Owner Trustee, on the Closing Date of the transactions contemplated
thereby do not and will not require the consent, approval or authorization of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of First Security or (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.
6.3.5 VALID AND BINDING AGREEMENTS
The Owner Trustee Agreements have been duly authorized, executed and
delivered by First Security, in its individual capacity or as Owner Trustee, as
the case may be, and constitute the legal, valid and binding obligations of
First Security, in its individual capacity and as Owner Trustee, and, assuming
the due authorization, execution and delivery thereof by the other party or
parties thereto, are enforceable against First Security, in its individual
capacity and as Owner Trustee, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.3.6 CITIZENSHIP
On the Closing Date, First Security is a Citizen of the United States.
6.3.7 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Owner Trustee is located at 79 South Main Street, Salt Lake City, Utah
84111.
<PAGE>
6.3.8 TITLE
On the Closing Date, Owner Trustee shall have received whatever title to
the Aircraft as was conveyed to it by Existing Lessor.
6.3.9 NO LIENS; FINANCING STATEMENTS
On the Closing Date, there are no Lessor Liens attributable to First
Security or Owner Trustee in respect of all or any part of the Aircraft, Trust
Estate or the Trust Indenture Estate. Except for the Financing Statements, it
has not, either in its individual capacity or as Owner Trustee, executed any UCC
financing statements relating to the Aircraft or the Lease.
6.3.10 LITIGATION
There are no pending or, to the Actual Knowledge of First Security,
threatened actions or proceedings against First Security or Owner Trustee before
any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to First Security, would materially
adversely affect the ability of First Security or Owner Trustee to perform its
obligations under the Owner Trustee Agreements.
6.3.11 SECURITIES LAWS
Neither First Security, nor any person authorized to act on its behalf, has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicited any offer to acquire any such interest or security
from, or has sold any such interest or security to, any person other than the
Participants, except for the offering and sale of the Pass Through Certificates.
6.3.12 EXPENSES AND TAXES
There are no Expenses or Taxes that may be imposed on or asserted against
the Trust, the Trust Estate or any part thereof or any interest therein, the
Trust Indenture Estate, Lessee, Owner Participant, any Pass Through Trustee,
Subordination Agent, Owner Trustee or Mortgagee (except as to Owner Trustee,
Taxes imposed on the fees payable to Owner Trustee) under the laws of Utah in
connection with the execution, delivery or performance of any Operative
Agreement by Owner Trustee or in connection with the issuance of the Equipment
Notes, which Expenses or Taxes would not have been imposed if Owner Trustee had
not (x) had its principal place of business in, (y) performed (in its individual
<PAGE>
capacity or as Owner Trustee) any or all of its duties under the Operative
Agreements in or (z) engaged in any activities unrelated to the transactions
contemplated by the Operative Agreements in, the State of Utah.
6.4 WTC'S REPRESENTATIONS AND WARRANTIES
WTC represents and warrants (with respect to Section 6.4.10, solely in its
capacity as Subordination Agent) to Lessee, Owner Participant, Existing
Mortgagee, Existing Lessor, Airframe Manufacturer, and Owner Trustee that:
6.4.1 ORGANIZATION, ETC.
WTC is a Delaware banking corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware, holding a valid
certificate to do business as a Delaware banking corporation with banking
authority to execute and deliver, and perform its obligations under, the
Mortgagee Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements.
6.4.2 CORPORATE AUTHORIZATION
WTC has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Certificate of Incorporation or By-Laws)
to authorize the execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements and the performance of its obligations
thereunder.
6.4.3 NO VIOLATION
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
Date of the transactions contemplated thereby, do not and will not (a) violate
any provision of the Certificate of Incorporation or By-Laws of WTC, (b) violate
any Law applicable to or binding on WTC, in its individual capacity or (except
in the case of any Law relating to any Plan) as Mortgagee, a Pass Through
Trustee or Subordination Agent, or (c) violate or constitute any default under
<PAGE>
(other than any violation or default that would not result in a Material Adverse
Change to WTC, in its individual capacity or Mortgagee, a Pass Through Trustee
or Subordination Agent), or result in the creation of any Lien (other than the
lien of the Trust Indenture) upon any property of WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, or any
of WTC's subsidiaries under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other agreement, instrument or
document to which WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, is a party or by which WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, or any of their respective properties is bound.
6.4.4 APPROVALS
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
Date by WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee
or Subordination Agent, as the case may be, of the transactions contemplated
thereby do not and will not require the consent, approval or authorization of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of WTC or (b) any Government Entity, other
than the filing of the FAA Filed Documents and the Financing Statements.
6.4.5 VALID AND BINDING AGREEMENTS
The Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements have been duly authorized, executed and delivered
by WTC and, assuming the due authorization, execution and delivery by the other
party or parties thereto, constitute the legal, valid and binding obligations of
WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, and are enforceable against WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
<PAGE>
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.4.6 CITIZENSHIP
WTC is a Citizen of the United States.
6.4.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to WTC in
respect of all or any part of the Trust Estate or the Trust Indenture Estate.
6.4.8 LITIGATION
There are no pending or, to the Actual Knowledge of WTC, threatened actions
or proceedings against WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, before any court, administrative agency
or tribunal which, if determined adversely to WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be,
would materially adversely affect the ability of WTC, in its individual capacity
or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may
be, to perform its obligations under any of the Mortgagee Agreements, the Pass
Through Trustee Agreements or the Subordination Agent Agreements.
6.4.9 SECURITIES LAWS
Neither WTC nor any person authorized to act on its behalf has directly or
indirectly offered any beneficial interest or Security relating to the ownership
of the Aircraft or any interest in the Trust Indenture Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicited any offer to acquire any such interest or security
from, or has sold any such interest or security to, any Person other than the
Participants, except for the offering and sale of the Pass Through Certificates.
6.4.10 INVESTMENT
The Equipment Notes to be acquired by the Subordination Agent are being
acquired by it for the account of the Pass Through Trustees, for investment and
not with a view to any resale or distribution thereof, except that, subject to
the restrictions on transfer set forth in Section 10.1.3, the disposition by it
of its Equipment Notes shall at all times be within its control.
<PAGE>
6.4.11 TAXES
There are no Taxes payable by any Pass Through Trustee or WTC, as the case
may be, imposed by the State of Delaware or any political subdivision or taxing
authority thereof in connection with the execution, delivery and performance by
such Pass Through Trustee or WTC, as the case may be, of this Agreement or any
of the Pass Through Trustee Agreements (other than franchise or other taxes
based on or measured by any fees or compensation received by any such Pass
Through Trustee or WTC, as the case may be, for services rendered in connection
with the transactions contemplated by any of the Pass Through Trust Agreements),
and there are no Taxes payable by any Pass Through Trustee or WTC, as the case
may be, imposed by the State of Delaware or any political subdivision thereof in
connection with the acquisition, possession or ownership by any such 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 any such Pass
Through Trustee or WTC, as the case may be, for services rendered in connection
with the transactions contemplated by any of the Pass Through Trust Agreements),
and, assuming that the trusts created by the Pass Through Trust Agreements will
not be taxable as corporations, but, rather, each will be characterized as a
grantor trust under subpart E, Part I of Subchapter J of the Code or as a
partnership under Subchapter K of the Code, such trusts will not be subject to
any Taxes imposed by the State of Delaware or any political subdivision thereof.
6.4.12 CONTROL
WTC is not an Affiliate of the Owner Participant or the Owner Trustee.
6.4.13 BROKER'S FEES
No Person acting on behalf of WTC, in its individual capacity or as
Mortgagee, any Pass Through Trustee or Subordination Agent, is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions.
6.5 EXISTING LESSOR'S REPRESENTATIONS AND WARRANTIES
Existing Lessor represents and warrants to Lessee, each Participant,
Existing Mortgagee, Subordination Agent, Owner Trustee and Mortgagee that:
6.5.1 ORGANIZATION, ETC.
Existing Lessor is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware, and has the corporate
<PAGE>
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into, and perform its
obligations under the Existing Lessor Agreements.
6.5.2 CORPORATE AUTHORIZATION
Existing Lessor has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Existing Lessor Agreements,
and the performance of its obligations thereunder.
6.5.3 NO VIOLATION
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby, do not and will not (a) violate any provision of the
Certificate of Incorporation or By-Laws of Existing Lessor, (b) violate any Law
applicable to or binding on Existing Lessor or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Lessor), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Lessor is a party
or by which Existing Lessor or any of its properties is bound.
6.5.4 APPROVALS
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby do not and will not require the consent or approval of, or
the giving of notice to, or the registration with, or the recording or filing of
any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of Existing Lessor and (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.
<PAGE>
6.5.5 VALID AND BINDING AGREEMENTS
The Existing Lessor Agreements have been duly authorized, executed and
delivered by Existing Lessor and, assuming the due authorization, execution and
delivery by the other party or parties thereto, constitute the legal, valid and
binding obligations of Existing Lessor and are enforceable against Existing
Lessor in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
6.5.6 TITLE
On the Closing Date, Existing Lessor shall have and the Bills of Sale shall
convey to Owner Trustee good marketable title to the Aircraft, free and clear of
all claims, Liens and encumbrances of any nature, except Permitted Liens.
6.5.7 LITIGATION
There are no pending or, to the Actual Knowledge of Existing Lessor,
threatened actions or proceedings against Existing Lessor before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Existing Lessor, would materially adversely affect
the ability of Existing Lessor to perform its obligations under the Existing
Lessor Agreements.
6.5.8 SECURITIES LAWS
Neither Existing Lessor nor any person Existing Lessor has authorized to
act on its behalf has directly or indirectly offered any beneficial interest in
or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the Securities Act or applicable state
securities Laws.
6.5.9 BROKER'S FEES
No Person acting on behalf of Existing Lessor is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions.
<PAGE>
6.6 EXISTING MORTGAGEE'S REPRESENTATIONS AND WARRANTIES
Existing Mortgagee represents and warrants to Lessee, each Participant,
Subordination Agent, Owner Trustee, Existing Lessor, Airframe Manufacturer and
Mortgagee that:
6.6.1 ORGANIZATION, ETC.
Existing Mortgagee is a corporation duly incorporated, validly existing
under the Laws of England and has the corporate power and authority to conduct
the business in which it is currently engaged and to own or hold under lease its
properties and to enter into, and perform its obligations under the Existing
Mortgagee Agreements.
6.6.2 CORPORATE AUTHORIZATION
Existing Mortgagee has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Existing Mortgagee Agreements, and the
performance of its obligations thereunder.
6.6.3 NO VIOLATION
The execution and delivery by Existing Mortgagee of the Existing Mortgagee
Agreements, the performance by Existing Mortgagee of its obligations thereunder
and the consummation by Existing Mortgagee on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the constitutional documents of Existing Mortgagee, (b) violate any Law
applicable to or binding on Existing Mortgagee or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Mortgagee), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Mortgagee is a
party or by which Existing Mortgagee or any of its properties is bound.
6.6.4 APPROVALS
The execution and delivery by Existing Mortgagee of the Existing Mortgagee
Agreements, the performance by Existing Mortgagee of its obligations thereunder
and the consummation by Existing Mortgagee on the Closing Date of the
<PAGE>
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Existing Mortgagee
and (b) any Government Entity, other than the filing of the FAA Filed Documents
and the Financing Statements.
6.6.5 VALID AND BINDING AGREEMENTS
The Existing Mortgagee Agreements have been duly authorized, executed and
delivered by Existing Mortgagee and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid
and binding obligations of Existing Mortgagee and are enforceable against
Existing Mortgagee in accordance with the respective terms thereof, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
6.6.6 LITIGATION
There are no pending or, to the Actual Knowledge of Existing Mortgagee,
threatened actions or proceedings against Existing Mortgagee before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Existing Mortgagee, would materially adversely affect
the ability of Existing Mortgagee to perform its obligations under the Existing
Mortgagee Agreements.
6.6.7 SECURITIES LAWS
Neither Existing Mortgagee nor any person Existing Mortgagee has authorized
to act on its behalf has directly or indirectly offered any beneficial interest
in or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the Securities Act or applicable state
securities Laws.
6.6.8 BROKER'S FEES
No Person acting on behalf of Existing Mortgagee is or will be entitled to
any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
<PAGE>
6.7 AIRFRAME MANUFACTURER'S REPRESENTATIONS AND WARRANTIES
Airframe Manufacturer represents and warrants to Lessee, each Participant,
Existing Mortgagee, Subordination Agent, Owner Trustee and Mortgagee that:
6.7.1 ORGANIZATION, ETC.
Airframe Manufacturer is a corporation duly incorporated, validly existing
and in good standing under the Laws of Brazil, and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into, and perform its obligations
under the Airframe Manufacturer Agreements.
6.7.2 CORPORATE AUTHORIZATION
Airframe Manufacturer has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Airframe Manufacturer Agreements, and
the performance of its obligations thereunder.
6.7.3 NO VIOLATION
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
obligations thereunder and the consummation by Airframe Manufacturer on the
Closing Date of the transactions contemplated thereby, do not and will not (a)
violate any provision of the constitutional documents of Airframe Manufacturer,
(b) violate any Law applicable to or binding on Airframe Manufacturer or (c)
violate or constitute any default under (other than any violation or default
that would not result in a Material Adverse Change to Airframe Manufacturer), or
result in the creation of any Lien (other than as provided for or otherwise
permitted in the Operative Agreements) upon the Trust Estate under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document to
which Airframe Manufacturer is a party or by which Airframe Manufacturer or any
of its properties is bound.
6.7.4 APPROVALS
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
<PAGE>
obligations thereunder and the consummation by Airframe Manufacturer on the
Closing Date of the transactions contemplated thereby do not and will not
require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
Debt of Airframe Manufacturer and (b) any Government Entity, other than the
filing of the FAA Filed Documents and the Financing Statements.
6.7.5 VALID AND BINDING AGREEMENTS
The Airframe Manufacturer Agreements have been duly authorized, executed
and delivered by Airframe Manufacturer and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Airframe Manufacturer and are
enforceable against Airframe Manufacturer in accordance with the respective
terms thereof, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar Laws
affecting the rights of creditors generally and general principles of equity,
whether considered in a proceeding at law or in equity.
6.7.6 TITLE
On the Closing Date, Existing Lessor shall have, and the Bills of Sale
shall convey to the Owner Trustee, good and marketable title to, the Aircraft,
free and clear of all claims, Liens and encumbrances of any nature, except
Permitted Liens.
6.7.7 TAXES
The Existing Lessor has filed or will cause to be filed all Federal and all
material state, local and foreign tax returns which are required to be filed by
it and have paid or will cause to be paid all Taxes which are due and payable in
connection with the Aircraft.
6.7.8 LITIGATION
There are no pending or, to the Actual Knowledge of Airframe Manufacturer,
threatened actions or proceedings against Airframe Manufacturer before any
court, governmental body, arbitration board, administrative agency or tribunal
which, if determined adversely to Airframe Manufacturer, would materially
adversely affect the ability of Airframe Manufacturer to perform its obligations
under the Airframe Manufacturer Agreements.
<PAGE>
6.7.9 SECURITIES LAWS
Neither Airframe Manufacturer nor any person Airframe Manufacturer has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the Securities
Act or applicable state securities Laws.
6.7.10 BROKER'S FEES
No Person acting on behalf of Airframe Manufacturer is or will be entitled
to any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS
7.1 COVENANTS OF LESSEE
Lessee covenants and agrees with Owner Participant, Loan Participant, Owner
Trustee, and Mortgagee as follows:
7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Lessee shall at all times maintain its corporate existence, except as
permitted by Section 13.2 of the Lease, and shall at all times remain a U.S. Air
Carrier.
7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Lessee will give Owner Participant, Owner Trustee and Mortgagee timely
written notice (but in any event within 30 days prior to the expiration of the
period of time specified under applicable Law to prevent lapse of perfection) of
any relocation of its chief executive office (as such term is defined in Article
9 of the UCC) from its then present location and will promptly take any action
required by Section 7.1.3(c) as a result of such relocation.
7.1.3 CERTAIN ASSURANCES
(a) Lessee shall duly execute, acknowledge and deliver, or shall cause to
be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
<PAGE>
further acts and things, in any case, as Owner Participant, Owner Trustee,
Mortgagee shall reasonably request for accomplishing the purposes of this
Agreement and the other Operative Agreements, 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 Agreement.
(b) Lessee shall promptly take such action with respect to the recording,
filing, re-recording and re-filing of the Lease, the Trust Agreement and the
Trust Indenture and the respective supplements thereto, including, without
limitation, Lease Supplement No. 1 and the initial Trust Indenture Supplement,
as shall be necessary to establish, perfect and protect the interests and rights
of Owner Trustee in and to the Aircraft and under the Lease and the perfection
and priority of the Lien created by the Trust Indenture, and Lessee shall pay
all out-of-pocket costs and expenses thereof to the extent not paid by another
party as Transaction Expenses. Lessee shall furnish to Owner Participant or
Owner Trustee such information (other than with respect to the citizenship of
Owner Participant and Owner Trustee) in Lessee's possession or otherwise
reasonably available to Lessee as may be required to enable Owner Participant or
Owner Trustee to make application for registration of the Aircraft under the Act
(subject to Lessee's rights under Section 7.1.2 of the Lease).
(c) Lessee will cause the FAA Filed Documents, the Financing Statements and
all continuation statements (and any amendments necessitated by any combination,
consolidation or merger pursuant to Section 13.2 of the Lease, or any relocation
of its chief executive office) in respect of the Financing Statements to be
prepared and, subject only to the execution and delivery thereof by Owner
Trustee and Mortgagee, as applicable, duly and timely filed and recorded, or
filed for recordation, to the extent permitted under the Act (with respect to
the FAA Filed Documents) or the UCC or similar law of any other applicable
jurisdiction (with respect to such other documents).
(d) If the Aircraft has been registered in a country other than the United
States pursuant to Section 7.1.2 of the Lease, Lessee will furnish to Owner
Trustee, Mortgagee and each Participant annually after such registration,
commencing with the calendar year after such registration is effected, an
opinion of special counsel reasonably satisfactory to Owner Trustee and
Mortgagee stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, re-recording and
re-filing of the Operative Agreements and any supplements and amendments thereto
as is necessary to establish, perfect and protect Owner Trustee's and
<PAGE>
Mortgagee's respective right, title and interest in and to the Aircraft and the
Operative Agreements, reciting the details of such actions, or (ii) no such
action is necessary to maintain the perfection of such right, title and
interest.
7.1.4 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf will directly
or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any person in violation of the Securities Act or applicable state or foreign
securities Laws.
7.2 COVENANTS OF OWNER PARTICIPANT
Owner Participant covenants and agrees with Lessee, and except with respect
to Section 7.2.4, Loan Participant, Owner Trustee and Mortgagee as follows:
7.2.1 LIENS
Owner Participant (a) will not directly or indirectly create, incur, assume
or suffer to exist any Lessor Lien attributable to it on or with respect to all
or any part of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b)
will, at its own cost and expense, take such action as may be necessary to
discharge any Lessor Lien attributable to Owner Participant on all or any part
of the Trust Estate, the Trust Indenture Estate or the Aircraft, PROVIDED that
Owner Participant shall not be in breach of its obligations under this sentence
so long as (i) Owner Participant shall, at its own cost and expense, be
diligently contesting such Lessor Lien in good faith by appropriate proceedings
and (ii) such Lessor Lien and such proceedings do not involve (x) any material
danger of the sale, forfeiture, or loss of the Aircraft, the Airframe, any
Engine or any Part thereof or (y) any restriction on the use or operation of the
Aircraft or title thereto. Owner Participant will hold harmless and indemnify
Lessee, Owner Trustee, each Note Holder, Mortgagee, each of their respective
Affiliates, successors and permitted assigns, the Trust Estate and the Trust
Indenture Estate from and against (i) any and all Expenses, (ii) any reduction
in the amount payable out of the Trust Estate or the Trust Indenture Estate and
(iii) any interference with the possession, operation or other use of all or any
<PAGE>
part of the Aircraft, in each case imposed on, incurred by or asserted against
any of the foregoing as a consequence of any such Lessor Lien.
7.2.2 REVOCATION OF TRUST AGREEMENT
(a) Owner Participant will comply with the provisions of the Trust
Agreement applicable to it, and will not terminate or revoke the Trust Agreement
or the trusts created thereunder without the prior written consent of Lessee and
Mortgagee and will not amend, modify or supplement the Trust Agreement, or waive
any of the provisions thereof, if such amendment, modification, supplement or
waiver would have a material adverse effect on Lessee, without the consent of
Lessee, or on Mortgagee or any Note Holder, without the consent of Mortgagee.
(b) Notwithstanding Section 7.2.2(a), Owner Participant may at any time
remove Owner Trustee pursuant to Section 9.1 of the Trust Agreement or terminate
the Trust Agreement pursuant to Section 11.2 of the Trust Agreement.
7.2.3 CHANGE OF SITUS OF OWNER TRUST
If, at any time, any Tax Indemnitee or the Trust Estate becomes subject to
any Taxes for which it is indemnified pursuant to Section 9.3 of this Agreement
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
Owner Participant (which consent shall not be unreasonably withheld) and Owner
Participant will take whatever action may be reasonably necessary to accomplish
such removal; PROVIDED, that, in any event, (a) Lessee shall provide such
additional tax indemnification as Owner Participant and the Note Holders or the
Pass Through Trustees may reasonably request to cover any additional
unindemnified Taxes or loss of Tax benefits described in the assumptions in the
Tax Indemnity Agreement resulting from such change in the situs of the Trust (it
being agreed that if a Lease Event of Default shall have occurred and is then
continuing, it shall not be unreasonable for Owner Participant to withhold its
consent to moving the situs of the Trust, notwithstanding the provision by
Lessee of such additional tax indemnification, unless a Section 1110 Event shall
have occurred and is then continuing), (b) the rights and obligations under the
Operative Agreements of Owner Participant, the Note Holders, Pass Through
Trustees and Mortgagee shall not be adversely affected 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 Lessee and Owner
Trustee shall execute and deliver such documents as may be necessary or as may
<PAGE>
reasonably be requested by Mortgagee to protect and maintain the perfection and
priority of such Lien, (d) Owner Participant, Pass Through Trustees and
Mortgagee shall have received an opinion or opinions of counsel (which counsel
is reasonably satisfactory to Owner Participant, Pass Through Trustees and
Mortgagee) in scope, form and substance reasonably satisfactory to Owner
Participant, Pass Through Trustees and Mortgagee 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) covering such other matters as Owner
Participant, Pass Through Trustees or Mortgagee may reasonably request, (e) if
such removal involves the replacement of Owner Trustee, then Owner Participant,
Pass Through Trustees and Mortgagee shall have received an opinion of counsel to
such successor Owner Trustee in form and substance reasonably satisfactory to
Owner Participant, Pass Through Trustees and Mortgagee covering the matters
described in the opinion delivered pursuant to Section 5.1.2(xxv)(D) and (f)
Lessee shall indemnify and hold harmless Owner Participant, Note Holders, Pass
Through Trustees and First Security, in its individual capacity and as Owner
Trustee, on a net after-tax basis against any and all reasonable out-of-pocket
costs and expenses including attorneys' fees and disbursements, fees and
expenses of any new owner trustee, registration, recording or filing fees and
taxes incurred by Owner Participant, Note Holders, Pass Through Trustees or
Owner Trustee in connection with such change of situs. 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, except that if a Lease
Event of Default shall have occurred and is then continuing, except during a
Section 1110 Period, such consent shall not be required.
7.2.4 COMPLIANCE WITH LEASE PROVISIONS
Owner Participant will, solely for the benefit of Lessee, comply with the
express provisions applicable to it contained in the Lease.
7.2.5 SECURITIES ACT
Owner Participant will not directly or indirectly offer any beneficial
interest or security relating to the ownership of the Aircraft or any interest
in the Trust Estate or any of the Equipment Notes or any other interest in or
security under the Trust Indenture for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any Person in violation of the registration provisions of the Securities Act or
<PAGE>
applicable state or foreign securities Laws, provided that the foregoing shall
not be deemed to impose on Owner Participant any responsibility with respect to
any such offer, sale or solicitation by any other party hereto.
7.2.6 REGARDING THE OWNER TRUSTEE
Owner Participant will instruct Owner Trustee to perform its obligations
under each Owner Trustee Agreement.
7.3 COVENANTS OF FIRST SECURITY AND OWNER TRUSTEE
First Security, in its individual capacity and/or as Owner Trustee, as
provided below, covenants and agrees with Lessee, Owner Participant, each Note
Holder and Mortgagee as follows:
7.3.1 LIENS
First Security (a) will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it or Owner Trustee with respect
to all or any part of the Trust Estate, the Trust Indenture Estate or the
Aircraft, (b) will, at its own cost and expense, take such action as may be
necessary to discharge any Lessor Lien attributable to First Security or Owner
Trustee on all or any part of the Trust Estate, the Trust Indenture Estate or
the Aircraft, PROVIDED that First Security shall not be in breach of its
obligations under this sentence so long as (i) First Security shall, at its own
cost and expense, be diligently contesting such Lessor Lien in good faith by
appropriate proceedings and (ii) such Lessor Lien and such proceedings do not
involve (x) any material danger of the sale, forfeiture, or loss of the
Aircraft, the Airframe, any Engine or any Part thereof or (y) any restriction on
the use or operation of the Aircraft or title thereto, First Security will in
its individual capacity hold harmless and indemnify Lessee, Owner Participant,
each Note Holder, Mortgagee, each of their respective Affiliates, successors and
permitted assigns, the Trust Estate and the Trust Indenture Estate from and
against (i) any and all Expenses, (ii) any reduction in the amount payable out
of the Trust Estate or the Trust Indenture Estate and (iii) any interference
with the possession, operation or other use of all or any part of the Aircraft,
in each case imposed on, incurred by or asserted against any of the foregoing as
a consequence of any such Lessor Lien.
7.3.2 OTHER BUSINESS
Owner Trustee will not enter into any business or other activity except as
contemplated by the Operative Agreements.
<PAGE>
7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
First Security, in its individual capacity and as Owner Trustee, will give
Lessee, each Participant and Mortgagee 30 days' prior written notice of any
relocation of its chief executive office (as such term is defined in Article 9
of the UCC) from its then present location and will promptly take any action
required by Section 7.3.8 as a result of such relocation.
7.3.4 SECURITIES ACT
First Security, in its individual capacity and as Owner Trustee, will not
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicit any offer to acquire any such interest or security from,
or sell any such interest or security to, any Person in violation of the
registration provisions of the Securities Act or applicable state or foreign
securities Laws, provided that the foregoing shall not be deemed to impose on
First Security in its individual capacity or as Owner Trustee, any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
7.3.5 PERFORMANCE OF AGREEMENTS
Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.
7.3.6 RELEASE OF LIEN OF TRUST INDENTURE
Owner Trustee, in each instance referred to in the Lease in which a
transfer of any property is required to be made by Owner Trustee to Lessee or
any other Person (other than Mortgagee or Owner Participant), shall, at Lessee's
request and expense, use its reasonable efforts to procure from Mortgagee the
prompt release of the Lien of the Trust Indenture with respect to such property.
7.3.7 NOTICES; DOCUMENTS
In the event any claim with respect to any liabilities is filed against the
Owner Trustee in its capacity as such and Owner Trustee shall have Actual
Knowledge thereof, the Owner Trustee shall promptly notify Lessee and Mortgagee
in writing thereof. Owner Trustee further agrees to provide to Lessee promptly
any documents (including the certificate of aircraft registration) that it
receives from the FAA with respect to the Aircraft.
<PAGE>
7.3.8 FILINGS
After the Closing Date, Owner Trustee shall duly execute and deliver to
Lessee all filings and recordings (including, without limitation, all filings
and UCC financing statements under the Act and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office), prepared and delivered to it by Lessee required to perfect Owner
Trustee's title to the Aircraft and the liens of and security interests granted
by the Trust Indenture (or to maintain such perfection) and to make such title,
liens and security interests valid and enforceable.
7.3.9 TRUST AGREEMENT
Each of First Security and Owner Trustee hereby agrees with Lessee, Loan
Participant and Mortgagee not to revoke the trust created by the Trust Agreement
so long as the Trust Indenture remains undischarged or if such revocation would
have an adverse effect on the Lessee. Nothing contained in this Agreement shall
impair any right under the Trust Agreement of First Security to resign as Owner
Trustee in accordance with the provisions of the Trust Agreement.
7.4 COVENANTS OF WTC
WTC in its individual capacity or as Mortgagee, each Applicable Pass
Through Trustee or Subordination Agent, as the case may be, covenants and agrees
with Lessee, Owner Participant and Owner Trustee as follows:
7.4.1 LIENS
WTC (a) will not directly or indirectly create, incur, assume or suffer to
exist any Lessor Lien attributable to it on or with respect to all or any part
of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b) will, at
its own cost and expense, promptly take such action as may be necessary to
discharge any Lessor Lien attributable to WTC on all or any part of the Trust
Estate, the Trust Indenture Estate or the Aircraft and (c) will in its
individual capacity hold harmless and indemnify Lessee, Owner Participant, each
Note Holder, Owner Trustee, each of their respective Affiliates, successors and
permitted assigns, the Trust Estate and the Trust Indenture Estate from and
against (i) any and all Expenses, (ii) any reduction in the amount payable out
of the Trust Estate or the Trust Indenture Estate and (iii) any interference
with the possession, operation or other use of all or any part of the Aircraft,
<PAGE>
in each case imposed on, incurred by or asserted against any of the foregoing as
a consequence of any such Lessor Lien.
7.4.2 SECURITIES ACT
WTC in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, will not offer any beneficial interest or Security relating
to the ownership of the Aircraft or any interest in the Trust Indenture Estate,
or any of the Equipment Notes or any other interest in or security under the
Trust Indenture for sale to, or solicit any offer to acquire any such interest
or security from, or sell any such interest or security to, any Person in
violation of the Securities Act or applicable state or foreign securities Laws,
provided that the foregoing shall not be deemed to impose on WTC any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
7.4.3 PERFORMANCE OF AGREEMENTS
WTC, in its individual capacity and as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, shall perform its obligations under the
Indenture Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements in accordance with the terms thereof.
7.4.4 WITHHOLDING TAXES
WTC shall indemnify (on an after-tax basis) and hold harmless Lessee,
Lessor and Owner Participant against any United States withholding taxes (and
related interest, penalties and additions to tax) as a result of the failure by
WTC to withhold on payments to any Note Holder if such Note Holder failed to
provide to Mortgagee necessary certificates or forms to substantiate the right
to exemption from such withholding tax.
7.5 COVENANTS OF NOTE HOLDERS
Each Note Holder (including Subordination Agent) as to itself only
covenants and agrees with Lessee, Owner Participant, Owner Trustee and Mortgagee
as follows:
7.5.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on an
after-tax basis) and hold harmless Lessee, Lessor, Owner Participant and
Mortgagee against any United States withholding taxes (and related interest,
penalties and additions to tax) as a result of the inaccuracy or invalidity of
any certificate or form provided by such Note Holder to Mortgagee in connection
<PAGE>
with such withholding taxes. Any amount payable hereunder shall be paid within
30 days after receipt by a Note Holder of a written demand therefor.
7.5.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (i) not transfer any Equipment Note or interest
therein in violation of the Securities Act or applicable state or foreign
securities Law; PROVIDED, that the foregoing provisions of this section shall
not be deemed to impose on such Note Holder any responsibility with respect to
any such offer, sale or solicitation by any other party hereto, and (ii) perform
and comply with the obligations specified to be imposed on it (as a Note Holder)
under each of the Trust Indenture and the form of Equipment Note set forth in
the Trust Indenture.
(b) Except as otherwise required by the terms of Section 2.13 of the Trust
Indenture, each Note Holder will not sell, assign, convey, exchange or otherwise
transfer any Equipment Note or any interest in, or represented by, any Equipment
Note (it being understood that this provision is not applicable to the Pass
Through Certificates) unless the proposed transferee thereof first provides
Lessee and Owner Participant with both of the following:
(i) a written representation and covenant that either (a) no
portion of the funds it uses to purchase, acquire and hold such Equipment
Note or interest directly or indirectly constitutes, or may be deemed under
the Code or ERISA or any rulings, regulations or court decisions thereunder
to constitute, the assets of any Plan or (b) the transfer, and subsequent
holding, of such Equipment Note or interest shall not involve or give rise
to a transaction that constitutes a prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code involving
Lessee, Owner Participant, a Pass Through Trustee, the Subordination Agent
or the proposed transferee (other than a transaction that is exempted from
the prohibitions of such sections by applicable provisions of ERISA or the
Code or administrative exemptions or regulations issued thereunder); and
(ii) a written covenant that it will not transfer any
Equipment Note or any interest in, or represented by, any Equipment Note
unless the subsequent transferee also makes the representation described in
clause (i) above and agrees to comply with this clause (ii) and the other
covenants of the Note Holders contained in the Operative Agreements.
<PAGE>
7.6 AGREEMENTS
7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES
Lessee, the Owner Participant and Owner Trustee agree that for all
purposes, after the Closing, Owner Trustee will be the owner of the Aircraft
(except that Owner Participant will be the owner for income tax purposes) and
Lessee will be the lessee thereof. No transfer, by operation of Law or
otherwise, of the beneficial interest of Owner Participant in and to the Trust
Estate shall operate to transfer legal title to any part of the Trust Estate to
any transferee thereof.
7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS
Lessee, each Participant, each Note Holder, First Security, Owner Trustee,
WTC and Mortgagee agree for the benefit of each of the others that it will not
commence or join in any proceeding under the Bankruptcy Code to commence a case
under Section 303 of the Bankruptcy Code against the Trust Estate. Nothing
contained herein shall be deemed to preclude any Participant, any Note Holder,
First Security, Owner Trustee, WTC or Mortgagee from filing any claim against
the Trust Estate in any case commenced against the Trust Estate.
7.6.3 CERTAIN BANKRUPTCY MATTERS
If (a) all or any part of the Trust Estate becomes the property of, or
Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy Code,
First Security or Owner Participant is required, by reason of First Security or
Owner Participant being held to have recourse liability to any Note Holder or
Mortgagee directly or indirectly (other than the recourse liability of First
Security or Owner Participant under this Agreement, the Trust Indenture or by
separate agreement), to make payment on account of any amount payable as
principal, Make-Whole Amount, if any, interest or other amounts on the Equipment
Notes, and (c) any Note Holder or Mortgagee actually receives any Excess Amount,
as defined below, which reflects any payment by First Security or Owner
Participant on account of (b) above, then such Note Holder or Mortgagee, as the
case may be, shall promptly refund to First Security or Owner Participant
(whichever shall have made such payment) such Excess Amount.
For purposes of this Section 7.6.3, "Excess Amount" means the amount by
which such payment exceeds the amount that would have been received by a Note
Holder or Mortgagee if First Security or Owner Participant had not become
<PAGE>
subject to the recourse liability referred to in clause (b) above, and such Note
Holder or Mortgagee receives written notice that such amount is an Excess Amount
prior to its distribution thereof. Nothing contained in this Section 7.6.3 shall
prevent a Note Holder or Mortgagee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of First Security or Owner
Participant under this Agreement (other than as referred to in clause (b) above)
or the Trust Indenture (and any exhibits or annexes thereto) or from retaining
any amount paid by Owner Participant under Sections 2.13 or 4.03 of the Trust
Indenture.
7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING
(a) Owner Participant, each Pass Through Trustee, Subordination Agent, each
Note Holder, Owner Trustee and Mortgagee agrees as to itself with Lessee that,
so long as no Lease Event of Default shall have occurred and be continuing, such
Person shall not (and shall not permit any Affiliate or other Person claiming
by, through or under it to) interfere with Lessee's rights in accordance with
the Lease to the quiet enjoyment, possession and use of the Aircraft during the
Term.
(b) Any assignment, sale, transfer or other conveyance of the Aircraft by
Owner Trustee made pursuant to the terms of this Agreement or the Lease shall
bind Owner Participant and shall be effective to transfer or convey all right,
title and interest of Owner Trustee and 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 Owner Trustee, as regards Owner Participant.
7.6.5 RELEASE OF LIEN TRUST INDENTURE
Each of Lessee, Lessor and Mortgagee agrees that in each instance referred
to in the Lease in which a transfer of any property is required to be made by
Lessor to Lessee or any other Person (other than Mortgagee), Mortgagee shall,
upon request of Lessor and compliance with the applicable provisions of the
Lease and Trust Indenture, promptly execute (at Lessee's cost and expense) such
instruments as Lessor or Lessee may reasonably request to evidence the release
of the Lien of the Trust Indenture with respect to such property.
7.6.6 NON-RECOURSE
Loan Participant and Mortgagee agree that (a) obligations of Owner Trustee
under the Trust Indenture or any other Operative Agreement and with respect to
<PAGE>
the Equipment Notes shall be non-recourse to Owner Participant and to First
Security and (b) they will look solely to the income and proceeds from the Trust
Estate and the Trust Indenture Estate to the extent available for distribution
to Note Holder or Mortgagee as provided in the Trust Indenture and that neither
Owner Participant nor First Security will be personally liable to Loan
Participant or Mortgagee for any amounts payable by Owner Trustee under the
Trust Indenture or any other Operative Agreement; PROVIDED, HOWEVER, that the
foregoing is not intended nor shall it be construed to limit any recourse
liability of Owner Participant or First Security to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any representation or warranty
or covenant given by such Person (in the case of First Security, in its
individual capacity).
7.6.7 OTHER DOCUMENTS; AMENDMENT
(a) Each of the Owner Participant and the Owner Trustee hereby agrees with
Lessee, the Loan Participant, and the Mortgagee not to amend, supplement or
otherwise modify any provision of the Trust Agreement in a manner that could
materially adversely affect such party without the prior written consent of such
party. Notwithstanding the foregoing, so long as the Lease has not been
terminated or expired, each Participant, the Mortgagee and the Owner Trustee
hereby agree for the benefit of Lessee that without the consent of Lessee they
will not amend, supplement or otherwise modify (i) Article III, Article IX or
Sections 2.05 or 2.15 of the Trust Indenture, (ii) any provision of any
Operative Agreement that will affect the stated principal amount of or premium
or interest on the Equipment Notes or (iii) any other provision of the Trust
Indenture or Equipment Notes in a manner that could materially adversely affect
Lessee. Mortgagee and Owner Trustee agree promptly to furnish to Lessee copies
of any supplement, amendment, waiver or modification of any of the Operative
Agreements to which Lessee is not a party. Loan Participant agrees that it will
not take any action in respect of the Trust Indenture Estate except through the
Mortgagee pursuant to the Trust Indenture or as otherwise permitted by Trust
Indenture.
(b) Owner Trustee agrees to join with Lessee to the extent that action on
its part is necessary or appropriate (i) to cause the following to be duly
accomplished in accordance with applicable United States federal Law by the time
the Aircraft is delivered under this Agreement and the Lease: (A) the
application for registration of the Aircraft in the name of Owner Trustee and
(B) all related action necessary in order for Lessee to have temporary or
permanent authority to operate the Aircraft as contemplated by the Lease and
<PAGE>
(ii) forthwith upon delivery of the Aircraft under this Agreement and the Lease,
to cause all necessary documents to be duly filed for recording in accordance
with applicable United States federal Law.
7.6.8 CONSENTS
Owner Participant and Owner Trustee each covenants and agrees, for the
benefit of Lessee, that it shall not unreasonably withhold its consent to any
consent or approval requested of it or of Owner Trustee or Mortgagee under the
terms of any of the Operative Agreements which by its terms is not to be
unreasonably withheld.
7.6.9 INSURANCE
Each of Owner Participant, the Pass Through Trustees, the Subordination
Agent and the Owner Trustee agrees not to obtain or maintain insurance for its
own account as permitted by Section 11.2 of the Lease if such insurance would
limit or otherwise materially adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to Section 11 and Annex
D of the Lease.
7.6.10 EXTENT OF INTEREST OF NOTE HOLDERS
A Note Holder shall not, as such, have any further interest in, or other
right with respect to, the Trust Estate or the Trust Indenture Estate when and
if the principal and Make-Whole Amount, if any, of and interest on the Equipment
Note held by such Holder, and all other sums, then due and payable to such
Holder hereunder and under any other Operative Agreement, shall have been paid
in full.
7.6.11 FOREIGN REGISTRATION
Each Participant, Owner Trustee and Mortgagee hereby agree, for the benefit
of Lessee but subject to the provisions of Section 7.1.2 of the Lease:
(a) that Lessee shall be entitled to register the Aircraft or cause the
Aircraft to be registered in a country other than the United States subject to
compliance with the following:
(i) each of the following requirements is satisfied:
(A) such registration shall be made only after the Tax Attribute
Period, unless Lessee prepays on a lump sum basis calculated
<PAGE>
pursuant to Section 5(f) of the Tax Indemnity Agreement any
liability due under the Tax Indemnity Agreement as a result of
such registration based upon the assumption that such
registration would continue for the remainder of the term of the
Permitted Sublease described in clause (C) below, provided, that
notwithstanding the foregoing, such registration may be made
during the taxable year in which the seventh anniversary of the
Closing Date occurs so long as the Aircraft is not "used
predominantly outside the United States" within the meaning of
Section 168(g) of the Code during such taxable years;
(B) no Lease Event of Default shall have occurred and be continuing
at the time of such registration;
(C) such proposed change of registration is made in connection with a
Permitted Sublease to a Permitted Air Carrier;
(D) such country is a Permitted Country with which the United States
then maintains normal diplomatic relations.
(ii) the Owner Trustee, Owner Participant and Mortgagee shall have
received an opinion, in form and substance reasonably satisfactory to the
Owner Participant (subject to customary exceptions) of counsel reasonably
satisfactory to the Owner Participant addressed to each such party to the
effect that:
(A) such country would recognize the Owner Trustee's title to,
ownership interest in and right to possession of, the Aircraft;
(B) the obligations of Lessee, and the rights and remedies of
Owner Trustee, under the Lease are valid, binding and enforceable
under the laws of such country (or the laws of the country to which
the laws of such country would refer as the applicable governing law);
(C) after giving effect to such change in registration, the Lien
of the Trust Indenture on the Owner Trustee's right, title and
interest in and to the Aircraft and the Lease shall continue as a
valid and duly perfected first priority security interest and all
filing, recording or other action necessary to protect the same shall
have been accomplished (or, if such opinion cannot be given at the
<PAGE>
time of such proposed change in registration because such change in
registration is not yet effective, (1) the opinion shall detail what
filing, recording or other action is necessary and (2) Owner Trustee
and the Mortgagee shall have received a certificate from Lessee 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 Owner Trustee and the Mortgagee on or
prior to the effective date of such change in registration;
(D) it is not necessary, solely as a consequence of such change
in registration and without giving effect to any other activity of
Owner Trustee, the Owner Participant or the Mortgagee (or any
Affiliate thereof), as the case may be, for Owner Trustee, the Owner
Participant or the Mortgagee to qualify to do business in such country
as a result of such reregistration;
(E) there is no tort liability of the owner or lessor of an
aircraft not in possession thereof under the laws of such country (it
being agreed 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
is provided to cover such risk); and
(F) unless Lessee shall have agreed to provide insurance
reasonably satisfactory to Owner Participant covering the risk of
requisition of use of the Aircraft by the government of such country
(so long as the Aircraft is registered under the laws of such
country), the laws of such country require fair compensation by the
government of such country payable in currency freely convertible into
Dollars and freely removable from such country (without license or
permit, unless Lessee prior to such proposed reregistration has
obtained such license or permit) for the taking or requisition by such
government of such use.
(b) In addition, as a condition precedent to any change in registration
Lessee shall have given to Lessor and Mortgagee assurances reasonably
satisfactory to each of them:
<PAGE>
(i) to the effect that the provisions of Section 11 of the Lease have
been complied with after giving effect to such change of
registration; and
(ii) of the payment by Lessee of all reasonable out-of-pocket expenses
at no after-tax cost to any Participant of Lessor, each
Participant and Mortgagee in connection with such change of
registry, including, without limitation (1) the reasonable fees
and disbursements of counsel to Lessee, Lessor and Mortgagee, (2)
any filing or recording fees, Taxes or similar payments incurred
in connection with the change of registration of the Aircraft and
the creation and perfection of the security interest therein in
favor of Mortgagee for the benefit of Note Holders, (3) all costs
and expenses incurred in connection with any filings necessary to
continue in the United States the perfection of the security
interest in the Aircraft and the Lease in favor of Mortgagee for
the benefit of Note Holders and (4) costs in connection with the
calculation of the lump sum payment described in clause (i)(A) of
this Section 7.6.11.
7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED
Notwithstanding anything to the contrary set forth in any Operative
Agreement:
(a) Except as set forth in the Purchase Agreement Assignment, nothing
contained in the Operative Agreements shall constitute or be deemed to be a
waiver by Lessee of any rights, remedies or claims it may have against Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either;
and the Operative Agreements do not and shall not be construed or deemed to
create any rights, waivers, immunities or indemnities in favor of Airframe
Manufacturer, Engine Manufacturer or any subcontractor or supplier of either
with respect to any such rights, remedies or claims of Lessee; and
(b) The Airframe Manufacturer, by its execution and delivery of the Consent
and Agreement, shall not be deemed to have waived any rights, remedies or claims
which Airframe Manufacturer (or any subcontractor or supplier of Airframe
Manufacturer) may have against Lessee; and the Operative Agreements do not and
shall not be construed or deemed to create any rights, waivers, immunities or
indemnities in favor of Lessee with respect to any such rights, remedies or
<PAGE>
claims of Airframe Manufacturer (or any subcontractor or supplier of Airframe
Manufacturer).
7.6.13 INTEREST IN CERTAIN ENGINES
Each Participant, Owner Trustee, and Mortgagee agree, for the benefit of
each of the lessor, conditional seller, mortgagee or secured party of any
airframe or engine leased to, or purchased by, Lessee or any Permitted Sublessee
subject to a lease, conditional sale, trust indenture or other security
agreement that it will not acquire or claim, as against such lessor, conditional
seller, mortgagee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such mortgagee or secured
party.
SECTION 8. CONFIDENTIALITY
Lessee, Owner Participant, Note Holders, Owner Trustee, Mortgagee, Existing
Lessor, Existing Mortgagee and Airframe Manufacturer shall keep Annexes B, C and
D and Schedules 1, 2, 3 and 4 to the Lease, the Purchase Agreement Assignment
and the Tax Indemnity Agreement confidential and shall not disclose, or cause to
be disclosed, the same to any Person, except (A) to prospective and permitted
transferees of Lessee's, Owner Participant's, a Note Holder's, a Liquidity
Provider's, Owner Trustee's, Mortgagee's or other Indenture Indemnitee's
interest or their respective counsel or special counsel, independent insurance
brokers, auditors, or other agents who agree to hold such information
confidential, (B) to Lessee's, Owner Participant's, a Note Holder's, a Liquidity
Provider's, a Pass Through Trustee's, Owner Trustee's, Mortgagee's or other
Indenture Indemnitee's counsel or special counsel, independent insurance
brokers, auditors, or other agents, Affiliates or investors who agree to hold
such information confidential, (C) as may be required by any statute, court or
administrative order or decree, legal process or governmental ruling or
regulation, including those of any applicable insurance regulatory bodies
(including, without limitation, the National Association of Insurance
Commissioners), federal or state banking examiners, Internal Revenue Service
auditors or any stock exchange, (D) with respect to Lessee and Owner
Participant, by mutual agreement of such parties, (E) with respect to a Note
Holder or any Pass Through Trustee, to a nationally recognized rating agency for
the purpose of obtaining a rating on the Equipment Notes or the Pass Through
Certificates or to support an NAIC rating for the Equipment Notes or (F) such
<PAGE>
other Persons as are reasonably deemed necessary by the disclosing party in
order to protect the interests of such party or for the purposes of enforcing
such documents by such party; PROVIDED, that any and all disclosures permitted
by clauses (C), (D), (E) or (F) above shall be made only to the extent necessary
to meet the specific requirements or needs of the Persons making such
disclosures.
SECTION 9. INDEMNIFICATION AND EXPENSES
9.1 GENERAL INDEMNITY
9.1.1 INDEMNITY
If the Closing occurs, Lessee shall indemnify, protect, defend and hold
harmless each Indemnitee from, against and in respect of, and shall pay on a net
after-tax basis, any and all Expenses of any kind or nature whatsoever that may
be imposed on, incurred by or asserted against any Indemnitee, relating to,
resulting from, or arising out of or in connection with, any one or more of the
following:
(a) The Operative Agreements, the Pass Through Agreements, or the
enforcement of any of the terms of any of the Operative Agreements or the Pass
Through Agreements;
(b) The Aircraft, the Airframe, any Engine or any Part, including, without
limitation, with respect thereto, (i) the manufacture, design, purchase,
acceptance, nonacceptance or rejection, ownership, registration, reregistration,
deregistration, delivery, nondelivery, lease, sublease, assignment, possession,
use or non-use, operation, maintenance, testing, repair, overhaul, condition,
alteration, modification, addition, improvement, storage, airworthiness,
replacement, repair, sale, substitution, return, abandonment, redelivery or
other disposition of the Aircraft, any Engine or any Part, (ii) any claim or
penalty arising out of violations of applicable Laws by Lessee (or any Permitted
Sublessee), (iii) tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed), (iv) death or property
damage of passengers, shippers or others, (v) environmental control, noise or
pollution and (vi) any Liens in respect of the Aircraft, any Engine or any Part;
(c) The offer, sale, or delivery of any Equipment Notes, Pass Through
Certificates or any interest therein or represented thereby; and
(d) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
<PAGE>
performed by Lessee under any Lessee Operative Agreement or any Pass Through
Agreement or the falsity of any representation or warranty of Lessee in any
Lessee Operative Agreement or any Pass Through Agreement other than in the Tax
Indemnity Agreement.
9.1.2 EXCEPTIONS
Notwithstanding anything contained in Section 9.1.1, Lessee shall not be
required to indemnify, protect, defend and hold harmless any Indemnitee pursuant
to Section 9.1.1 in respect of any Expense of such Indemnitee:
(a) For any Taxes or a loss of Tax benefit, whether or not Lessee is
required to indemnify therefor pursuant to Section 9.3 or the Tax Indemnity
Agreement;
(b) Except to the extent attributable to acts or events occurring prior
thereto, acts or events (other than acts or events related to the performance or
failure to perform by Lessee of its obligations pursuant to the terms of the
Lessee Operative Agreements) that occur after the earliest of: (i) with respect
to the Airframe, any Engine or any Part, the return of possession (it being
understood that the date of the placement of the Aircraft in storage as provided
in Section 5 of the Lease constitutes the date of return of the Aircraft under
the Lease) of such Airframe, Engine or Part pursuant to the terms of and in
compliance with the Lease (other than pursuant to Section 15 thereof, in which
case Lessee's liability under this Section 9.1 shall survive for so long as
Lessor or Mortgagee shall be entitled to exercise remedies under such Section
15) or (ii) the termination of the Term in accordance with the Lease;
(c) To the extent attributable to any Transfer (voluntary or involuntary)
by or on behalf of such Indemnitee of any Equipment Note or interest therein,
except (i) for out-of-pocket costs and expenses incurred as a result of any such
Transfer pursuant to the exercise of remedies under any Operative Agreement
resulting from a Lease Event of Default and (ii) as otherwise required by the
terms of Section 2.13 of the Trust Indenture;
(d) To the extent attributable to any Transfer (voluntary or involuntary)
by or on behalf of Owner Participant of any interest in the Aircraft, or the
Trust Estate except for costs and expenses incurred as a result of such
Transfer, if such Transfer arises directly from a Lease Event of Default that
shall have occurred and be continuing;
(e) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
<PAGE>
(other than gross negligence or willful misconduct imputed to such person by
reason of its interest in the Aircraft or any Operative Agreement);
(f) In the case of First Security, to the extent attributable to matters
enumerated in the proviso to Section 14;
(g) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Agreement or any Pass Through
Agreement;
(h) To the extent attributable to the failure by such Indemnitee or any
related Indemnitee to perform or observe any agreement, covenant or condition on
its part to be performed or observed in any Operative Agreement or any Pass
Through Agreement;
(i) To the extent attributable to the offer or sale by such Indemnitee or
any related Indemnitee of any interest in the Aircraft, the Equipment Notes, the
Pass Through Certificates, the Trust Estate or the Trust Agreement or any
similar interest, in violation of the Securities Act or other applicable
federal, state or foreign securities Laws (other than any offer or sale thereof
caused by the acts or omissions of Lessee);
(j) (i) With respect to any Indemnitee (other than Mortgagee), to the
extent attributable to the failure of the Mortgagee to distribute funds received
and distributable by it in accordance with the Trust Indenture, (ii) with
respect to any Indemnitee (other than the Owner Trustee), to the extent
attributable to the failure of the Owner Trustee to distribute funds received
and distributable by it in accordance with the Trust Agreement, (iii) with
respect to any Indemnitee (other than the Subordination Agent), to the extent
attributable to the failure of the Subordination Agent to distribute funds
received and distributable by it in accordance with the Intercreditor Agreement,
(iv) with respect to any Indemnitee (other than the Pass Through Trustees), to
the extent attributable to the failure of a Pass Through Trustee to distribute
funds received and distributable by it in accordance with the Pass Through Trust
Agreements, (v) with respect to Mortgagee, to the extent attributable to the
negligence or willful misconduct of Mortgagee in the distribution of funds
received and distributable by it in accordance with the Trust Indenture, (vi)
with respect to Owner Trustee, to the extent attributable to the negligence or
willful misconduct of Owner Trustee in the distribution of funds received and
distributable by it in accordance with the Trust Agreement, (vii) with respect
to the Subordination Agent, to the extent attributable to the negligence or
<PAGE>
willful misconduct of the Subordination Agent in the distribution of funds
received and distributable by it in accordance with the Intercreditor Agreement,
and (viii) with respect to the Pass Through Trustees, to the extent attributable
to the negligence or willful misconduct of a Pass Through Trustee in the
distribution of funds received and distributable by it in accordance with the
Pass Through Trust Agreements.
(k) Other than during the continuation of a Lease Event of Default, to the
extent attributable to the authorization or giving or withholding of any future
amendments, supplements, waivers or consents with respect to any Operative
Agreement or Pass Through Agreement other than such as have been requested by
Lessee or as are required by or made pursuant to the terms of the Operative
Agreements or Pass Through Agreements (unless such requirement results from the
actions of an Indemnitee not required by or made pursuant to the Operative
Agreements or the Pass Through Agreements);
(l) To the extent attributable to any amount which any Indemnitee expressly
agrees to pay or such Indemnitee expressly agrees shall not be paid by or be
reimbursed by Lessee;
(m) To the extent that it is an ordinary and usual operating or overhead
expense;
(n) With respect to the Owner Participant or the Owner Trustee, or any
related Indemnitee, to the extent attributable to the deregistration of the
Aircraft under the Act as a result of Owner Participant's or Owner Trustee's (or
any related Indemnitee of either) not being a Citizen of the United States as a
result of any act (other than reregistration of the Aircraft pursuant to Section
7.1.2 of the Lease) of Owner Participant or Owner Trustee, or any related
Indemnitee of either of the foregoing (not taken at the request of the Lessee);
(o) For any Lessor Lien attributable to such Indemnitee or any related
Indemnitee;
(p) If another provision of an Operative Agreement or a Pass Through
Agreement specifies the extent of Lessee's responsibility or obligation with
respect to such Expense, to the extent arising from other than failure of Lessee
to comply with such specified responsibility or obligation;
(q) To the extent it is a Transaction Expense;
(r) To the extent constituting principal, Make-Whole Amount or interest on
the Equipment Notes attributable solely to an Event of Default not constituting
a Lease Event of Default; or
<PAGE>
(s) To the extent incurred by or asserted against an Indemnitee as a result
of any "prohibited transaction", within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code.
For purposes of this Section 9.1, a Person shall be considered a "related"
Indemnitee with respect to an Indemnitee if such Person is an Affiliate or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such Indemnitee or any such Affiliate or a successor or permitted assignee of
any of the foregoing.
9.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
9.1.4 NOTICE
If a claim for any Expense that an Indemnitee shall be indemnified against
under this Section 9.1 is made, such Indemnitee shall give prompt written notice
thereof to Lessee. Notwithstanding the foregoing, the failure of any Indemnitee
to notify Lessee as provided in this Section 9.1.4, or in Section 9.1.5, shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure results in an additional
Expense to Lessee (in which event Lessee shall not be responsible for such
additional Expense) or materially impairs Lessee's ability to contest such
claim.
9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS
(a) In case any action, suit or proceeding shall be brought against any
Indemnitee for which Lessee is responsible under this Section 9.1, such
Indemnitee shall notify Lessee of the commencement thereof and Lessee may, at
its expense, participate in and to the extent that it shall wish (subject to the
provisions of the following paragraph), assume and control the defense thereof
and, subject to Section 9.1.5(c), settle or compromise the same.
(b) Lessee or its insurer(s) shall have the right, at its or their expense,
to investigate or, if Lessee or its insurer(s) shall agree in writing not to
dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 9.1.5 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
<PAGE>
any action, suit or proceeding, relating to any Expense for which
indemnification is sought pursuant to this Section 9.1, and each Indemnitee
shall cooperate with Lessee or its insurer(s) with respect thereto; PROVIDED,
that Lessee shall not be entitled to control the defense of any such action,
suit, proceeding or compromise any such Expense (i) during the continuance of
any Lease Event of Default arising under Section 14.1 of the Lease, (ii) if such
proceedings would entail a material risk of the sale, forfeiture or loss of the
Aircraft or (iii) if such proceedings would entail a risk of criminal liability
or greater than de minimis risk of material civil penalties being imposed on
such Indemnitee. In connection with any such action, suit or proceeding being
controlled by Lessee, such Indemnitee shall have the right to participate
therein, at its sole cost and expense, with counsel reasonably satisfactory to
Lessee; PROVIDED, that such Indemnitee's participation does not, in the
reasonable opinion of the independent counsel appointed by the Lessee or its
insurers to conduct such proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of
Lessee, 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 9.1.
(d) In the case of any Expense indemnified by the Lessee hereunder which is
covered by a policy of insurance maintained by Lessee pursuant to Section 11 of
the Lease, at Lessee's expense, each Indemnitee agrees to cooperate with the
insurers in the exercise of their rights to investigate, defend or compromise
such Expense as may be required to retain the benefits of such insurance with
respect to such Expense.
(e) If an Indemnitee is not a party to this Agreement, Lessee may require
such Indemnitee to agree in writing to the terms of this Section 9 and Section
15.8 prior to making any payment to such Indemnitee under this Section 9.
(f) Nothing herein shall be deemed to be an assumption by Lessee of
obligations of Owner Trustee with respect to, or a guarantee by Lessee of, any
amounts payable by Owner Trustee upon Equipment Notes or a guarantee of any
residual value of the Aircraft.
(g) Nothing contained in this Section 9.1.5 shall be deemed to require an
Indemnitee to contest any Expense or to assume responsibility for or control of
any judicial proceeding with respect thereto.
<PAGE>
9.1.6 INFORMATION
Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Lessee's control or is
reasonably available to Lessee, which such Indemnitee may reasonably request and
will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under Section 9.1.5. The Indemnitee shall supply Lessee
with such information not within the control of Lessee, as is in such
Indemnitee's control or is reasonably available to such Indemnitee, which Lessee
may reasonably request to control or participate in any proceeding to the extent
permitted by Section 9.1.5.
9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER ASSURANCES
Upon the payment in full by Lessee of any indemnity provided for under this
Agreement, Lessee, without any further action and to the full extent permitted
by Law, will be subrogated to all rights and remedies of the person indemnified
(other than with respect to any of such Indemnitee's insurance policies or in
connection with any indemnity claim such Indemnitee may have under Section 5.03
or 7.01 of the Trust Indenture or Section 5.3 or 7 of the Trust Agreement) in
respect of the matter as to which such indemnity was paid. Each Indemnitee will
give such further assurances or agreements and cooperate with Lessee to permit
Lessee to pursue such claims, if any, to the extent reasonably requested by
Lessee and at Lessee's expense.
9.1.8 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with respect to
any Expense paid by Lessee hereunder, it will promptly pay the amount refunded
(but not an amount in excess of the amount Lessee or any of its insurers has
paid in respect of such Expense) over to Lessee unless a Lease Event of Default
shall have occurred and be continuing, in which case such amounts shall be paid
over to Owner Trustee (or, so long as the Trust Indenture shall not have been
discharged, to Mortgagee) to hold as security for Lessee's obligations under the
Lessee Operative Agreements or, if requested by Lessee, applied to satisfy such
obligations.
9.2 EXPENSES
9.2.1 TRANSACTION EXPENSES
Owner Participant shall pay all Transaction Expenses (other than the
ongoing fees, disbursements and expenses of Mortgagee and the Owner Trustee), up
<PAGE>
to an aggregate amount equal to the Expense Limit (including the ongoing fees,
disbursements and expenses of Mortgagee and the Owner Trustee). Airframe
Manufacturer shall pay all Transaction Expenses in excess of the Expense Limit.
Lessee shall have no liability or obligation with respect to Transaction
Expenses.
9.2.2 PAYMENT OF OTHER EXPENSES
Lessee will be responsible for the fees and charges of its counsel incurred
in connection with the preparation, execution and delivery of the Operating
Agreements. All out-of-pocket costs and expenses of Lessee (including, without
limitation, reasonable attorney's fees and charges) incurred in performance of
Sections 7.1.3(a), (b) and (c) (other than with respect to the first
parenthetical of Section 7.1.3(c)) to the extent constituting Transaction
Expenses, shall be paid pursuant to Section 9.2.1 and, otherwise, shall be paid
by Airframe Manufacturer. Existing Lessor and Airframe Manufacturer shall each
pay all costs and expenses incurred by it in connection with the Operative
Agreements.
9.3 GENERAL TAX INDEMNITY
9.3.1 GENERAL
Except as provided in Section 9.3.2, Lessee agrees that each payment of
Rent paid by Lessee pursuant to the Lease, and any other payment or indemnity
paid by Lessee to a Tax Indemnitee under any Operative Agreement, shall be free
of all withholdings or deductions with respect to Taxes of any nature (other
than U.S. federal withholding taxes on, based on or measured by gross or net
income), and in the event that Lessee shall be required by applicable law to
make any such withholding or deduction for any such payment (x) Lessee shall
make all such withholdings or deductions, (y) the amount payable by Lessee shall
be increased so that after making all required withholdings or deductions such
Tax Indemnitee receives (at no after-Tax cost to the Tax Indemnitee) the same
amount that it would have received had no such withholdings or deductions been
made, and (z) Lessee shall pay the full amount withheld or deducted to the
relevant Taxing Authority in accordance with applicable law. Lessee further
agrees that, in the event it is required to withhold from any payment of Basic
Rent, Termination Value, Stipulated Loss Value (and amounts determined by
reference thereto), and amounts payable upon exercise of Lessee's purchase
option pursuant to Section 17.3 of the Lease, any Tax imposed upon Owner
Participant or Owner Trustee (including any withholding Tax based on income or
receipts of Owner Participant or Owner Trustee) and such Tax is excluded from
<PAGE>
indemnification pursuant to Section 9.3.2, Lessee shall pay such additional
amount, if any, required so that the total amount paid by Lessee (after making
all required withholdings) is equal to (assuming timely payment of the Equipment
Notes prior to the relevant Payment Date) the aggregate principal amount of
scheduled installments due on the Equipment Notes outstanding on the relevant
Payment Date, together with accrued and unpaid interest, due on the Equipment
Notes; Owner Participant or Owner Trustee, as the case may be, shall reimburse
Lessee for any such additional amounts within two Business Days after demand
therefor. Except as provided in Section 9.3.2 and whether or not any of the
transactions contemplated hereby are consummated, Lessee shall pay, indemnify,
protect, defend and hold each Tax Indemnitee harmless from all Taxes imposed by
any Taxing Authority that may from time to time be imposed on or asserted
against any Tax Indemnitee or the Aircraft, the Airframe, any Engine or any Part
or any interest in any of the foregoing (whether or not indemnified against by
any other Person), upon or with respect to the Operative Agreements or the
transactions or payments contemplated thereby, including but not limited to any
Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine,
any Part, any Operative Agreement (including without limitation any Equipment
Notes) or any data or any other thing delivered or to be delivered under an
Operative Agreement, (y) the purchase, manufacture, acceptance, rejection, sale,
transfer of title, return, ownership, mortgaging, delivery, transport, charter,
rental, lease, re-lease, sublease, assignment, possession, repossession,
presence, use, condition, storage, preparation, maintenance, modification,
alteration, improvement, operation, registration, transfer or change of
registration, reregistration, repair, replacement, overhaul, location, control,
the imposition of any Lien (other than a Lessor Lien), financing, refinancing
requested by the Lessee, abandonment or other disposition of the Aircraft, the
Airframe, any Engine, any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, or (z) rent, interest, fees or any other
income, proceeds, receipts or earnings, whether actual or deemed, arising upon,
in connection with, or in respect of, any of the Operative Agreements (including
the property or income or other proceeds with respect to property held as part
of the Trust Estate) or the transactions contemplated thereby.
9.3.2 CERTAIN EXCEPTIONS
The provisions of Section 9.3.1 shall not apply to, and Lessee shall have
no liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the United
States or any Taxing Authority of any jurisdiction within the United States in
<PAGE>
which such Tax Indemnitee is incorporated or maintains its principal place of
business or is otherwise subject to Taxes of such type as a result of
transactions or activities other than those contemplated by the Operative
Agreements (i) on, based on, or measured by, gross or net income or gross or net
receipts, including capital gains taxes, excess profits taxes, minimum taxes
from tax preferences, alternative minimum taxes, branch profits taxes,
accumulated earnings taxes, personal holding company taxes, succession taxes and
estate taxes, and any withholding taxes on, based on or measured by gross or net
income or receipts or (ii) on, or with respect to, or measured by, capital or
net worth or in the nature of a franchise tax or a tax for the privilege of
doing business (other than, in the case of clause (i) or (ii), sales, use,
license or property Taxes, value added taxes imposed in lieu of any of the
foregoing, airport excise taxes or any excise taxes imposed in the nature of or
in lieu of any of the foregoing or any Hawaii general excise tax and related
county surcharges imposed as a result of the use or location of the Aircraft in
Hawaii by a Lessee Person; and other than, in the case of clause (ii), any doing
business taxes imposed by a taxing authority in any jurisdiction (other than a
jurisdiction within which such Tax Indemnitee is incorporated or maintains its
principal place of business) if such doing business taxes attributable to the
transactions contemplated by the Operative Agreements were subject to indemnity
pursuant to the provisions of this clause 9.3.2(a) (without regard to this
parenthetical) solely as a result of the usage or location of the Aircraft in
such jurisdiction by a Lessee Person when such Tax Indemnitee was not
incorporated or doing business or otherwise subject to Taxes of such type in
such jurisdiction, if in a subsequent taxable period such Tax Indemnitee becomes
subject to Taxes of such type as a result of activities or transactions other
than those contemplated by the Operative Agreements, to the extent that such
Taxes (and in an amount no more than the amount of such Taxes that) would have
continued to be imposed solely as a result of the usage or location of the
Aircraft by a Lessee Person in such jurisdiction in the absence of any
additional nexus between such Tax Indemnitee and such jurisdiction);
(b) any Taxes imposed in connection with the sale or transfer of the
Aircraft from the Existing Lessor to the Owner Trustee or the purchase by Owner
Trustee for the benefit of the Owner Participant of the Aircraft from the
Existing Lessor;
(c) on, or with respect to, or measured by, any trustee fees, commissions
or compensation received by Owner Trustee, Pass Through Trustee, Subordination
Agent or Mortgagee;
<PAGE>
(d) on the Trust or the Trust Estate that result from treatment of the
Trust or the Trust Estate as an entity, such as a corporation, separate and
apart from the Owner Participant;
(e) that are being contested as provided in Section 9.3.4 hereof, for so
long as such contest is continuing;
(f) imposed on any Tax Indemnitee to the extent that such Taxes result from
the gross negligence or willful misconduct of such Tax Indemnitee, a related Tax
Indemnitee or any Affiliate thereof;
(g) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is imposed on, or is
collected from, the transferee) as a result of a transfer or other disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of the Owner Participant, by Owner Trustee
(unless requested by the Lessee), or, in the case of Taxes imposed on a
transferee, by the transferor) of any interest in the Aircraft, the Airframe,
any Engine or any Part, the Rent (other than the assignment of Rent to the Loan
Trustee pursuant to the Trust Indenture), the Trust, the Trust Estate, the Trust
Indenture Estate, the Lease or any interest arising under the Operative
Agreements or any Equipment Note or a transfer or disposition (including a
deemed transfer or disposition) of any interest in a Tax Indemnitee (other than
(A) a substitution or replacement of the Aircraft, the Airframe, any Engine or
any Part by a Lessee Person that is treated for Tax purposes as a transfer or
disposition, (B) a transfer pursuant to an exercise of remedies upon a Lease
Event of Default that shall have occurred and have been continuing, or (C) a
transfer to Lessee pursuant to Section 17.3 of the Lease);
(h) except with respect to gross-ups, imposed subsequent to (and not in
respect of) a transfer or other disposition described in paragraph (g) above and
in excess of those that would have been imposed had there not been a transfer or
other disposition by or to such Tax Indemnitee or a related Tax Indemnitee
described in paragraph (g) above;
(i) imposed on the Owner Participant and indemnified by Lessee pursuant to
the Tax Indemnity Agreement;
(j) imposed with respect to any period after the expiration or earlier
termination of the Term and, if required pursuant to the terms of the Lease, the
return of possession of the Aircraft to Lessor or placement in storage at the
request of Lessor in accordance with the Lease (provided that this exclusion (j)
<PAGE>
shall not apply to Taxes imposed after such period arising as a result of events
occurring prior to such expiration or earlier termination);
(k) consisting of any interest, penalties or additions to tax imposed on a
Tax Indemnitee resulting from a failure of such Tax Indemnitee or a related Tax
Indemnitee to file any return properly and timely, unless such failure shall be
caused by the failure of Lessee to fulfill its obligations, if any, under
Section 9.3.6 with respect to such return, PROVIDED that if any such return is
required to be filed in a jurisdiction outside the United States, which return
would not have been required to be filed in the absence of the transactions
contemplated under the Operative Agreements or Lessee's transactions or
activities in such jurisdiction, this exclusion shall not apply if (A) Lessee
has not informed the Tax Indemnitee in writing of the need to file such return
at least 30 days prior to the due date thereof (or such shorter period as would
reasonably allow the Tax Indemnitee to file such return if, under the
circumstances, the Lessee could not have reasonably informed the Tax Indemnitee
of the need to file at least 30 days prior to the due date thereof), or (B) the
Tax Indemnitee had determined in good faith that such filing would subject it or
any Affiliate to adverse consequences in such jurisdiction for which it had not
been (and would not have been) indemnified;
(l) resulting from, or that would not have been imposed but for, any Lessor
Liens arising as a result of claims against, or acts or omissions of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee;
(m) imposed on any Tax Indemnitee as a result of the breach by such Tax
Indemnitee or a related Tax Indemnitee of any covenant of such Tax Indemnitee or
any Affiliate thereof contained in any Operative Agreement or the inaccuracy of
any representation or warranty by such Tax Indemnitee or any Affiliate thereof
in any Operative Agreement;
(n) in the nature of an intangible or similar Tax (i) upon or with respect
to the value or principal amount of the interest of Loan Participant or any Note
Holder in any Equipment Note or the loan evidenced thereby or (ii) upon or with
respect to the value of the interest of the Owner Participant in the Trust
Estate or the Trust, in each case only if such Taxes are in the nature of
franchise Taxes or result from the Tax Indemnitee doing business in the taxing
jurisdiction and are imposed because of the place of incorporation or the
activities unrelated to the transactions contemplated by the Operative
Agreements in the taxing jurisdiction of such Tax Indemnitee;
<PAGE>
(o) that are included in Lessor's Cost and paid to the appropriate Taxing
Authority;
(p) imposed on a Tax Indemnitee by a Taxing Authority of a jurisdiction
outside the United States within which such Tax Indemnitee is incorporated or
maintains its principal place of business or to the extent that such Taxes would
not have been imposed but for a connection between the Tax Indemnitee or a
related Tax Indemnitee and such jurisdiction imposing such Tax unrelated to the
transactions contemplated by the Operative Agreements; or
(q) Taxes relating to ERISA or Section 4975 of the Code.
For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees that
are successors, assigns, agents, servants or Affiliates of such Tax Indemnitee
shall be related Tax Indemnitees.
9.3.3 PAYMENT
(a) Lessee's indemnity obligation to a Tax Indemnitee under this Section
9.3 shall equal the amount which, after taking into account any Tax imposed upon
the receipt or accrual of the amounts payable under this Section 9.3 and any tax
benefits actually recognized by such Tax Indemnitee as a result of the
indemnifiable Tax (including, without limitation, any benefits recognized as a
result of an indemnifiable Tax being utilized by such Tax Indemnitee as a credit
against Taxes not indemnifiable under this Section 9.3), shall equal the amount
of the Tax indemnifiable under this Section 9.3.
(b) At Lessee's request, the computation of the amount of any indemnity
payment owed by Lessee or any amount owed by a Tax Indemnitee to Lessee pursuant
to this Section 9.3 shall be verified and certified by an independent public
accounting firm selected by such Tax Indemnitee and reasonably satisfactory to
Lessee. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Lessee
unless such verification shall result in an adjustment in Lessee's favor of 5%
or more of the net present value (computed using a discount rate equal to the
Debt Rate, compounded semiannually) of the payment as computed by such Tax
Indemnitee, in which case the costs shall be paid by such Tax Indemnitee.
(c) Each Tax Indemnitee shall provide Lessee with such certifications,
information and documentation as shall be in such Tax Indemnitee's possession
and as shall be reasonably requested by Lessee to minimize any indemnity payment
<PAGE>
pursuant to this Section 9.3; provided, that notwithstanding anything to the
contrary contained herein, no Tax Indemnitee shall be required to provide Lessee
with any Tax returns.
(d) Each Tax Indemnitee shall promptly forward to Lessee any written
notice, bill or advice received by it from any Taxing Authority concerning any
Tax for which it seeks indemnification under this Section 9.3. Lessee shall pay
any amount for which it is liable pursuant to this Section 9.3 directly to the
appropriate Taxing Authority if legally permissible or upon demand of a Tax
Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a
contest occurs in accordance with Section 9.3.4, within 30 days after a Final
Determination (as defined below)), but in no event more than two Business Days
prior to the date the Tax to which such amount payable hereunder relates is due.
If requested by a Tax Indemnitee in writing, Lessee shall furnish to the
appropriate Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of any Tax paid by Lessee or such other evidence of payment of
such Tax as is acceptable to such Tax Indemnitee. Lessee shall also furnish
promptly upon written request such data as any Tax Indemnitee may reasonably
require to enable such Tax Indemnitee to comply with the requirements of any
taxing jurisdiction unless such data is not reasonably available to Lessee or,
unless such data is specifically requested by a Taxing Authority, is not
customarily furnished by domestic air carriers under similar circumstances. For
purposes of this Section 9.3, a "Final Determination" shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction that
occurs pursuant to the provisions of Section 9.3.4, which decision, judgment,
decree or other order has become final and unappealable (by law or by Lessee
hereunder), (ii) a closing agreement or settlement agreement entered into in
accordance with Section 9.3.4 that has become binding and is not subject to
further review or appeal (absent fraud, misrepresentation, etc.), or (iii) the
termination of administrative proceedings and the expiration of the time for
instituting a claim in a court proceeding.
(e) If any Tax Indemnitee shall actually realize a tax savings by reason of
any Tax paid or indemnified by Lessee pursuant to this Section 9.3 (whether such
tax savings shall be by means of a foreign tax credit, depreciation or cost
recovery deduction or otherwise) and such savings is not otherwise taken into
account in computing such payment or indemnity, such Tax Indemnitee shall pay to
Lessee (within 30 days after the realization of such tax savings) an amount
equal to the lesser of (i) the amount of such tax savings, plus any additional
tax savings recognized as the result of any payment made pursuant to this
sentence, when, as, if, and to the extent, realized or (ii) the amount of all
<PAGE>
payments (other than in respect of contest costs) pursuant to this Section 9.3
by Lessee to such Tax Indemnitee (less any payments previously made by such Tax
Indemnitee to Lessee pursuant to this Section 9.3.3 (e)) (and the excess, if
any, of the amount described in clause (i) over the amount described in clause
(ii) shall be carried forward and applied to reduce pro tanto any subsequent
obligations of Lessee to make payments to such Tax Indemnitee pursuant to this
Section 9.3); provided, that such Tax Indemnitee shall not be required to make
any payment pursuant to this sentence so long as a Lease Event of Default of a
monetary nature has occurred and is continuing. If a tax benefit is later
disallowed or denied, the disallowance or denial shall be treated as a Tax
indemnifiable under Section 9.3.1 without regard to the provisions of Section
9.3.2 (other than Section 9.3.2 (f)). Each such Tax Indemnitee shall in good
faith use reasonable efforts in filing its tax returns and in dealing with
Taxing Authorities to seek and claim any such tax benefit.
(f) For purposes of this Section 9.3, items of foreign Tax of any Tax
Indemnitee shall be deemed to be utilized by such Tax Indemnitee as credits or
deductions for any taxable year in accordance with the following priorities:
(x) First, all utilizable foreign Taxes (taking into account the
limitations of Section 904(d) of the Code) other than those described in clause
(y) below;
(y) Second, all utilizable foreign Taxes (taking into account the
limitations of Section 904(d) of the Code) arising out of the transactions
contemplated by the Operative Agreements and other equipment leasing
transactions to the extent such Tax Indemnitee is indemnified or held harmless
for such Taxes by the Lessee or a lessee on a pari passu basis.
9.3.4 CONTEST
(a) If a written claim is made against a Tax Indemnitee for Taxes with
respect to which Lessee could be liable for payment or indemnity hereunder, or
if a Tax Indemnitee makes a determination that a Tax is due for which Lessee
could have an indemnity obligation hereunder, such Tax Indemnitee shall promptly
give Lessee notice in writing of such claim (provided, that failure to so notify
Lessee shall not relieve Lessee of its indemnity obligations hereunder unless
such failure to notify forecloses Lessee's rights to require a contest of such
claim) and shall take no action with respect to such claim without the prior
written consent of Lessee for 30 days following the receipt of such notice by
Lessee; provided, that, in the case of a claim made against a Tax Indemnitee, if
<PAGE>
such Tax Indemnitee shall be required by law to take action prior to the end of
such 30-day period, such Tax Indemnitee shall, in such notice to Lessee, so
inform Lessee, and such Tax Indemnitee shall take no action for as long as it is
legally able to do so (it being understood that a Tax Indemnitee shall be
entitled to pay the Tax claimed and sue for a refund prior to the end of such
30-day period if (i)(A) the failure to so pay the Tax would result in
substantial penalties (unless immediately reimbursed by Lessee) and the act of
paying the Tax would not materially prejudice the right to contest or (B) the
failure to so pay would result in criminal penalties and (ii) such Tax
Indemnitee shall take any action so required in connection with so paying the
Tax in a manner that, in its good faith opinion, is the least prejudicial to the
pursuit of the contest). In addition, such Tax Indemnitee shall (provided, that
Lessee shall have agreed to keep such information confidential other than to the
extent necessary in order to contest the claim) furnish Lessee with copies of
any requests for information from any Taxing Authority relating to such Taxes
with respect to which Lessee may be required to indemnify hereunder. If
requested by Lessee in writing within 30 days after its receipt of such notice,
such Tax Indemnitee shall, at the expense of Lessee (including, without
limitation, all reasonable costs, expenses and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law to be contested by the Lessee in its own name, allow Lessee to
contest) through appropriate administrative and judicial proceedings the
validity, applicability or amount of such Taxes by (I) resisting payment
thereof, (II) not paying the same except under protest if protest is necessary
and proper or (III) if the payment is made, using reasonable efforts to obtain a
refund thereof in an appropriate administrative and/or judicial proceeding. If
requested to do so by Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to pursue any appeals to the United States Supreme Court. If and to the
extent the Tax Indemnitee is able to separate the contested issue or issues from
other issues arising in the same administrative or judicial proceeding that are
unrelated to the transactions contemplated by the Operative Agreements without,
in the good faith judgment of such Tax Indemnitee, adversely affecting such Tax
Indemnitee, such Tax Indemnitee shall permit Lessee to contest such matter in
its own name, if permitted by applicable law, and shall provide to Lessee (at
Lessee's cost and expense) such information or data that is in such Tax
Indemnitee's control or possession that is reasonably necessary to conduct such
contest (other than such Tax Indemnitee's federal income tax returns). In the
case of a contest controlled by a Tax Indemnitee, such Tax Indemnitee shall
consult with Lessee in good faith regarding the manner of contesting such claim
and shall keep Lessee reasonably informed regarding the progress of such
<PAGE>
contest. A Tax Indemnitee shall not fail to take any action expressly required
by this Section 9.3.4 (including, without limitation, any action regarding any
appeal of an adverse determination with respect to any claim) or settle or
compromise any claim without the prior written consent of the Lessee (except as
contemplated by Section 9.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee be
required to pursue any contest (or to permit Lessee to pursue any contest)
unless (i) Lessee shall have agreed to pay such Tax Indemnitee on demand all
reasonable costs and expenses incurred by such Tax Indemnitee in connection with
contesting such Taxes, including, without limitation, all reasonable out of
pocket costs and expenses and reasonable attorneys' and accountants' fees and
disbursements, (ii) if such contest shall involve the payment of the claim,
Lessee shall advance the amount thereof (to the extent indemnified hereunder)
plus interest, penalties and additions to tax with respect thereto that are
required to be paid prior to the commencement of such contest on an
interest-free and after-Tax basis to such Tax Indemnitee (and such Tax
Indemnitee shall promptly pay to the Lessee any net realized tax benefits
resulting from such advance including any tax benefits resulting from making
such payment), (iii) such Tax Indemnitee shall have reasonably determined that
the action to be taken will not result in any material risk of forfeiture, sale
or loss of the Aircraft (unless Lessee shall have made provisions to protect the
interests of any such Tax Indemnitee and the Owner Participant in a manner
reasonably satisfactory to such Tax Indemnitee and the Owner Participant)
(provided, that such Tax Indemnitee agrees to notify Lessee in writing promptly
after it becomes aware of any such risk), (iv) no Lease Event of Default shall
have occurred and be continuing unless Lessee has provided adequate security for
its obligations hereunder by advancing to such Tax Indemnitee before proceeding
or continuing with such contest, the amount of the Tax being contested, plus any
interest and penalties and an amount estimated in good faith by such Tax
Indemnitee for expenses, and (v) prior to commencing any judicial action
controlled by Lessee, Lessee shall have acknowledged its liability for such
claim hereunder, provided that Lessee shall not be bound by its acknowledgment
if the Final Determination articulates conclusions of law and fact that
demonstrate that Lessee has no liability for the contested amounts hereunder.
Notwithstanding the foregoing, if any Tax Indemnitee shall release, waive,
compromise or settle any claim which may be indemnifiable by Lessee pursuant to
this Section 9.3 without the written permission of Lessee, Lessee's obligation
to indemnify such Tax Indemnitee with respect to such claim (and all directly
related claims and claims based on the outcome of such claim) shall terminate,
subject to Section 9.3.4(c), and subject to Section 9.3.4(c), such Tax
<PAGE>
Indemnitee shall repay to Lessee any amount previously paid or advanced to such
Tax Indemnitee with respect to such claim (other then contest costs), plus
interest at the rate that would have been payable by the relevant Taxing
Authority with respect to a refund of such Tax.
(c) Notwithstanding anything contained in this Section 9.3, a Tax
Indemnitee will not be required to contest the imposition of any Tax and shall
be permitted to settle or compromise any claim without Lessee's consent if such
Tax Indemnitee (i) shall waive its right to indemnity under this Section 9.3
with respect to such Tax (and any directly related claim and any claim the
outcome of which is determined based upon the outcome of such claim), (ii) shall
pay to Lessee any amount previously paid or advanced by Lessee pursuant to this
Section 9.3 (other than contest costs) with respect to such Tax, plus interest
at the rate that would have been payable by the relevant Taxing Authority with
respect to a refund of such Tax, and (iii) shall agree to discuss with Lessee
the views or positions of any relevant Taxing Authority with respect to the
imposition of such Tax.
9.3.5 REFUND
If any Tax Indemnitee shall receive a refund of, or be entitled to a credit
against other liability for, all or any part of any Taxes paid, reimbursed or
advanced by Lessee, such Tax Indemnitee shall pay to Lessee within 30 days of
such receipt an amount equal to the lesser of (a) the amount of such refund or
credit plus any net tax benefit (taking into account any Taxes incurred by such
Tax Indemnitee by reason of the receipt of such refund or realization of such
credit) actually realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence (including this clause (a))
and (b) such tax payment, reimbursement or advance by Lessee to such Tax
Indemnitee theretofore made pursuant to this Section 9.3 (and the excess, if
any, of the amount described in clause (a) over the amount described in clause
(b) shall be carried forward and applied to reduce pro tanto any subsequent
obligation of Lessee to make payments to such Tax Indemnitee pursuant to this
Section 9.3). If, in addition to such refund or credit, such Tax Indemnitee
shall receive (or be credited with) an amount representing interest on the
amount of such refund or credit, such Tax Indemnitee shall pay to Lessee within
30 days of such receipt or realization of such credit that proportion of such
interest that shall be fairly attributable to Taxes paid, reimbursed or advanced
by Lessee prior to the receipt of such refund or realization of such credit.
<PAGE>
9.3.6 TAX FILING
If any report, return or statement is required to be filed with respect to
any Tax which is subject to indemnification under this Section 9.3, Lessee shall
timely file the same (except for any such report, return or statement which a
Tax Indemnitee has timely notified the Lessee in writing that such Tax
Indemnitee intends to file or which a Tax Indemnitee is required by law to file
in its own name); provided, that the relevant Tax Indemnitee shall furnish
Lessee with any information in such Tax Indemnitee's possession or control that
is reasonably necessary to file any such return, report or statement and is
reasonably requested in writing by Lessee (it being understood that the Tax
Indemnitee shall not be required to furnish copies of its actual tax returns,
although it may be required to furnish relevant information contained therein).
Lessee shall either file such report, return or statement and send a copy of
such report, return or statement to such Tax Indemnitee, and Owner Trustee if
the Tax Indemnitee is not Owner Trustee, or, where Lessee is not permitted to
file such report, return or statement, or if the same is required by law to be
filed in the Tax Indemnitee's own name, it shall notify such Tax Indemnitee in
writing of such requirement and prepare and deliver such report, return or
statement to such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
within a reasonable time prior to the time such report, return or statement is
to be filed.
9.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Lessee or Loan
Trustee or to such other person as Lessee or Loan Trustee may designate, at
Lessee's or Loan Trustee's request, such duly executed and properly completed
forms as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(x) such reduction or exemption is available to such Tax Indemnitee, (y) Lessee
has provided such Tax Indemnitee with any information necessary to complete such
form not otherwise reasonably available to such Tax Indemnitee, and (z) if such
return is required to be filed in a jurisdiction outside the United States, the
Tax Indemnitee has not made a good faith determination that such filing would
subject it or any Affiliate to any adverse consequences in such jurisdiction for
which it has not been (and would not have been) indemnified.
9.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Lessee may require
the Tax Indemnitee to agree in writing, in a form reasonably acceptable to
<PAGE>
Lessee, to the terms of this Section 9.3 and Section 15.8 prior to making any
payment to such Tax Indemnitee under this Section 9.3.
9.3.9 SUBROGATION
Upon payment of any Tax by Lessee pursuant to this Section 9.3 to or on
behalf of a Tax Indemnitee, Lessee, without any further action, shall be
subrogated to any claims that such Tax Indemnitee may have relating thereto.
Such Tax Indemnitee shall cooperate with Lessee (to the extent such cooperation
does not result in any unreimbursed cost, expense or liability to such Tax
Indemnitee) to permit Lessee to pursue such claims.
9.3.10 FOREIGN TAX ON LOAN PAYMENTS
If an Owner Participant is incorporated or organized, or maintains a place
of business or conducts activities (other than any activities of the Owner
Participant resulting from its participation in the transactions contemplated by
the Operative Agreements or resulting from any activities of Lessee in such
jurisdiction) in a country other than the United States or in a territory,
possession or commonwealth of the United States (within the meaning of the tax
law of that foreign jurisdiction) and if as a result thereof any foreign Taxes
(including withholding Taxes) are imposed on the Pass Through Trustees, Pass
Through Trusts, or Note Holders, then Owner Participant shall reimburse Lessee
for any payments Lessee is required to make to or on behalf of any Pass Through
Trustee, Pass Through Trust, or Note Holder under this Section 9.3 as a result
of the imposition of such Taxes. The amount payable by Owner Participant to
Lessee shall be an amount which, after taking into account any such Taxes, any
Tax imposed upon the receipt or accrual by Lessee of such payment by Owner
Participant and any tax benefits or tax savings realized by Lessee with respect
to the payment of such withholding Tax or the payment hereunder, shall equal the
amount of Lessee's payment to or on behalf of such Pass Through Trustee, or Note
Holder.
9.4 PAYMENTS
Any payments made pursuant to Section 9.1 and Section 9.3 shall be due on
the 60th day after demand is made to the indemnifying party therefor (other than
any payments for which a different time is provided under Section 9.3.3 hereof)
and shall be made directly to the relevant Indemnitee or Tax Indemnitee or to
Lessee, in immediately available funds at such bank or to such account as
specified by such Indemnitee or Tax Indemnitee or Lessee, as the case may be, in
written directives to the payor, or, if no such direction shall have been given,
by check of the payor payable to the order of, and mailed to, such Indemnitee or
<PAGE>
Tax Indemnitee or Lessee, as the case may be, by certified mail, postage
prepaid, at its address as set forth in this Agreement.
9.5 INTEREST
If any amount, payable by Lessee, any Indemnitee or any Tax Indemnitee
under Section 9.1 or 9.3 is not paid when due, the person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the same is paid, at the
Payment Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.
9.6 BENEFIT OF INDEMNITIES
The obligations of Lessee in respect of all indemnities, obligations,
adjustments and payments in Section 9.1 or 9.3 are expressly made for the
benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee
entitled thereto, without declaring the Lease to be in default or taking other
action thereunder, and notwithstanding any provision of the Trust Indenture.
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS
10.1 PARTICIPANTS, OWNER TRUSTEE AND NOTE HOLDERS
10.1.1 OWNER PARTICIPANT
(a) Owner Participant shall not Transfer any or all of its right, title or
interest in the Trust Estate or the Trust Agreement and to this Agreement
unless:
(i) The Transferee shall have full power, authority and legal
right to execute and deliver and to perform the obligations of Owner
Participant under this Agreement and the other Owner Participant
Agreements and shall provide reasonably satisfactory evidence of such
power and authority to Lessee, Owner Trustee and Mortgagee;
(ii) The Transferee shall enter into one or more legal, valid,
binding and enforceable agreements effective to confirm that such
Transferee agrees to be bound by all the terms of, and to undertake all
of the obligations arising after such transfer of, the transferring
Owner Participant contained in the Owner Participant Agreements and in
<PAGE>
which it makes representations and warranties substantially the same as
those contained in Section 6.2 of this Participation Agreement;
(iii) Lessee shall not be obligated to pay any greater amount
or incur any greater obligation than that which it would have been
obliged to pay or incur under the Lease or other Lessee Operative
Agreement if no transfer or assignment had taken place, and the terms
and conditions of the Lease and the other Lessee Operative Agreements
insofar as they relate to the rights and obligations of Lessee or the
Loan Participants shall not be altered;
(iv) Owner Participant shall deliver to Lessee, Owner Trustee
and Mortgagee an opinion of counsel reasonably satisfactory to each of
them (which, if the Transferee is an Affiliate of the Owner
Participant, may be in-house counsel to such Owner Participant) to the
effect that such agreement or agreements referred to in Section
10.1.1(a)(ii) and, if applicable, 10.1.1(a)(vi) are legal, binding and
enforceable in accordance with its or their terms and that such
transfer will not violate applicable securities laws, the Act or any
other applicable law and is in accordance with this Section 10.1.1;
(v) The Transferee is a Citizen of the United States (it being
understood that the existence of any such requirement is to be
determined without giving consideration to Section 47.9 of the FAA
Regulations or any other provision that would restrict Lessee's use or
operation of the Aircraft), or shall use a voting powers trust or
similar arrangement in order to hold an interest in the Trust Estate
such that the Aircraft can be registered in the United States (without
giving consideration to Section 47.9 of the FAA Regulations or any
other provision that would restrict Lessee's use or operation of the
Aircraft);
(vi) The Transferee shall be one person and shall be either
(A) a Permitted Institution or (B) any other person (other than,
without Lessee's consent, a commercial air carrier, a commercial
aircraft operator, a freight forwarder or an Affiliate of any of the
foregoing) the obligations of which under the Owner Participant
Agreements are guaranteed by a Permitted Institution in any case,
pursuant to a written guaranty, in form and substance reasonably
satisfactory to Lessee, Owner Trustee and Mortgagee; and
(vii) The Transferee shall be a "U.S. Person" as defined in
Section 7701(a)(30) of the Code (or any successor provision thereto).
<PAGE>
(b) Owner Participant shall give written notice to Lessee, Mortgagee and
Owner Trustee at least 10 days prior to any such Transfer, specifying the name
and address of the proposed Transferee, and providing financial statements of
the proposed Transferee evidencing satisfaction of the requirements described in
Section 10.1.1(a)(vi)(A) or (B) above.
(c) Any fees, charges and expenses, including the reasonable legal fees,
charges and expenses incurred by Lessee, Owner Participant, Mortgagee, any Note
Holder or Owner Trustee in connection with any Transfer by Owner Participant
permitted by this Section 10.1.1, or by the Transferee in any such case, will be
paid for by Owner Participant.
10.1.2 OWNER TRUSTEE
Owner Trustee may transfer its interests in the Trust Agreement pursuant to
Section 9 thereof.
10.1.3 NOTE HOLDERS
Subject to Section 7.5.2 hereof and Section 2.07 of the Trust Indenture,
any Note Holder may, at any time and from time to time, Transfer or grant
participations in all or any portion of the Equipment Notes and/or all or any
portion of its beneficial interest in its Equipment Notes and the Trust
Indenture Estate to any person (it being understood that the sale or issuance of
Pass Through Certificates by a Pass Through Trustee shall not be considered a
Transfer or participation); provided, that any participant in any such
participations shall not have any direct rights under the Operative Agreements
or any Lien on all or any part of the Aircraft or Trust Indenture Estate and
neither Lessee, Lessor, nor Owner Participant shall have any increased liability
or obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be deemed to be bound by all of the covenants of Note
Holders contained in the Operative Agreements.
10.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with Section 10.1.1, 10.1.2 or 10.1.3
(other than any Transfer by any Note Holder, to the extent it only grants
participations in Equipment Notes or in its beneficial interest therein),
Transferee shall be deemed an "Owner Participant," "Owner Trustee" or a "Note
Holder," respectively, for all purposes of this Agreement and the other
Operative Agreements and, in the case of a Transferee of any Participant or Note
Holder, shall be deemed to have paid its ratable portion of Lessor's Cost
<PAGE>
previously made by Owner Participant or Loan Participant, respectively, making
such conveyance and represented by the interest being conveyed, and each
reference herein to Owner Participant, Owner Trustee or Note Holder,
respectively, shall thereafter be deemed a reference to such Transferee for all
purposes, and the transferring Owner Participant, Owner Trustee, Loan
Participant or Note Holder shall be released (except, in the case of Owner
Participant, to the extent of any guaranty provided by it under Section
10.1.1(a)(vi)) from all of its liabilities and obligations under this Agreement
and any other Operative Agreements to the extent such liabilities and
obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the transferee; PROVIDED, that such
transferring Owner Participant, Owner Trustee or Note Holder (and its respective
Affiliates, successors, assigns, agents, servants, representatives, directors
and officers) will continue to have the benefit of any rights or indemnities
under any Operative Agreement vested or relating to circumstances, conditions,
acts or events prior to such Transfer.
SECTION 11. [RESERVED]
SECTION 12. SECTION 1110
It is the intention of each of Lessee, Owner Participant, Loan Participant,
the Note Holders (such intention being evidenced by each of their acceptance of
an Equipment Note), Owner Trustee and Mortgagee that Owner Trustee, as lessor
under the Lease (and Mortgagee as assignee of Owner Trustee under the Trust
Indenture), shall be entitled to the benefits of Section 1110 in the event of a
case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor. Lessee
shall at all times be certificated and registered to the extent necessary to
entitle Owner Trustee to the rights afforded to lessors of aircraft equipment
under Section 1110 of the United States Bankruptcy Code.
SECTION 13. CHANGE OF CITIZENSHIP
13.1 GENERALLY
Without prejudice to the representations, warranties or covenants regarding
the status of any party hereto as a Citizen of the United States:
(a) Each of Lessee, First Security and WTC agrees that it will, immediately
upon obtaining knowledge of any facts that would cast doubt upon its continuing
status as a Citizen of the United States and promptly upon public disclosure of
negotiations in respect of any transaction which would or might adversely affect
<PAGE>
such status, notify in writing all parties hereto of all relevant matters in
connection therewith; and
(b) Owner Participant agrees that, in the event its status is to change or
has changed as a Citizen of the United States, or it makes public disclosure of
circumstances as a result of which it believes that such status is likely to
change, it will notify all the other parties to this Participation Agreement of
(i) such change in status promptly after obtaining Actual Knowledge thereof or
(ii) such belief as soon as practicable after such public disclosure but in any
event within ten Business Days after such public disclosure.
13.2 OWNER PARTICIPANT
Owner Participant agrees, solely for the benefit of Lessee and the Note
Holders that if, during such time as the Aircraft is registered in the United
States, (a) it shall not be a Citizen of the United States and (b) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
Owner Trustee under the Act and regulations then applicable thereunder (without
giving consideration to Section 47.9 of the FAA Regulations or any other
provision that may restrict Lessee's use or operation of the Aircraft), then
Owner Participant shall as soon as is reasonably practicable, but in any event
within 30 days after obtaining Actual Knowledge of such ineligibility and of
such loss of citizenship, (y) effect voting trust or other similar arrangements
(in which case any provisions contained in the Operative Agreements restricting
Owner Participant's or Owner Trustee's ability to amend the Trust Agreement
shall not apply to the extent necessary to permit the use of such a voting trust
or other similar arrangement) or take any other action as may be necessary to
prevent any deregistration or maintain the United States registration of the
Aircraft or (z) transfer in accordance with the terms of this Agreement all its
right, title and interest in and to this Agreement, the Trust Estate and the
Trust Agreement in accordance with Section 10.1.
13.3 OWNER TRUSTEE
Upon First Security giving any notice in accordance with Section 13.1(a),
Owner Trustee shall, subject to Section 9.1.1 of the Trust Agreement, resign as
Owner Trustee. Upon its receipt of such notice, Owner Participant shall as
promptly as practicable appoint a Citizen of the United States as successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement.
<PAGE>
13.4 MORTGAGEE
Upon WTC giving any notice in accordance with Section 13.1(a), Mortgagee
shall (if and so long as such citizenship is necessary under the Act as in
effect at such time or, if it is not necessary, if and so long as Mortgagee's
citizenship could have any adverse effect on Lessee, any Participant or any Note
Holder), subject to Section 8.02 of the Trust Indenture, resign as Mortgagee
promptly upon its ceasing to be such a citizen.
SECTION 14. CONCERNING OWNER TRUSTEE
It is understood and agreed that, except as otherwise expressly provided
herein or in the Trust Agreement or the Trust Indenture, Owner Trustee is
entering into this Agreement solely in its capacity as trustee as provided in
the Trust Agreement and not in its individual capacity and in no case whatsoever
will it be liable or accountable in its individual capacity for any of the
statements, representations, warranties, agreements or obligations of Owner
Trustee hereunder, or for any loss in respect thereof, as to all of which the
parties agree to look solely to the Trust Estate; PROVIDED, that nothing in this
Section 14 shall be deemed to limit in scope or substance the personal liability
of First Security (a) to Owner Participant as expressly set forth in the Trust
Agreement, (b) in respect of the representations, warranties and agreements of
First Security expressly made as such herein or in any other Operative Agreement
to which it is a party, and (c) for the consequences of its own gross
negligence, willful misconduct, and, in receiving, handling or remitting of
funds only, its willful misconduct or simple negligence as a trustee.
SECTION 15. MISCELLANEOUS
15.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
<PAGE>
communication, course of dealing or performance or other manner not set forth in
an agreement, document or instrument in writing and signed by the party against
which enforcement of the same is sought.
15.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or unenforceable in
any respect in any jurisdiction, then, to the extent permitted by Law, (a) all
other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held
invalid, illegal or unenforceable may be waived, such Law is hereby waived by
the parties hereto to the full extent permitted, to the end that this Agreement
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
15.3 SURVIVAL
The indemnities set forth herein shall survive the delivery or return of
the Aircraft, the Transfer of any interest of Owner Participant in this
Agreement, the Trust Estate and the Trust Agreement, the Transfer of any
interest by any Note Holder of its Equipment Note and the expiration or other
termination of this Agreement or any other Operative Agreement.
15.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction likewise is
admissible in evidence.
15.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements hereto
may be executed in any number of counterparts (or upon separate signature pages
<PAGE>
bound together into one or more counterparts), each of which when so executed
shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
15.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by any
party hereto in exercising, any of its respective rights, powers, remedies or
privileges under this Agreement or provided at Law, in equity or otherwise shall
impair, prejudice or constitute a waiver of any such right, power, remedy or
privilege or be construed as a waiver of any breach hereof or default hereunder
or as an acquiescence therein nor shall any single or partial exercise of any
such right, power, remedy or privilege preclude any other or further exercise
thereof by it or the exercise of any other right, power, remedy or privilege by
it. No notice to or demand on any party hereto in any case shall, unless
otherwise required under this Agreement, entitle such party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any party hereto to any other or further action in any
circumstances without notice or demand.
15.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile or telecommunication transmission (which in either
case provides written confirmation to the sender of its delivery), sent by
registered mail or certified mail, return receipt requested, postage prepaid, or
sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other
address, facsimile or other number as each party hereto may hereafter specify by
notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by facsimile
or telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
<PAGE>
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE
CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE
OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 15.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 15.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(D) TO THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY OF THE ABOVE-NAMED COURTS OR FROM ANY LEGAL
PROCESS THEREIN, SUCH PARTY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, SUCH IMMUNITY, AND EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY
WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING
BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, (I) THE DEFENSE OF SOVEREIGN
IMMUNITY, (II) THAT IT OR ANY OF ITS PROPERTY IS IMMUNE FROM THE ABOVE DESCRIBED
LEGAL PROCESS AND (III) THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
<PAGE>
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
15.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person not a
party hereto (other than the Liquidity Provider, which is an intended third
party beneficiary with respect to the provisions of Section 9.1, and the other
persons referred to in Section 7.6.13, who are intended third party
beneficiaries of such Section) with any rights of any nature whatsoever against
any of the parties hereto and no person not a party hereto (other than the
Liquidity Provider, with respect to the provisions of Section 9.1, and the other
persons referred to in Section 7.6.13, with respect to such Section) shall have
any right, power or privilege in respect of any party hereto, or have any
benefit or interest, arising out of this Agreement.
15.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and as of
the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, among any of the parties
hereto with respect to such subject matter are hereby superseded in their
entireties (except that the letter agreement, dated May 14, 1997, among Lessee,
Existing Mortgagee and Airframe Manufacturer shall not be superseded).
15.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge and deliver or shall cause to
be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as any other party hereto shall reasonably
request in connection with the administration of, or to carry out more
effectively the purposes of, or to better assure and confirm into such other
party the rights and benefits to be provided under this Agreement and the other
Operative Agreements.
[This space intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Participation
Agreement to be duly executed and delivered as of the day and year first above
written.
CONTINENTAL AIRLINES, INC.,
Lessee
By______________________________________
Name:
Title:
_______________________________________
_______________________________________,
PACIFIC CENTURY LEASING, INC., Owner
Participant
By______________________________________
Name:
Title:
By______________________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity, except
as expressly provided herein, but
solely as Owner Trustee
By______________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Mortgagee
By______________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3A
By______________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3B
By______________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3C
By______________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Subordination Agent
By______________________________________
Name:
Title:
CORCIM, INC.,
Existing Lessor
By______________________________________
Name:
Title:
<PAGE>
ROLLS-ROYCE PLC,
Existing Mortgagee
By______________________________________
Name:
Title:
EMBRAER-EMPRESA BRASILEIRA DE
AERONAUTICA S.A.,
Airframe Manufacturer
By______________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided,
a reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner
Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted transferee,
permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex,
schedule or exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Agreement, that agreement,
instrument or document, or annex, schedule or exhibit, or part,
respectively, as amended, modified or supplemented from time to time in
accordance with its terms and in accordance with the Operative Agreements,
and any agreement, instrument or document entered into in substitution or
replacement therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or reenacted prior
to the Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import when used in
any Operative Agreement refer to such Operative Agreement as a whole and
not to any particular provision of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
<PAGE>
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in
any Operative Agreement, or in any annex thereto, is a reference to a
section of, or an exhibit, an annex or a schedule to, such Operative
Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or Mortgagee,
as the case may be, actual knowledge of a responsible officer in the Corporate
Trust Department or the Corporate Trust Office, respectively, and (b) as it
applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee and
Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering the
Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books, and
all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (PROVIDED, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from time
to time installed thereon) manufactured by Airframe Manufacturer and identified
by Airframe Manufacturer's model number, United States registration number and
Airframe Manufacturer's serial number set forth in Lease Supplement No. 1 and
(b) any and all Parts incorporated or installed in or attached or appurtenant to
such airframe, and any and all Parts removed from such airframe, unless title to
such Parts shall not be vested in Lessor in accordance with Section 8.1 and
Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de Aeronautica
S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the Participation
Agreement, the Purchase Agreement and the Consent and Agreement.
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as of any
Payment Date, the amount determined by multiplying the percentage set forth
<PAGE>
opposite such Date on the Amortization Schedule by the Original Amount of such
Equipment Note.
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note, the
amortization schedule for such Equipment Note delivered pursuant to Section 2.02
of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to be,
and is, registered with any other Government Entity under and in accordance with
Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. ss.
101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section 14.5 of
the Lease.
"BASE LEASE TERM" means the period beginning on and including the Closing
Date and ending on the Scheduled Expiration Date, or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
"BASIC RENT" means the rent payable for the Aircraft pursuant to Section
3.2.1 of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
<PAGE>
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required by law to close in New York,
New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of the
Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code or the
regulations promulgated thereunder or any change in the interpretation of the
Code or such regulations in a decision by the United States Supreme Court, the
United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events: (i) sale
of the Aircraft to the Owner Trustee and the filing of the FAA Bill of Sale with
the FAA in connection therewith; (ii) payment of Lessor's Cost by Owner Trustee
to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee to Lessee
<PAGE>
pursuant to the Lease; and (iv) completion of the other events contemplated by
the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement No. 1
as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; PROVIDED, that
when used in relation to a Plan, "Code" shall mean the Internal Revenue Code of
1986 and any regulations and rulings issued thereunder, all as amended and in
effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its participation in
the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the Participation
Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement ____,
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee located at
Mortgagee's address for notices under the Participation Agreement or such other
office at which Mortgagee's corporate trust business shall be administered which
Mortgagee shall have specified by notice in writing to Lessee, Owner Trustee and
each Note Holder.
"CRAF" means the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C. ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
<PAGE>
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice or
the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to Lessee,
Existing Lessor, each Participant, Owner Trustee and Mortgagee by Existing
Mortgagee pursuant to Section 4.3 of the Participation Agreement, which delayed
Closing Date shall be a Business Day not later than the Commitment Termination
Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to Lessee
by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of the
United States.
"DOT" means the Department of Transportation of the United States or any
Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine Manufacturer
and identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number set forth in Lease Supplement No. 1 and originally installed on
the Airframe on delivery thereof pursuant to the Lease, and any Replacement
Engine, in any case whether or not from time to time installed on such Airframe
or installed on any other airframe or aircraft, and (b) any and all Parts
incorporated or installed in or attached or appurtenant to such engine, and any
and all Parts removed from such engine, unless title to such Parts shall not be
vested in Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Engine under and in accordance with the Lease,
such Replacement Engine shall become subject to the Lease and shall be an
"Engine" for all purposes of the Lease and the other Operative Agreements and
thereupon the Engine for which the substitution is made shall no longer be
subject to the Lease, and such replaced Engine shall cease to be an "Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
<PAGE>
"EQUIPMENT NOTES" means and includes any equipment notes issued under the
Trust Indenture in the form specified in Section 2.01 thereof (as such form may
be varied pursuant to the terms of the Trust Indenture) and any Equipment Note
issued under the Trust Indenture in exchange for or replacement of any Equipment
Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations and rulings issued thereunder all as amended and in effect from time
to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit for
normal use by Lessee;
(b) the actual or constructive total loss of such property or any damage
to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property
on the basis of a total loss or constructive or compromised total
loss;
(c) any theft, hijacking or disappearance of such property for a period of
180 consecutive days or more or, if earlier, the end of the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government or
purported Government Entity (other than a requisition of use by the
U.S. Government) for a period exceeding 180 consecutive days or, if
earlier, at the end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition of use
of such property by the U.S. Government that continues until the last
day of the Term, PROVIDED that no such Event of Loss shall exist if
Lessor shall have elected not to treat such event as an Event of Loss
pursuant to Section 10.6 of the Lease; and
<PAGE>
(f) as a result of any law, rule, regulation, order or other action by the
Aviation Authority or by any Government Entity of the government of
registry of the Aircraft or by any Government Entity otherwise having
jurisdiction over the operation or use of the Aircraft, the use of
such property in the normal course of Lessee's business of passenger
air transportation is prohibited for a period of 180 consecutive days,
unless Lessee, prior to the expiration of such 180 day period, shall
have undertaken and shall be diligently carrying forward such steps as
may be 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 720 days, provided that no Event of Loss
shall be deemed to have occurred if such prohibition has been
applicable to Lessee's (or a Permitted Sublessee's) entire U.S. fleet
of such property and Lessee (or a Permitted Sublessee), prior to the
expiration of such 720-day period, shall have conformed at least one
unit of such property 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 and shall be
diligently carrying forward, in a manner which does not discriminate
against such property in so conforming such property, 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 three years or such use shall be prohibited at the
expiration of the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by Lessee
to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) any
amount payable to the Owner Participant by any transferee as the purchase price
of the Owner Participant's interest in the Trust Estate, (vi) any interest that
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pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (v) above, (vii) proceeds of
any right to enforce the payment of any amount described in clauses (i) through
(vi) above (PROVIDED, that the rights referred to in this clause (vii) shall not
be deemed to include the exercise of any remedies provided for in the Lease
other than the right to sue for specific performance of any covenant to make
such payment or to sue for damages in respect of the breach of any such
covenant) and (viii) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized under
the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement and the
Termination Agreement with respect to the Existing Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in Schedule 3
to the Participation Agreement.
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the date
of the Existing Participation Agreement, between Lessee and Express relating to
the Aircraft.
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the Participation
Agreement.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary of
Lessee.
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"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date of
the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner Trustee on
the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the Express
Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars for
the Aircraft that would apply in an arm's-length transaction between an informed
and willing buyer under no compulsion to buy, and an informed and willing seller
under no compulsion to sell, the Aircraft, in a transaction that would close on
or about the relevant time of determination, assuming (except as otherwise
provided in Section 15.4 of the Lease) that (a) the Aircraft has been maintained
in accordance with, and is in the condition required by, the Lease and (b) the
Aircraft would be delivered to such informed and willing buyer in the return
condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing statements
(i) covering the Trust Indenture Estate, by Owner Trustee, as debtor, showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction that,
in the opinion of Mortgagee, is necessary to perfect its Lien on the Trust
Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
<PAGE>
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
such principles may at any time or from time to time be varied by any applicable
financial accounting rules or regulations issued by the SEC and, with respect to
any person, shall mean such principles applied on a basis consistent with prior
periods except as may be disclosed in such person's financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) the Trust
Estate and the Trust Indenture Estate, (vi) the Subordination Agent, (vii) the
Liquidity Providers, (viii) the Pass Through Trustees, (ix) each Affiliate of
the persons described in clauses (i) through (iv), inclusive, (x) each Affiliate
of the persons described in clauses (vi), (vii) and (viii), (xi) the respective
directors, officers, employees, agents and servants of each of the persons
described in clauses (i) through (iv) inclusive and in clause (ix), (xii) the
<PAGE>
respective directors, officers, employees, agents and servants of each of the
persons described in clauses (vi), (vii), (viii), and (x), (xiii) the successors
and permitted assigns of the persons described in clauses (i) through (iv),
inclusive, and in clauses (ix) and (xi), and (xiv) the successors and permitted
assigns of the persons described in clauses (vi), (vii), (viii), (x) and (xii);
PROVIDED THAT the persons described in clauses (vi), (vii), (viii), (x), (xii)
and (xiv) are Indemnitees only for purposes of Section 9.1 of the Participation
Agreement. If any Indemnitee is Airframe Manufacturer or Engine Manufacturer or
any subcontractor or supplier of either thereof, such Person shall be an
Indemnitee only in its capacity as Owner Participant, Loan Participant or Note
Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease, the
Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each separate
or additional trustee appointed pursuant to the Trust Indenture, (iii) the
Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through Trustee
and (vi) each of the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (v) inclusive
above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement among
the Pass Through Trustees, the Liquidity Providers and the Subordination Agent,
dated as of the Issuance Date, PROVIDED that, for purposes of any obligation of
Lessee, no amendment, modification or supplement to, or substitution or
replacement of, such Intercreditor Agreement shall be effective unless consented
to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
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"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that, with
the giving of notice, the lapse of time or both, would constitute a Lease Event
of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of Exhibit
A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Continental Airlines, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the Lease,
Lease Supplement No. 1, the Express Sublease, the Termination Agreement with
respect to the Existing Sublease and the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or other
user or person in possession of the Aircraft, Airframe or an Engine with or
without color of right, or any Affiliate of any of the foregoing (excluding any
Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any person
using or claiming any rights with respect to the Aircraft, Airframe or an Engine
directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
<PAGE>
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
"LESSOR RENT" means, with respect to any Payment Date, the amount set forth
in Schedule 4 to the Participation Agreement with respect to such Payment Date.
"LESSOR'S COST" means the amount paid by Owner Trustee to Existing Lessor
to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider
(as such terms are defined in the Intercreditor Agreement) under the respective
Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been consummated,
the Pass Through Trustees, and after the Closing shall have been consummated,
each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date of
determination, the holders of a majority in aggregate unpaid Original Amount of
<PAGE>
all Equipment Notes outstanding as of such date (excluding any Equipment Notes
held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of any such
party or any interests of Owner Trustee or Owner Participant therein by reason
of subrogation pursuant to Section 4.03 of the Trust Indenture (unless all
Equipment Notes then outstanding shall be held by Owner Trustee, Lessee, Owner
Participant or any Affiliate of any thereof)); PROVIDED that for the purposes of
directing any action or casting any vote or giving any consent, waiver or
instruction hereunder any Note Holder of an Equipment Note or Equipment Notes
may allocate, in such Note Holder's sole discretion, any fractional portion of
the principal amount of such Equipment Note or Equipment Notes in favor of or in
opposition to any such action, vote, consent, waiver or instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
<PAGE>
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity but solely as loan trustee under the Trust
Indenture.
"MORTGAGEE AGREEMENTS" means, collectively, the Participation Agreement and
the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization proceeding
involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the trustee in
such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax yield
utilizing the multiple investment sinking fund method of analysis and aggregate
net after-tax cash flow, computed on the basis of the same methodology and
assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
"NET WORTH" means, for any person, the excess of its total assets over its
total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person, as
defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or more
Equipment Notes.
<PAGE>
"OFFICER'S CERTIFICATE" means, in respect of any party to the Participation
Agreement, a certificate signed by the Chairman, the President, any Vice
President (including those with varying ranks such as Executive, Senior,
Assistant or Staff Vice President), the Treasurer or the Secretary of such
party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation Agreement,
the Trust Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the initial
Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity Agreement, the
Equipment Notes, the Letter Agreement and the Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes have
been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the stated
original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation Agreement
as "Owner Participant" or, if a second person becomes an "Owner Participant"
pursuant to Section 10.1.1 of the Participation Agreement, both of such persons;
PROVIDED that if an Owner Participant Transfers 100% of its interest to a
successor Owner Participant, such transferring Owner Participant shall
thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
<PAGE>
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ____ dated as
of September 25, 1997 among Lessee, Owner Participant, Owner Trustee, the Pass
Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor, the
Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing gear,
instruments, appurtenances, accessories, furnishings, seats and other equipment
of whatever nature (other than (a) Engines or engines, and (b) any items leased
by Lessee from a third party other than Lessor)), that may from time to time be
installed or incorporated in or attached or appurtenant to the Airframe or any
Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as defined
in the Intercreditor Agreement), provided, that no amendment, modification or
supplement to, or substitution or replacement of, any such Fee Letter shall be
effective for purposes of any obligation of Lessee, unless consented to by
Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates issued by
the Pass Through Trusts (and any other pass through certificates for which such
pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through trusts
created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, in its capacity as trustee under each Pass Through Trust Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement, the
Pass Through Trust Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means the Closing Date and each March 24, June 24, September
24 and December 24 during the Term, commencing with the first such date to occur
after the Closing Date.
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"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of Basic
Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive quarterly periods during the
Term ending on a Payment Date, the first such period commencing on and including
the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier, (ii)
any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its principal
executive offices in any Permitted Country and which is authorized to conduct
commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance company,
financial institution or corporation (other than, without Lessee's consent, a
commercial air carrier, a commercial aircraft operator, a freight forwarder or
Affiliate of any of the foregoing), in each case with a combined capital and
surplus or net worth of at least $25,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7 of the
Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
<PAGE>
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the Series
A Equipment Notes, April 30, 2004 in the case of the Series B Equipment Notes
and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee, the
percentage of Lessor's Cost allocated to such Pass Through Trustee in Schedule 2
to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement Assignment
____, dated as of even date with the Participation Agreement, between Existing
Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or any
Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
"RENEWAL RENT" for the Aircraft means the rent payable therefor in respect
of a Renewal Lease Term determined pursuant to Section 17.2.2 of the Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine pursuant to
the Lease.
<PAGE>
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement, dated
as of the date the Aircraft is returned to Lessor pursuant to Section 5 of the
Lease, by Lessor and Lessee substantially in the form of Exhibit B to the Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the first
Renewal Lease Term, the second anniversary of the Scheduled Expiration Date, and
in the case of the second Renewal Lease Term, the fourth anniversary of the
Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of such Securities and
Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy Code and the trustee
or debtor-in-possession in such proceedings (i) having agreed to perform its
obligations under the Lease with the approval of the applicable court and
thereafter having continued to perform such obligations in accordance with
Section 1110 or (ii) having assumed the Lease with the approval of the relevant
court and thereafter having continued to perform its obligations under the
Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such other
period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code,
plus an additional period, if any, resulting from the trustee or
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the Securities
Act.
<PAGE>
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series A" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series B" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series C" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a) during the
Base Lease Term, the amount determined by multiplying (i) the percentage set
forth in Schedule 3 to the Lease (as adjusted from time to time in accordance
with Section 3.2.3 of the Lease) opposite the Stipulated Loss Value Date by (ii)
Lessor's Cost and (b) during any Renewal Term, the amount determined pursuant to
Section 17.2.3 of the Lease. Notwithstanding anything to the contrary in any
Operative Agreement, Stipulated Loss Value shall always be sufficient to pay in
full, as of the date of payment thereof (assuming timely payment of the
Equipment Notes prior to such date), the aggregate unpaid principal amount of
all Equipment Notes outstanding as of such date, together with accrued and
unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such month
specified in Schedule 3 to the Lease or, if such day is not a Business Day, the
immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as subordination
agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement, the
Liquidity Facilities and the Intercreditor Agreement.
<PAGE>
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), PROVIDED that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and PROVIDED, FURTHER, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax Indemnity
Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC and
Mortgagee, (c) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as of
even date with the Participation Agreement, between Lessee and Owner
Participant.
<PAGE>
"TAXES" means all license, recording, documentary, registration and other
similar fees and all taxes, levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever imposed by any Taxing Authority, together
with any penalties, additions to tax, fines or interest thereon or additions
thereto.
"TAXING AUTHORITY" means any federal, state or local government or other
taxing authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority or
any territory or possession of the United States or any taxing authority
thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION AGREEMENTS" means, collectively, the termination agreement
with respect to the Existing Lease, the termination agreement with respect to
the Existing Sublease and the release from the Lien of the Existing Mortgage, in
each case delivered pursuant to Section 5.1.2(xiii) of the Participation
Agreement.
"TERMINATION DATE" means any Payment Date occurring after the end of the
Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
<PAGE>
"TRANSACTIONS" means the transactions contemplated by the Participation
Agreement and the other Operative Agreements to occur on the Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements (including,
without limitation, the reasonable fees and expenses of counsel for such
parties), (b) all costs and expenses for the recording or filing of any
documents, certificates or instruments in accordance with any Operative
Agreement, including, without limitation, the FAA Filed Documents and the
Financing Statements, (c) one ninth of (i) the underwriting fees and expenses
attributable to the offering and sale of the Pass Through Certificates and (ii)
all costs and expenses incurred by Existing Mortgagee, the Pass Through
Trustees, the Subordination Agent, Owner Trustee and Mortgagee in connection
with the preparation, execution and delivery of the Pass Through Agreements
(including, without limitation, the reasonable fees and expenses of counsel for
such parties), (d) the equity placement fee and expenses of Equity Advisor
attributable to the Aircraft, (e) the reasonable fees and disbursements of
special counsel in Oklahoma City, Oklahoma, in connection with the Closing, (f)
all initial and ongoing fees, disbursements and expenses of Owner Trustee and
Mortgagee, and (g) the fees and expenses of the Appraiser contemplated by
Section 5.1.2(xv) of the Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance of all
or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner Trustee
or any Loan Participant or Note Holder purports or intends to Transfer any or
all of its right, title or interest in the Trust Estate or in its Equipment Note
and the Trust Indenture Estate, respectively, as described in Section 10.1.1(a),
10.1.2 or 10.1.3 (but excluding participants in any participation referred to in
Section 10.1.3), respectively, of the Participation Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ____, dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner Trustee
in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
<PAGE>
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the Trust
Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage ____
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" or "U.S." means the United States of America; PROVIDED,
that for geographic purposes, "United States" means, in aggregate, the 50 states
and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is 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 10 or more individuals or 6000
pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
<PAGE>
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any specified
Debt, at the time of the determination thereof the number of years obtained by
dividing the then Remaining Dollar-years of such Debt by the then outstanding
principal amount of such Debt. The term "Remaining Dollar-years" shall mean the
amount obtained by (1) multiplying the amount of each then-remaining principal
payment on such Debt by the number of years (calculated at the nearest
one-twelfth) that will elapse between the date of determination of the Weighted
Average Life to Maturity of such Debt and the date of that required payment and
(2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted Sublessee
agrees to furnish the Aircraft, Airframe or any Engine to a third party pursuant
to which the Aircraft, Airframe or Engine shall at all times be in the
operational control of Lessee or a Permitted Sublessee, provided that Lessee's
obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking corporation, not
in its capacity as Mortgagee under the Trust Indenture, but in its individual
capacity.
<PAGE>
----------------------------------
| SCHEDULE 1 |
| TO |
| Participation Agreement PACIFIC|
----------------------------------
<TABLE>
<CAPTION>
ACCOUNTS; ADDRESSES
-------------------
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
<S> <C> <C>
CONTINENTAL AIRLINES, INC. The Chase Manhattan Bank Continental Airlines, Inc.
New York, New York 10081 2929 Allen Parkway
Account No.: 910-2-499291 Suite 2010
ABA#: 021-000021 Houston, Texas 77019
Attention: Paul Trupia Attention: Executive Vice
Voice: 212-552-2829 President and Chief
Facsimile: 212-552-0107 Financial Officer
Reference: Continental Facsimile: (713) 520-6329
Lease _____
PACIFIC CENTURY LEASING, Pacific Century Leasing, Inc.
INC. 130 Merchant Street
19th Floor
Honolulu, Hawaii 96813
Attention: Leasing Manager
Telephone: (808) 537-8198 Facsimile: (808) 526-0964
FIRST SECURITY BANK, First Security Bank, First Security Bank,
NATIONAL ASSOCIATION National Association National Association
79 South Main Street 79 South Main Street
Salt Lake City, Utah 84111 Salt Lake City, Utah 84111
Account No.: 051-0922115 Attention: Corporate Trust Department
Corporate Trust Department Facsimile: (801) 246-5053
ABA#: 124-0000-12
Reference: Continental Lease____
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS MORTGAGEE New York, New York 10081 One Rodney Square
Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Administration Attention: Corporate Trust Administration
Reference: Continental Lease____ Facsimile: (302) 651-8882
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS SUBORDINATION AGENT New York, New York 10081 One Rodney Square
Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Administration Attention: Corporate Trust
Reference: Continental Lease___ Administration
Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE New York, New York 10081 One Rodney Square
FOR THE 1997-3A PASS Account No.: 920-1-014363 1100 North Market Street
THROUGH TRUST ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Administration Attention: Corporate Trust
Reference: Continental Lease___ Administration
Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE New York, New York 10081 One Rodney Square
FOR THE 1997-3B PASS Account No.: 920-1-014363 1100 North Market Street
THROUGH TRUST ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Administration Attention: Corporate Trust
Reference: Continental Lease___ Administration
Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank Wilmington Trust Company
AS PASS THROUGH TRUSTEE New York, New York 10081 One Rodney Square
FOR THE 1997-3C PASS Account No.: 920-1-014363 1100 North Market Street
THROUGH TRUST ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Administration Attention: Corporate Trust
Reference: Continental Lease___ Administration
Facsimile: (302) 651-8882
CORCIM, INC. None CT Corporation System
1209 Orange Street
Wilmington, Delaware 19801
Attention: Mark Ferrucci
Facsimile: (302) 658-5459
With copy to:
EMBRAER-Empresa Brasileira de Aeronautica S.A.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
EMBRAER-EMPRESA BRASILEIRA Banco do Brasil S.A. EMBRAER-Empresa Brasileira de Aeronautica S.A.
DE AERONAUTICA S.A. Av. Nelson D'Avila, 149 Av. Brigadeiro Faria Lima, 2170
12245-030, Sao Jose dos 12227-901 Sao Jose dos Campos -SP Brazil
Campos-SP Brazil Attention: General Counsel
Swift Code: BRASBRRJSJC Facsimile: (55-123) 41-1679
Account No.: 9405-6
Reference: COEX Lease
ROLLS-ROYCE PLC Citibank, NA Rolls-Royce plc
New York, New York 10005 65 Buckingham Gate
Account No. 36855852 London SW1E 6AT, England
For further credit: 794-508 Attn: Company Secretary
ABA#: 021-000089 Facsimile: 011-44-171-233-1733
Reference: Paying Agent
</TABLE>
<PAGE>
----------------------------------
| SCHEDULE 2 |
| TO |
| PARTICIPATION AGREEMENT PACIFIC|
----------------------------------
<TABLE>
<CAPTION>
COMMITMENTS
PERCENTAGE OF LESSOR'S
PARTICIPANT COST DOLLAR AMOUNT
----------- ---------------------- -------------
<S> <C> <C>
OWNER PARTICIPANT OWNER PARTICIPANT'S
PERCENTAGE
PASS THROUGH TRUSTEE LOAN PARTICIPANT'S
PTT PERCENTAGE
TOTAL 100%
</TABLE>
<PAGE>
----------------------------------
| SCHEDULE 1 |
| TO |
| PARTICIPATION AGREEMENT PACIFIC|
----------------------------------
<TABLE>
<CAPTION>
CERTAIN TERMS
DEFINED TERM DEFINITION
<S> <C>
Commitment
Termination Date October 15, 1997
Existing Lease Lease Agreement _________, dated as of __________, 1997
between Existing Lessor and Lessee
Existing Mortgage Aircraft Mortgage and Security Agreement ________, dated as
of _______, 1997 between Existing Lessor, as Debtor and
Existing Mortgagee, as Secured Party
Existing
Participation
Agreement Participation Agreement _______, dated as of _______, 1997,
among Lessee, Existing Lessor, Express, Airframe
Manufacturer and Existing Mortgagee
Equity Advisor Babcock & Brown, Inc.
Expense Limit
Lessor's Cost $12,600,000
Local Counsel to
the Owner
Participant Carlsmith Ball et al
OP Jurisdiction Hawaii
Special Counsel
to the Owner
Participant Chadbourne & Parke LLP
Special Tax Counsel
to the Owner
Participant Chadbourne & Parke LLP
</TABLE>
----------------------------------------------------------
| CONFIDENTIAL: Subject to Restrictions on Dissemination |
| Set Forth in Section 8 of this Agreement |
----------------------------------------------------------
================================================================================
PARTICIPATION AGREEMENT ____
Dated as of September 25, 1997
Among
CONTINENTAL AIRLINES, INC.,
Lessee,
ICX CORPORATION,
Owner Participant,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its individual capacity
except as expressly provided herein,
but solely as Owner Trustee,
Owner Trustee,
WILMINGTON TRUST COMPANY,
Not in its individual capacity
except as expressly provided herein,
but solely as Mortgagee, Subordination Agent
under the Intercreditor Agreement, and Pass Through
Trustee under each of the Pass Through Agreements,
Mortgagee and Loan Participant,
CORCIM, INC.
Existing Lessor,
ROLLS-ROYCE PLC,
Existing Mortgagee
and
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.
Airframe Manufacturer
----------------------------
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No. 145.___
and U.S. Registration No. N_____
with Two Allison Model AE3007A Engines
================================================================================
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION....................................2
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE........................2
2.1 Participation in Lessor's Cost..................................2
2.2 Nature of Obligations of Participants...........................3
2.3 Termination of Obligation to Participate........................3
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT..................3
3.1 Sale of Aircraft................................................3
3.2 Commitment to Lease.............................................6
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST;
POSTPONEMENT OF SCHEDULED CLOSING DATE..........................6
4.1 Notices of Scheduled Closing Date...............................6
4.2 Payment of Lessor's Cost........................................6
4.3 Postponement of Scheduled Closing Date..........................7
4.4 Closing.........................................................9
SECTION 5. CONDITIONS PRECEDENT............................................9
5.1 Conditions Precedent to Obligations of Participants.............9
5.2 Conditions Precedent to Obligations of Owner Trustee...........16
5.3 Conditions Precedent to Obligations of Mortgagee...............17
5.4 Conditions Precedent to Obligations of Lessee..................17
5.5 Conditions Precedent to Obligations of Existing Lessor
and Existing Mortgagee.........................................18
5.6 Post-Registration Opinion......................................19
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................19
6.1 Lessee's Representations and Warranties........................19
6.2 Owner Participant's Representations and Warranties.............23
6.3 First Security's Representations and Warranties................26
6.4 WTC's Representations and Warranties...........................29
6.5 Existing Lessor's Representations and Warranties...............33
6.6 Existing Mortgagee's Representations and Warranties............35
6.7 Airframe Manufacturer's Representations and Warranties.........37
<PAGE>
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS.........................39
7.1 Covenants of Lessee............................................39
7.2 Covenants of Owner Participant.................................41
7.3 Covenants of First Security and Owner Trustee..................44
7.4 Covenants of WTC...............................................46
7.5 Covenants of Note Holders......................................48
7.6 Agreements.....................................................49
SECTION 8. CONFIDENTIALITY................................................56
SECTION 9. INDEMNIFICATION AND EXPENSES...................................57
9.1 General Indemnity..............................................57
9.2 Expenses.......................................................64
9.3 General Tax Indemnity..........................................65
9.4 Payments.......................................................77
9.5 Interest.......................................................77
9.6 Benefit of Indemnities.........................................78
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS............................78
10.1 Participants, Owner Trustee and Note Holders...................78
10.2 Effect of Transfer.............................................80
SECTION 11. [RESERVED].....................................................81
SECTION 12. SECTION 1110...................................................81
SECTION 13. CHANGE OF CITIZENSHIP..........................................81
13.1 Generally......................................................81
13.2 Owner Participant..............................................82
13.3 Owner Trustee..................................................82
13.4 Mortgagee......................................................82
SECTION 14. CONCERNING OWNER TRUSTEE.......................................83
SECTION 15. MISCELLANEOUS..................................................83
15.1 Amendments.....................................................83
15.2 Severability...................................................84
15.3 Survival.......................................................84
15.4 Reproduction of Documents......................................84
15.5 Counterparts...................................................84
15.6 No Waiver......................................................85
15.7 Notices........................................................85
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE...............86
15.9 Third-Party Beneficiary........................................87
15.10 Entire Agreement...............................................87
15.11 Further Assurances.............................................87
</TABLE>
<PAGE>
ANNEX, SCHEDULES AND EXHIBITS
ANNEX A - Definitions
SCHEDULE 1 - Accounts; Addresses
SCHEDULE 2 - Commitments
SCHEDULE 3 - Certain Terms
SCHEDULE 4 - Lessor Rent
EXHIBIT A - Opinion of special counsel to Lessee
EXHIBIT B - Opinion of corporate counsel to Lessee
EXHIBIT C-1 - Opinion of corporate counsel to Airframe Manufacturer
EXHIBIT C-2 - Opinion of special counsel to Airframe Manufacturer
EXHIBIT D - Opinion of special counsel to Owner Trustee
EXHIBIT E - Opinion of special counsel to Mortgagee
EXHIBIT F-1 - Opinion of special counsel to Owner Participant and Owner
Participant Parent
EXHIBIT F-2 - Opinion of local counsel to Owner Participant and Owner
Participant Parent
EXHIBIT G - Opinion of special counsel to Existing Lessor
EXHIBIT H - Opinion of special counsel to Existing Mortgagee
EXHIBIT I - Opinion of special counsel in Oklahoma City, Oklahoma
EXHIBIT J - Delivery Receipt
<PAGE>
PARTICIPATION AGREEMENT ____
PARTICIPATION AGREEMENT ____, dated as of September 25, 1997 (this
"Agreement"), among (a) CONTINENTAL AIRLINES, INC., a Delaware corporation
("Lessee"), (b) ICX CORPORATION, an Ohio corporation ("Owner Participant"), (c)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not
in its individual capacity, except as expressly provided herein, but solely as
Owner Trustee (this and all other capitalized terms used but not defined herein
shall have the respective meanings ascribed thereto in Section 1) (in its
capacity as Owner Trustee, "Owner Trustee" or "Lessor," and in its individual
capacity, "First Security"), (d) WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity, except as expressly provided
herein, but solely as Mortgagee (in its capacity as Mortgagee, "Mortgagee" and
in its individual capacity, "WTC"), (e) WILMINGTON TRUST COMPANY, not in its
individual capacity, except as expressly provided herein, but solely as Pass
Through Trustee under each of the Pass Through Trust Agreements, (each, a "Pass
Through Trustee"), (f) WILMINGTON TRUST COMPANY, not in its individual capacity,
except as expressly provided herein, but solely as Subordination Agent under the
Intercreditor Agreement ("Subordination Agent"), (g) CORCIM, INC., a Delaware
corporation (the "Existing Lessor"), (h) ROLLS-ROYCE PLC, a corporation
organized under the laws of England (the "Existing Mortgagee"), and (i)
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A., a company organized under the
laws of Brazil ("Airframe Manufacturer").
RECITALS
A. Express and Airframe Manufacturer have entered into the Purchase
Agreement, pursuant to which, among other things, Airframe Manufacturer has
agreed to manufacture and sell to Express and Express has agreed to purchase
from Airframe Manufacturer certain aircraft, including the Aircraft.
B. Prior to the date hereof, in connection with the interim financing of
the Aircraft, (i) certain of Express' rights under the Purchase Agreement with
respect to the Aircraft were assigned to Existing Lessor, (ii) the Aircraft was
purchased by Existing Lessor, leased to Lessee pursuant to the Existing Lease
and subleased to Express pursuant to the Existing Sublease and (iii) the
Existing Lessor granted to Existing Mortgagee a security interest in, among
other things, the Aircraft and the Existing Lease pursuant to the Existing
Mortgage.
C. In order to effectuate the long-term financing of the Aircraft, the
parties hereto intend that (i) the Owner Trustee purchase the Aircraft from the
<PAGE>
Existing Lessor utilizing the proceeds of the sale of the Equipment Notes to the
Pass Through Trustees and the investment by Owner Participant, (ii) the Aircraft
be leased to Lessee and subleased to Express, (iii) Owner Trustee grant a
security interest to Mortgagee in the Aircraft and the Lease for the benefit of
the Note Holders and (iv) the Existing Lease be terminated and the Aircraft
released from the Lien of the Existing Mortgagee.
D. Concurrently with the execution and delivery hereof, Owner Participant
Parent has, for the benefit of Lessee, Owner Trustee and Mortgagee, issued the
Owner Participant Guaranty, pursuant to which Owner Participant Parent will
guarantee the obligations of Owner Participant under the Operative Agreements.
E. The parties hereto wish to set forth in this Agreement the terms and
conditions upon and subject to which the aforesaid transactions shall be
effected.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the respective
meanings set forth or incorporated by reference, and shall be construed and
interpreted in the manner described, in Annex A.
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE
2.1 PARTICIPATION IN LESSOR'S COST
Subject to the terms and conditions of this Agreement, on the Closing Date,
Owner Participant and each Pass Through Trustee shall participate in the payment
of Lessor's Cost as follows:
(a) Owner Participant shall participate in the payment of Lessor's Cost
for the Aircraft by making an equity investment in the beneficial
ownership of the Aircraft in the amount in Dollars equal to Owner
Participant's Percentage multiplied by Lessor's Cost; and
(b) Each Pass Through Trustee shall make a non-recourse secured loan to
Owner Trustee to finance, in part, the Owner Trustee's payment of
<PAGE>
Lessor's Cost in the amount in Dollars equal to such Pass Through
Trustee's PTT Percentage multiplied by Lessor's Cost, such loan to be
evidenced by one or more Equipment Notes, dated the Closing Date,
issued to the Subordination Agent as the registered holder on behalf
of each such Pass Through Trustee for the related Pass Through Trust
by Owner Trustee in accordance with this Agreement and the Trust
Indenture, in an aggregate principal amount equal to the Commitment of
each such Pass Through Trustee.
2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS
The obligations hereunder of each Participant are several, and not joint,
and a Participant shall have no obligation to make available to Owner Trustee
any portion of any amount not paid hereunder by any other Participant. The
failure by any Participant to perform its obligations hereunder shall not affect
the obligations of Lessee toward the other Participants, except to the extent
provided in Section 5.4.
2.3 TERMINATION OF OBLIGATION TO PARTICIPATE
Notwithstanding any other provision of this Agreement, if the Closing does
not occur on or before the Commitment Termination Date, the Commitment of each
Participant and its obligation to participate in the payment of Lessor's Cost
shall expire and be of no further force and effect; PROVIDED, that the liability
of any Participant that has defaulted in the payment of its Commitment shall not
be released.
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT
3.1 SALE OF AIRCRAFT
Subject to the terms and conditions hereof, at the Closing, Existing Lessor
hereby agrees to sell to Owner Trustee and Owner Trustee hereby agrees to
purchase from Existing Lessor the Aircraft, on the following terms:
3.1.1 DELIVERY
The Aircraft shall be delivered by Existing Lessor to Owner Trustee at such
place as may be designated by Lessee and approved by Existing Lessor (which
approval shall not be unreasonably withheld). Upon Existing Lessor's delivery of
the Aircraft to Owner Trustee, Owner Trustee shall execute and deliver to
Existing Lessor a Delivery Receipt therefor in the form annexed hereto as
Exhibit J. This purchase and sale shall not be effective as to the Aircraft
unless and until the Aircraft is concurrently delivered under the Lease.
<PAGE>
3.1.2 PURCHASE PRICE
The full purchase price for the Aircraft in the amount of Lessor's Cost
shall be paid to Existing Lessor in immediately available funds on delivery of
the Aircraft.
3.1.3 DISCLAIMER
Existing Lessor does not make, has not made and shall not be deemed to have
made, and expressly disclaims, any representation or warranty, express or
implied, as to:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT
TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF, WHETHER OR NOT
DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK
OR COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART
THEREOF.
The foregoing disclaimer shall in no way affect or limit (i) Existing
Lessor's obligations under the Operative Agreements, or (ii) Existing Lessor's
representations and warranties in Section 6.5 of this Agreement, in the Aircraft
Bill of Sale, including without limitation the warranty of good title, or any
other express representation or warranty in any Operative Agreement.
3.1.4 TERMINATION OF EXISTING FINANCING AGREEMENTS
(a) The Existing Lease and Existing Sublease for the Aircraft shall be
terminated, and each of the Existing Lessor and Lessee shall take such action to
evidence such termination as Owner Trustee or Mortgagee shall reasonably
request, including execution and delivery of a termination agreement for the
<PAGE>
Existing Lease and Existing Sublease in form and substance reasonably acceptable
to Owner Trustee and satisfactory for filing with the FAA, and UCC-3 termination
statements with respect to the termination of the Existing Lease and Existing
Sublease.
(b) The Aircraft, Aircraft Documents and other collateral shall be released
from the Lien of the Existing Mortgage, and the Existing Lessor and Existing
Mortgagee shall take such action to evidence such release as Owner Trustee,
Mortgagee or Lessee shall reasonably request, including the execution and
delivery of a Lien release with respect to the Existing Mortgage in form and
substance reasonably acceptable to Owner Trustee, Mortgagee and Lessee and
satisfactory for filing with the FAA, and UCC-3 termination statements with
respect to the release of the Aircraft from the Lien of the Existing Mortgage.
(c) The Existing Participation Agreement shall be terminated, effective as
of the Closing, and the parties thereto shall have no further obligation
thereunder except for Sections 7, 10, 11 and 12 thereof and for any breach of
such Agreement arising prior to the Closing.
(d) Existing Lessor shall refund to Lessee "Basic Rent" (as defined in the
Existing Lease) paid in advance by Lessee attributable to periods on and after
the Closing Date determined by multiplying such Basic Rent by a fraction, the
numerator of which shall be the number of days remaining in the month in which
the Closing Date occurs (from and including the Closing Date) and the
denominator of which shall be the total number of days in such month.
3.1.5 TAXES
Existing Lessor shall pay and discharge all applicable sales, use or
similar Taxes, duties or fees assessed or levied by any federal, state,
provincial or local taxing authority as a result of the sale and delivery of the
Aircraft to Owner Trustee contemplated by this Agreement. Existing Lessor, Owner
Trustee and Lessee will cooperate in order to minimize Taxes applicable to the
sale and delivery of the Aircraft to Owner Trustee contemplated by this
Agreement.
3.2 COMMITMENT TO LEASE
Subject to the terms and conditions of this Agreement, concurrently with
the issuance of the Equipment Notes and the purchase of the Aircraft by the
Owner Trustee on the Closing Date, Owner Trustee shall lease the Aircraft to
Lessee, and Lessee shall lease the Aircraft from Owner Trustee, under the Lease.
<PAGE>
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST;
POSTPONEMENT OF SCHEDULED CLOSING DATE
4.1 NOTICES OF SCHEDULED CLOSING DATE
Existing Mortgagee agrees to give Lessee, Existing Lessor, Participants,
Owner Trustee, and Mortgagee at least five Business Days' written notice of the
Scheduled Closing Date. Each Participant agrees that making available its
respective Commitment shall constitute a waiver of such notice. Owner Trustee
and Mortgagee shall be deemed to have waived such notice if Mortgagee shall have
received from each Participant funds in the full amount of its respective
Commitment.
4.2 PAYMENT OF LESSOR'S COST
(a) Each Participant agrees, subject to the terms and conditions of this
Agreement, to make the Dollar amount of its respective Commitment available, by
wire transfer of immediately available funds to WTC's account no. 0016-1728 at
Citibank, NA, New York, New York ABA# 021-000-089, reference Continental Lease
____, at or before 12:00 Noon, New York City time, on the Scheduled Closing
Date. All such funds made available by each Participant to WTC shall, until
payment thereof to Existing Lessor as provided in Section 4.2(b)(ii) or return
thereof to the respective Participant as provided in Section 4.3.2, be held by
WTC in trust for the benefit of the respective Participant, as the sole and
exclusive property of the respective Participant and not as part of the Trust
Estate or the Trust Indenture Estate.
(b) Subject to the satisfaction or waiver by the applicable party of the
conditions precedent set forth in Section 5, and simultaneously with the receipt
by the parties hereto of all amounts to be paid to them on the Closing Date
pursuant to this Section 4.2, Owner Trustee shall:
(i) purchase, take title to, and accept delivery of the Aircraft, and
in connection therewith execute the Delivery Receipt in the form of Exhibit
J hereto;
(ii) in consideration of the transfer of title to the Aircraft to
Owner Trustee, direct WTC to pay, from the funds made available to WTC
hereunder by the Participants, Lessor's Cost to Existing Lessor by wire
transfer of immediately available funds to Existing Lessor's account set
forth in Schedule 1 or as otherwise directed by Existing Lessor;
<PAGE>
(iii) execute an application for registration of the Aircraft with the
FAA and Lease Supplement No. 1, in each case with respect to the Aircraft;
(iv) execute the Trust Indenture and the initial Trust Indenture
Supplement and issue the Equipment Notes to the Subordination Agent in
accordance with Section 2.1(b);
(v) lease the Aircraft to Lessee pursuant to the Lease; and
(vi) take such other action as may be required to be taken by the
Owner Trustee on the Closing Date by the terms of any Operative Agreement.
4.3 POSTPONEMENT OF SCHEDULED CLOSING DATE
4.3.1 POSTPONEMENT
If for any reason whatsoever the Closing is not consummated on the
Scheduled Closing Date, Existing Mortgagee may by telephonic notice, given by
5:00 p.m., New York City time (such telephonic notice to be promptly confirmed
in writing by personal delivery or facsimile), on the Scheduled Closing Date to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee,
designate a Delayed Closing Date.
4.3.2 RETURN OF FUNDS
If the Closing fails to occur on the Scheduled Closing Date, WTC shall
promptly return to each Participant that makes funds available to it in
accordance with Section 4.2(a) such funds, together with interest or income
earned thereon.
4.3.3 INVESTMENT OF FUNDS; INTEREST
(a) If the Closing fails to occur on the Scheduled Closing Date, WTC shall,
if so instructed in the notice from Existing Mortgagee, use reasonable efforts
to invest, at the risk of Existing Mortgagee, the funds received by it from
Participants in Cash Equivalents. Any such obligations purchased by WTC, whether
directly or through a repurchase agreement, shall be held in trust by WTC for
the benefit of the respective Participants that provided such funds, and not as
part of the Trust Estate or the Trust Indenture Estate.
(b) If the Closing fails to occur on the Scheduled Closing Date, unless WTC
returns all funds to the Participants by 2:00 p.m., New York City time, on the
Scheduled Closing Date, Existing Mortgagee shall, on the Scheduled Closing Date
<PAGE>
or on the date funds are required to be returned to Participants pursuant to
Section 4.3.2, reimburse each Participant that has made funds available pursuant
to Section 4.2 for the loss of the use of its funds, by paying to such
Participant in immediately available funds an amount equal to the excess, if
any, of (i) interest at the Debt Rate on the amount of such funds for the period
from and including the Scheduled Closing Date to but excluding the Closing Date
or, if earlier, the day on which such Participant's funds are returned if such
return is made by 2:00 p.m., New York City time (or to but excluding the next
following Business Day if such return is not made by such time) over (ii) any
amount paid to such Participant in respect of interest or income earned by WTC
pursuant to Section 4.3.3(a).
(c) On the Closing Date or on the date funds are required to be returned to
Participants pursuant to Section 4.3.2, Existing Mortgagee shall reimburse WTC,
for the benefit of Participants that provided funds which are invested by WTC
hereunder, for any losses incurred on such investments. All income and profits
on the investment of such funds shall be for the respective accounts of such
Participants, and WTC shall not be liable for failure to invest such funds or
for any losses incurred on such investments, except for its own negligence or
willful misconduct.
4.4 CLOSING
The Closing shall occur at the offices of Hughes Hubbard & Reed LLP, One
Battery Park Plaza, New York, New York 10004, or such other place as the parties
shall agree.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTICIPANTS
The obligation of each Participant to make the Dollar amount of its
respective Commitment available for payment as directed by the Owner Trustee on
the Closing Date is subject to satisfaction or waiver by each such Participant,
at or prior to the Closing, of the conditions precedent set forth below in this
Section 5.1; provided, that it shall not be a condition precedent to the
obligation of any Participant that any document be produced or action taken that
is to be produced or taken by such Participant or by a Person within such
Participant's control; provided, further, that Sections 5.1.2(iii), (xv) and
(xxv) (G) and 5.1.15 shall not be conditions precedent to the obligation of Loan
Participant, and Section 5.1.2 (xxviii) and Section 5.1.5 shall not be a
condition precedent to the obligation of Owner Participant.
<PAGE>
5.1.1 NOTICE
Such Participant shall have received the notice described in Section 4.1
or, in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.1.2 DELIVERY OF DOCUMENTS
Such Participant shall, except as noted below, have received executed
counterparts of the following agreements, instruments, certificates or
documents, and each of such counterparts (a) shall have been duly authorized,
executed and delivered by the respective party or parties thereto, (b) shall be
reasonably satisfactory in form and substance to such Participant and (c) shall
be in full force and effect:
(i) the Lease; provided, that only Mortgagee shall receive the sole
executed chattel paper original thereof;
(ii) Lease Supplement No. 1; provided, that only Mortgagee shall
receive the sole executed chattel paper original thereof;
(iii) the Tax Indemnity Agreement; provided, that only Owner
Participant and Lessee shall receive copies of the Tax Indemnity Agreement;
(iv) the Trust Agreement;
(v) the Trust Indenture;
(vi) the initial Trust Indenture Supplement;
(vii) the Purchase Agreement Assignment;
(viii) the Consent and Agreement;
(ix) the Equipment Notes dated the Closing Date; provided, that only
the Subordination Agent shall receive the authenticated Equipment Notes;
(x) an excerpted copy of the Purchase Agreement to the extent relating
to Airframe Manufacturer's warranties or related obligations or any right
in the Purchase Agreement assigned to Owner Trustee pursuant to the
Purchase Agreement Assignment; provided, that only Owner Trustee and
Mortgagee shall receive copies of such agreements (copies of which may be
inspected by Participants and their respective special counsel on the
Closing Date, but after the Closing Date such copies shall be retained by
Owner Trustee and Mortgagee and may be inspected and reviewed by Owner
<PAGE>
Participant or Loan Participant or their respective counsel if and only if
there shall have occurred and be continuing a Lease Default or Lease Event
of Default);
(xi) the Bills of Sale;
(xii) the Express Sublease;
(xiii) termination agreements with respect to the Existing Lease and
the Existing Sublease and a release of the Aircraft, Aircraft Documents and
other collateral from the Lien of the Existing Mortgage, as contemplated by
Section 3.1.4;
(xiv) the broker's report and insurance certificates required by
Section 11 of the Lease;
(xv) an appraisal or appraisals from an Appraiser, which appraisal or
appraisals shall be reasonably satisfactory in form and substance to Owner
Participant; PROVIDED, that only Owner Participant shall receive a copy of
its appraisal (the "Appraisal");
(xvi) (A) a copy of the Certificate of Incorporation and By-Laws of
Lessee and resolutions of the board of directors of Lessee and/or the
executive committee thereof, in each case certified as of the Closing Date,
by the Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of the Lessee Operative
Agreements required to be executed and delivered by Lessee on or prior to
the Closing Date in accordance with the provisions hereof and thereof; (B)
an incumbency certificate of Lessee, Existing Lessor, Existing Mortgagee,
Airframe Manufacturer, Owner Participant, Owner Participant Parent, First
Security and WTC as to the person or persons authorized to execute and
deliver the relevant Operative Agreements on behalf of such party; and (C)
a copy of the Certificate of Incorporation or Articles of Incorporation and
By-Laws and general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization of
Existing Lessor, Existing Mortgagee, Airframe Manufacturer, Owner
Participant, Owner Participant Parent, First Security and WTC, certified as
of the Closing Date by the Secretary or an Assistant or Attesting Secretary
of Existing Lessor, Existing Mortgagee, Airframe Manufacturer, Owner
<PAGE>
Participant, Owner Participant Parent, First Security and WTC,
respectively, which authorize the execution, delivery and performance by
Existing Lessor, Existing Mortgagee, Airframe Manufacturer, Owner
Participant, Owner Participant Parent, First Security and WTC,
respectively, of each of the Operative Agreements to which it is a party,
together with such other documents and evidence with respect to it as
Lessee or any Participant may reasonably request in order to establish the
consummation of the transactions contemplated by this Agreement and the
taking of all corporate proceedings in connection therewith;
(xvii) an Officer's Certificate of Lessee, dated as of the Closing
Date, stating that its representations and warranties set forth in this
Agreement are true and correct as of the Closing Date (or, to the extent
that any such representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date);
(xviii) an Officer's Certificate of First Security, dated as of the
Closing Date, stating that its representations and warranties, in its
individual capacity and as Owner Trustee, set forth in this Agreement are
true and correct as of the Closing Date (or, to the extent that any such
representation and warranty expressly relates to an earlier date, true and
correct as of such earlier date);
(xix) an Officer's Certificate of Owner Participant, dated as of the
Closing Date, stating that its representations and warranties set forth in
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xx) an Officer's Certificate of WTC, dated as of the Closing Date,
stating that its representations and warranties in its individual capacity
or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case
may be, set forth in this Agreement are true and correct as of the Closing
Date (or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xxi) an Officer's Certificate of Existing Lessor, dated as of the
Closing Date, stating that its representations and warranties set forth in
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxii) an Officer's Certificate of Existing Mortgagee, dated as of the
Closing Date, stating that its representations and warranties set forth in
<PAGE>
this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxiii) an application for registration of the Aircraft with the FAA
in the name of Owner Trustee; PROVIDED, that only special counsel in
Oklahoma City, Oklahoma shall receive the sole executed copy thereof for
filing with the FAA;
(xxiv) the Financing Statements;
(xxv) the following opinions of counsel, in each case dated the
Closing Date:
(A) an opinion of Hughes Hubbard & Reed LLP, special counsel to
Lessee, substantially in the form of Exhibit A;
(B) an opinion of Lessee's Legal Department, substantially in the
form of Exhibit B;
(C) an opinion of (x) corporate counsel to Airframe Manufacturer,
substantially in the form of Exhibit C-1, and (y) Condon & Forsyth,
special counsel to Airframe Manufacturer, substantially in the form of
Exhibit C-2;
(D) an opinion of Ray, Quinney & Nebeker, special counsel to
Owner Trustee, substantially in the form of Exhibit D;
(E) an opinion of Morris, James, Hitchens & Williams, special
counsel to Mortgagee and Loan Participant, substantially in the form
of Exhibit E;
(F) an opinion of Special Counsel to Owner Participant and Owner
Participant Parent and an opinion of Local Counsel to Owner
Participant and Owner Participant Parent (each as defined in Schedule
3 to this Agreement), substantially in the form of Exhibit F-1 and
F-2, respectively;
(G) an opinion of Special Tax Counsel to Owner Participant (as
defined in Schedule 3 to this Agreement), with respect to certain tax
consequences of the transactions contemplated hereby; PROVIDED, that
only Owner Participant shall receive such opinion;
<PAGE>
(H) an opinion of Condon & Forsyth, special counsel to Existing
Lessor, substantially in the form of Exhibit G;
(I) an opinion of Haight Gardner Holland & Knight, special
counsel to Existing Mortgagee, substantially in the form of Exhibit H;
and
(J) an opinion of Lytle Soule & Curlee, special counsel in
Oklahoma City, Oklahoma, substantially in the form of Exhibit I;
(xxvi) a copy of a current, valid Standard Certificate of
Airworthiness for the Aircraft duly issued by the FAA;
(xxvii) an Officer's Certificate of Airframe Manufacturer, dated as of
the Closing Date, stating that its representations and warranties set forth
in this Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to an
earlier date, true and correct as of such earlier date);
(xxviii) the Owner Participant Guaranty; and
(xxix) the Participants and their respective counsel shall have
received copies of such documents and papers as such Participants may
reasonably request, other than (A) in the case of Loan Participant, copies
of the Purchase Agreement, provided that special counsel for Loan
Participant may inspect the Purchase Agreement in connection with the
transactions contemplated hereby or as a basis for such counsel's closing
opinion, and (B) in the case of parties other than Owner Participant and
its special counsel, the Tax Indemnity Agreement.
5.1.3 OTHER COMMITMENTS
Each other Participant shall have made available the Dollar amount of its
Commitment in accordance with Section 4.
5.1.4 VIOLATION OF LAW
No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Lessee, Existing Lessor,
Existing Mortgagee, any Participant, Subordination Agent, Owner Trustee or
Mortgagee to execute, deliver and perform the Operative Agreements to which any
of them is a party or (b) any Participant to make the Dollar amount of its
<PAGE>
Commitment available or, in the case of any Loan Participant, to acquire an
Equipment Note or to realize the benefits of the security afforded by the Trust
Indenture.
5.1.5 PERFECTED SECURITY INTEREST
On the Closing Date, after giving effect to the filing of the FAA Filed
Documents and the Financing Statements, Mortgagee shall have received a duly
perfected first priority security interest in all of Owner Trustee's right,
title and interest in the Aircraft and the Lease, subject only to Permitted
Liens.
5.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of each other party to this Agreement
made, in each case, in this Agreement and in any other Operative Agreement to
which it is a party, shall be true and accurate in all material respects as of
the Closing Date (unless any such representation and warranty shall have been
made with reference to a specified date, in which case such representation and
warranty shall be true and accurate as of such specified date) and each other
party to this Agreement shall have performed and observed, in all material
respects, all of its covenants, obligations and agreements in this Agreement and
in any other Operative Agreement to which it is a party to be observed or
performed by it as of the Closing Date.
5.1.7 NO EVENT OF DEFAULT
On the Closing Date, no event shall have occurred and be continuing, or
would result from the sale, mortgage or lease of the Aircraft, which constitutes
a Lease Default or Lease Event of Default, or an Indenture Default or Indenture
Event of Default.
5.1.8 NO EVENT OF LOSS
On the Closing Date, no Event of Loss with respect to the Airframe or any
Engine shall have occurred and no circumstance, condition, act or event that,
with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
5.1.9 TITLE
Owner Trustee shall have good title (subject to filing and recordation of
the FAA Bill of Sale with the FAA) to the Aircraft, free and clear of Liens,
except (a) the rights of Lessee under the Lease and Lease Supplement No. 1, (b)
the Lien created by the Trust Indenture and the initial Trust Indenture
Supplement and (c) other Permitted Liens.
<PAGE>
5.1.10 CERTIFICATION
The Aircraft shall have been duly certificated by the FAA as to type and
airworthiness.
5.1.11 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee of
Owner Trustee under the Trust Indenture), shall be entitled to the benefits of
Section 1110 (as currently in effect) with respect to the right to take
possession of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
5.1.12 FILING
On the Closing Date (a) the FAA Filed Documents shall have been duly filed
for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Act and (b) each Financing
Statement shall have been duly filed (or shall be in the process of being so
duly filed) in the appropriate jurisdiction.
5.1.13 NO PROCEEDINGS
No action or proceeding shall have been instituted, nor shall any
action be threatened in writing, before any Government Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.
5.1.14 GOVERNMENTAL ACTION
All appropriate action required to have been taken prior to the Closing
Date by the FAA, or any governmental or political agency, subdivision or
instrumentality of the United States, in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders, permits,
waivers, authorizations, exemptions and approvals of such entities required to
be in effect on the Closing Date in connection with the transactions
contemplated by this Agreement shall have been issued.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER TRUSTEE
The obligation of Owner Trustee to apply the Commitments of the
Participants to pay Lessor's Cost on the Closing Date is subject to satisfaction
<PAGE>
or waiver by Owner Trustee, at or prior to the Closing, of the conditions
precedent set forth below in this Section 5.2.
5.2.1 NOTICE
Owner Trustee shall have received the notice described in Section 4.1 or,
in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.2.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Owner Trustee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Owner Trustee.
5.2.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and 5.1.11
shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Owner Trustee.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF MORTGAGEE
The obligation of Mortgagee to authenticate the Equipment Notes on the
Closing Date is subject to the satisfaction or waiver by Mortgagee, at or prior
to the Closing, of the conditions precedent set forth below in this Section 5.3.
5.3.1 NOTICE
Mortgagee shall have received the notice described in Section 4.1 or, in
the case of a Delayed Closing Date, 4.3, when and as required thereby, or shall
have waived such notice.
5.3.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Mortgagee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Mortgagee.
<PAGE>
5.3.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and 5.1.11
shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Mortgagee.
5.4 CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE
The obligation of Lessee to lease the Aircraft on the Closing Date and to
take the other actions required by this Agreement to be taken by it at the
Closing is subject to the satisfaction or waiver by Lessee, at or prior to the
Closing, of the conditions precedent set forth below in this Section 5.4.
5.4.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Lessee, except
as specifically provided therein, and shall be satisfactory to Lessee, unless
the failure to receive any such agreement, instrument, certificate or document
is the result of any action or inaction by Lessee.
5.4.2 SALES TAX
Lessee shall be satisfied that no sales, use, value added, goods and
services or like tax, and no stamp tax duty, is payable with respect to the
delivery of the Aircraft on the Closing Date to the extent that Lessee has
liability therefor under Section 9.3.
5.4.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.3 (as to all
Participants), 5.1.4, 5.1.6, 5.1.7 (as to Indenture Defaults or Indenture Events
of Default not constituting Lease Defaults or Lease Events of Default,
respectively), 5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13 and 5.1.14 shall
have been satisfied or waived by Lessee, unless the failure of any such
condition to be satisfied is the result of any action or inaction by Lessee.
5.5 CONDITIONS PRECEDENT TO OBLIGATIONS OF EXISTING LESSOR AND EXISTING
MORTGAGEE
The obligation of Existing Lessor to sell and transfer the Aircraft to
Owner Trustee at the time of the Closing and the respective obligations of each
of Existing Lessor and Existing Mortgagee to take the other actions required by
this Agreement to be taken by it at the Closing is subject to the satisfaction
<PAGE>
or waiver by it, at or prior to the Closing, of the conditions precedent set
forth below in this Section 5.5.
5.5.1 TENDER OF LESSOR'S COST
Owner Trustee shall have tendered to Existing Lessor Lessor's Cost pursuant
to Section 4.2, subject to performance by Existing Lessor and Existing Mortgagee
of their respective obligations under this Agreement.
5.5.2 OTHER CONDITIONS PRECEDENT
The condition set forth in Sections 5.1.2 and 5.1.4(a) shall have been
satisfied with respect to it.
5.6 POST-REGISTRATION OPINION
Promptly upon the registration of the Aircraft and the recordation of the
FAA Filed Documents pursuant to the Act, Airframe Manufacturer will cause Lytle
Soule & Curlee, special counsel in Oklahoma City, Oklahoma, to deliver to
Lessee, Existing Lessor, Existing Mortgagee, each Participant, Owner Trustee and
Mortgagee a favorable opinion or opinions addressed to each of them with respect
to such registration and recordation.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to each Participant, Existing Mortgagee,
Existing Lessor, Airframe Manufacturer, Subordination Agent, Owner Trustee and
Mortgagee that:
6.1.1 ORGANIZATION; QUALIFICATION
Lessee is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into and perform its obligations
under the Lessee Operative Agreements. Lessee is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which the
nature and extent of the business conducted by it, or the ownership of its
properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to Lessee.
<PAGE>
6.1.2 CORPORATE AUTHORIZATION
Lessee has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Lessee Operative Agreements,
and the performance of its obligations thereunder.
6.1.3 NO VIOLATION
The execution and delivery by Lessee of the Lessee Operative Agreements,
the performance by Lessee of its obligations thereunder and the consummation by
Lessee on the Closing Date of the transactions contemplated thereby, do not and
will not (a) violate any provision of the Certificate of Incorporation or
By-Laws of Lessee, (b) violate any Law applicable to or binding on Lessee or (c)
violate or constitute any default under (other than any violation or default
that would not result in a Material Adverse Change to Lessee), or result in the
creation of any Lien (other than as permitted under the Lease) upon the Aircraft
under, any indenture, mortgage, chattel mortgage, deed of trust, conditional
sales contract, lease, loan or other material agreement, instrument or document
to which Lessee is a party or by which Lessee or any of its properties is bound.
6.1.4 APPROVALS
The execution and delivery by Lessee of the Lessee Operative Agreements,
the performance by Lessee of its obligations thereunder and the consummation by
Lessee on the Closing Date of the transactions contemplated thereby do not and
will not require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
Debt of Lessee and (b) any Government Entity, other than the filing of (x) the
FAA Filed Documents and the Financing Statements (and continuation statements
periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.
6.1.5 VALID AND BINDING AGREEMENTS
The Lessee Operative Agreements have been duly authorized, executed and
delivered by Lessee and, assuming the due authorization, execution and delivery
thereof by the other party or parties thereto, constitute the legal, valid and
binding obligations of Lessee and are enforceable against Lessee in accordance
<PAGE>
with the respective terms thereof, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar Laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.
6.1.6 LITIGATION
Except as set forth in Lessee's most recent Annual Report on Form 10-K, as
amended, filed by Lessee with the SEC on or prior to the Closing Date, or in any
Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Lessee with
the SEC subsequent to such Form 10-K and on or prior to the Closing Date, no
action, claim or proceeding is now pending or, to the Actual Knowledge of
Lessee, threatened, against Lessee, before any court, governmental body,
arbitration board, tribunal or administrative agency, which is reasonably likely
to be determined adversely to Lessee and if determined adversely to Lessee would
result in a Material Adverse Change.
6.1.7 FINANCIAL CONDITION
The audited consolidated balance sheet of Lessee with respect to Lessee's
most recent fiscal year included in Lessee's most recent Annual Report on Form
10-K, as amended, filed by Lessee with the SEC, and the related consolidated
statements of operations and cash flows for the period then ended have been
prepared in accordance with GAAP and fairly present in all material respects the
financial condition of Lessee and its consolidated subsidiaries as of such date
and the results of its operations and cash flows for such period, and since the
date of such balance sheet, there has been no material adverse change in such
financial condition or operations of Lessee, except for matters disclosed in (a)
the financial statements referred to above, (b) any subsequent Quarterly Report
on Form 10-Q or Current Report on Form 8-K filed by Lessee with the SEC on or
prior to the date hereof, or (c) any prospectus or prospectus supplement filed
by Lessee with the SEC in connection with the offering of the Pass Through
Certificates.
6.1.8 REGISTRATION AND RECORDATION
Except for (a) the registration of the Aircraft with the FAA pursuant to
the Act in the name of Owner Trustee, (b) the filing for recordation (and
recordation) of the FAA Filed Documents, (c) the filing of the Financing
Statements (and continuation statements relating thereto at periodic intervals),
(d) the taking of possession and retention by Mortgagee of the original
counterparts of the Lease and Lease Supplement No. 1 and (e) the affixation of
the nameplates referred to in Section 7.1.3 of the Lease, no further action,
<PAGE>
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the right, title or interest of Owner Trustee, and the
Mortgagee's security interest, in the Aircraft and the Lease, as against Lessee
and any other Person, in each case, in any applicable jurisdiction in the United
States.
6.1.9 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Lessee is located at 2929 Allen Parkway, Houston, Texas 77019.
6.1.10 NO DEFAULT
No event which, if the Aircraft were subject to the Lease, constitutes
a Lease Event of Default has occurred and is continuing.
6.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any Engine,
and, to the Actual Knowledge of Lessee, no circumstance, condition, act or event
has occurred that, with the giving of notice or lapse of time or both gives rise
to or constitutes an Event of Loss with respect to the Airframe or any Engine.
6.1.12 COMPLIANCE WITH LAWS
(a) Lessee is a Citizen of the United States and a U.S. Air Carrier.
(b) Lessee holds all licenses, permits and franchises from the appropriate
Government Entities necessary to authorize Lessee to lawfully engage in air
transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse Change to Lessee.
(c) Lessee is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
6.1.13 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
<PAGE>
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any person in violation of the Securities Act.
6.1.14 BROKER'S FEES
No Person acting on behalf of Lessee is or will be entitled to any broker's
fee, commission or finder's fee in connection with the Transactions.
6.1.15 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee under
the Trust Indenture), is entitled to the benefits of Section 1110 (as currently
in effect) with respect to the right to take possession of the Airframe and
Engines as provided in the Lease in the event of a case under Chapter 11 of the
Bankruptcy Code in which Lessee is a debtor.
6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES
Owner Participant represents and warrants to Lessee, Loan Participant,
Existing Mortgagee, Existing Lessor, Airframe Manufacturer, Subordination Agent,
Owner Trustee and Mortgagee that:
6.2.1 ORGANIZATION, ETC.
Owner Participant is a corporation duly incorporated, validly existing and
in good standing under the Laws of the OP Jurisdiction, has the corporate power
and authority to conduct the business in which it is currently engaged and to
own or hold under lease its properties and to enter into, and perform its
obligations under the Owner Participant Agreements, and the Owner Participant
Parent has a tangible net worth (exclusive of goodwill) greater than
$25,000,000.
6.2.2 CORPORATE AUTHORIZATION
Owner Participant has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Owner Participant
Agreements, and the performance of its obligations thereunder.
<PAGE>
6.2.3 NO VIOLATION
The execution and delivery by Owner Participant of the Owner Participant
Agreements, the performance by Owner Participant of its obligations thereunder
and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of Owner Participant, (b) violate
any Law applicable to or binding on Owner Participant or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to Owner Participant), or result in the
creation of any Lien (other than as provided for or otherwise permitted in the
Operative Agreements) upon the Trust Estate under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease, loan or
other material agreement, instrument or document to which Owner Participant is a
party or by which Owner Participant or any of its properties is bound.
6.2.4 APPROVALS
The execution and delivery by Owner Participant of the Owner Participant
Agreements, the performance by Owner Participant of its obligations thereunder
and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Owner Participant and
(b) any Government Entity, other than the filing of the FAA Filed Documents and
the Financing Statements.
6.2.5 VALID AND BINDING AGREEMENTS
The Owner Participant Agreements have been duly authorized, executed and
delivered by Owner Participant and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid
and binding obligations of Owner Participant and are enforceable against Owner
Participant in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
<PAGE>
6.2.6 CITIZENSHIP
On the Closing Date, Owner Participant is a Citizen of the United States,
without making use of any voting trust or similar arrangement permitted under 14
C.F.R ss. 47.8.
6.2.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to Owner
Participant in respect of all or any part of the Trust Estate.
6.2.8 INVESTMENT BY OWNER PARTICIPANT
Owner Participant's beneficial interest in the Trust Estate is being
acquired by it for its own account, for investment and not with a view to any
resale or distribution thereof, except that, subject to the restrictions on
transfer set forth in Section 10, the disposition by Owner Participant of its
beneficial interest in the Trust Estate shall at all times be within its
control.
6.2.9 ERISA
No part of the funds to be used by Owner Participant or Owner Participant
Parent to acquire or hold its interests in the Trust Estate to be acquired by it
under this Agreement directly or indirectly constitutes assets of a Plan.
6.2.10 LITIGATION
There are no pending or, to the Actual Knowledge of Owner Participant,
threatened actions or proceedings against Owner Participant or Owner Participant
Parent before any court, governmental body, arbitration board, administrative
agency or tribunal which, if determined adversely to Owner Participant or Owner
Participant Parent, would materially adversely affect the ability of Owner
Participant to perform its obligations under the Owner Participant Agreements or
Owner Participant Parent to perform its obligations under the Owner Participant
Guaranty.
6.2.11 SECURITIES LAWS
Neither Owner Participant nor any person Owner Participant has authorized
to act on its behalf has directly or indirectly offered any beneficial interest
in or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
<PAGE>
the same from, any Person in violation of the registration provisions of the
Securities Act or applicable state securities Laws.
6.2.12 BROKER'S FEES
No Person acting on behalf of Owner Participant or Owner Participant Parent
is or will be entitled to any broker's fee, commission or finder's fee in
connection with the Transactions.
6.3 FIRST SECURITY'S REPRESENTATIONS AND WARRANTIES
First Security represents and warrants to Lessee, Owner Participant,
Existing Mortgagee, Existing Lessor, Airframe Manufacturer, Loan Participants,
Subordination Agent and Mortgagee that:
6.3.1 ORGANIZATION, ETC.
First Security is a national banking association duly organized, validly
existing and in good standing under the Laws of the United States, holding a
valid certificate to do business as a national banking association with banking
authority to execute and deliver, and perform its obligations under, the Owner
Trustee Agreements.
6.3.2 CORPORATE AUTHORIZATION
First Security has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by Law or by its Articles of Association or By-Laws) to
authorize the execution and delivery by First Security, in its individual
capacity and as Owner Trustee, of each of the Owner Trustee Agreements, and the
performance of its obligations thereunder.
6.3.3 NO VIOLATION
The execution and delivery by First Security, in its individual capacity
and as Owner Trustee of the Owner Trustee Agreements, the performance by First
Security, in its individual capacity and as Owner Trustee, of its obligations
thereunder and the consummation by First Security in its individual capacity and
as Owner Trustee on the Closing Date of the transactions contemplated thereby,
do not and will not (a) violate any provision of the Articles of Association or
By-Laws of First Security, (b) violate any Law applicable to or binding on Owner
Trustee or First Security or (c) violate or constitute any default under(other
than any violation or default that would not result in a Material Adverse Change
to First Security, in its individual capacity or as Owner Trustee), or result in
<PAGE>
the creation of any Lien (other than the lien of the Trust Indenture) upon any
property of First Security, in its individual capacity and as Owner Trustee, or
any of its subsidiaries under, any indenture, mortgage, chattel mortgage, deed
of trust, conditional sales contract, lease, loan or other material agreement,
instrument or document to which First Security, in its individual capacity and
as Owner Trustee, is a party or by which First Security, in its individual
capacity and as Owner Trustee, or any of its properties is or may be bound or
affected.
6.3.4 APPROVALS
The execution and delivery by First Security, in its individual capacity
and as Owner Trustee, of the Owner Trustee Agreements, the performance by First
Security, in its individual capacity and as Owner Trustee, of its obligations
thereunder and the consummation by First Security, in its individual capacity
and as Owner Trustee, on the Closing Date of the transactions contemplated
thereby do not and will not require the consent, approval or authorization of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of First Security or (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.
6.3.5 VALID AND BINDING AGREEMENTS
The Owner Trustee Agreements have been duly authorized, executed and
delivered by First Security, in its individual capacity or as Owner Trustee, as
the case may be, and constitute the legal, valid and binding obligations of
First Security, in its individual capacity and as Owner Trustee, and, assuming
the due authorization, execution and delivery thereof by the other party or
parties thereto, are enforceable against First Security, in its individual
capacity and as Owner Trustee, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.3.6 CITIZENSHIP
On the Closing Date, First Security is a Citizen of the United States.
<PAGE>
6.3.7 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of the
UCC) of Owner Trustee is located at 79 South Main Street, Salt Lake City, Utah
84111.
6.3.8 TITLE
On the Closing Date, Owner Trustee shall have received whatever title to
the Aircraft as was conveyed to it by Existing Lessor.
6.3.9 NO LIENS; FINANCING STATEMENTS
On the Closing Date, there are no Lessor Liens attributable to First
Security or Owner Trustee in respect of all or any part of the Aircraft, Trust
Estate or the Trust Indenture Estate. Except for the Financing Statements, it
has not, either in its individual capacity or as Owner Trustee, executed any UCC
financing statements relating to the Aircraft or the Lease.
6.3.10 LITIGATION
There are no pending or, to the Actual Knowledge of First Security,
threatened actions or proceedings against First Security or Owner Trustee before
any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to First Security, would materially
adversely affect the ability of First Security or Owner Trustee to perform its
obligations under the Owner Trustee Agreements.
6.3.11 SECURITIES LAWS
Neither First Security, nor any person authorized to act on its behalf, has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicited any offer to acquire any such interest or security
from, or has sold any such interest or security to, any person other than the
Participants, except for the offering and sale of the Pass Through Certificates.
6.3.12 EXPENSES AND TAXES
There are no Expenses or Taxes that may be imposed on or asserted against
the Trust, the Trust Estate or any part thereof or any interest therein, the
Trust Indenture Estate, Lessee, Owner Participant, any Pass Through Trustee,
Subordination Agent, Owner Trustee or Mortgagee (except as to Owner Trustee,
<PAGE>
Taxes imposed on the fees payable to Owner Trustee) under the laws of Utah in
connection with the execution, delivery or performance of any Operative
Agreement by Owner Trustee or in connection with the issuance of the Equipment
Notes, which Expenses or Taxes would not have been imposed if Owner Trustee had
not (x) had its principal place of business in, (y) performed (in its individual
capacity or as Owner Trustee) any or all of its duties under the Operative
Agreements in or (z) engaged in any activities unrelated to the transactions
contemplated by the Operative Agreements in, the State of Utah.
6.4 WTC'S REPRESENTATIONS AND WARRANTIES
WTC represents and warrants (with respect to Section 6.4.10, solely in its
capacity as Subordination Agent) to Lessee, Owner Participant, Existing
Mortgagee, Existing Lessor, Airframe Manufacturer, and Owner Trustee that:
6.4.1 ORGANIZATION, ETC.
WTC is a Delaware banking corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware, holding a valid
certificate to do business as a Delaware banking corporation with banking
authority to execute and deliver, and perform its obligations under, the
Mortgagee Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements.
6.4.2 CORPORATE AUTHORIZATION
WTC has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Certificate of Incorporation or By-Laws)
to authorize the execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements and the performance of its obligations
thereunder.
6.4.3 NO VIOLATION
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
<PAGE>
Date of the transactions contemplated thereby, do not and will not (a) violate
any provision of the Certificate of Incorporation or By-Laws of WTC, (b) violate
any Law applicable to or binding on WTC, in its individual capacity or (except
in the case of any Law relating to any Plan) as Mortgagee, a Pass Through
Trustee or Subordination Agent, or (c) violate or constitute any default under
(other than any violation or default that would not result in a Material Adverse
Change to WTC, in its individual capacity or Mortgagee, a Pass Through Trustee
or Subordination Agent), or result in the creation of any Lien (other than the
lien of the Trust Indenture) upon any property of WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, or any
of WTC's subsidiaries under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other agreement, instrument or
document to which WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, is a party or by which WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, or any of their respective properties is bound.
6.4.4 APPROVALS
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
Date by WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee
or Subordination Agent, as the case may be, of the transactions contemplated
thereby do not and will not require the consent, approval or authorization of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of WTC or (b) any Government Entity, other
than the filing of the FAA Filed Documents and the Financing Statements.
6.4.5 VALID AND BINDING AGREEMENTS
The Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements have been duly authorized, executed and delivered
by WTC and, assuming the due authorization, execution and delivery by the other
party or parties thereto, constitute the legal, valid and binding obligations of
WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or
<PAGE>
Subordination Agent, as the case may be, and are enforceable against WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.4.6 CITIZENSHIP
WTC is a Citizen of the United States.
6.4.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to WTC in
respect of all or any part of the Trust Estate or the Trust Indenture Estate.
6.4.8 LITIGATION
There are no pending or, to the Actual Knowledge of WTC, threatened actions
or proceedings against WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, before any court, administrative agency
or tribunal which, if determined adversely to WTC, in its individual capacity or
as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be,
would materially adversely affect the ability of WTC, in its individual capacity
or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may
be, to perform its obligations under any of the Mortgagee Agreements, the Pass
Through Trustee Agreements or the Subordination Agent Agreements.
6.4.9 SECURITIES LAWS
Neither WTC nor any person authorized to act on its behalf has directly or
indirectly offered any beneficial interest or Security relating to the ownership
of the Aircraft or any interest in the Trust Indenture Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicited any offer to acquire any such interest or security
from, or has sold any such interest or security to, any Person other than the
Participants, except for the offering and sale of the Pass Through Certificates.
6.4.10 INVESTMENT
The Equipment Notes to be acquired by the Subordination Agent are being
acquired by it for the account of the Pass Through Trustees, for investment and
<PAGE>
not with a view to any resale or distribution thereof, except that, subject to
the restrictions on transfer set forth in Section 10.1.3, the disposition by it
of its Equipment Notes shall at all times be within its control.
6.4.11 TAXES
There are no Taxes payable by any Pass Through Trustee or WTC, as the case
may be, imposed by the State of Delaware or any political subdivision or taxing
authority thereof in connection with the execution, delivery and performance by
such Pass Through Trustee or WTC, as the case may be, of this Agreement or any
of the Pass Through Trustee Agreements (other than franchise or other taxes
based on or measured by any fees or compensation received by any such Pass
Through Trustee or WTC, as the case may be, for services rendered in connection
with the transactions contemplated by any of the Pass Through Trust Agreements),
and there are no Taxes payable by any Pass Through Trustee or WTC, as the case
may be, imposed by the State of Delaware or any political subdivision thereof in
connection with the acquisition, possession or ownership by any such 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 any such Pass
Through Trustee or WTC, as the case may be, for services rendered in connection
with the transactions contemplated by any of the Pass Through Trust Agreements),
and, assuming that the trusts created by the Pass Through Trust Agreements will
not be taxable as corporations, but, rather, each will be characterized as a
grantor trust under subpart E, Part I of Subchapter J of the Code or as a
partnership under Subchapter K of the Code, such trusts will not be subject to
any Taxes imposed by the State of Delaware or any political subdivision thereof.
6.4.12 CONTROL
WTC is not an Affiliate of the Owner Participant or the Owner Trustee.
6.4.13 BROKER'S FEES
No Person acting on behalf of WTC, in its individual capacity or as
Mortgagee, any Pass Through Trustee or Subordination Agent, is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions.
6.5 EXISTING LESSOR'S REPRESENTATIONS AND WARRANTIES
Existing Lessor represents and warrants to Lessee, each Participant,
Existing Mortgagee, Subordination Agent, Owner Trustee and Mortgagee that:
<PAGE>
6.5.1 ORGANIZATION, ETC.
Existing Lessor is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware, and has the corporate
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into, and perform its
obligations under the Existing Lessor Agreements.
6.5.2 CORPORATE AUTHORIZATION
Existing Lessor has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Existing Lessor Agreements,
and the performance of its obligations thereunder.
6.5.3 NO VIOLATION
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby, do not and will not (a) violate any provision of the
Certificate of Incorporation or By-Laws of Existing Lessor, (b) violate any Law
applicable to or binding on Existing Lessor or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Lessor), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Lessor is a party
or by which Existing Lessor or any of its properties is bound.
6.5.4 APPROVALS
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby do not and will not require the consent or approval of, or
the giving of notice to, or the registration with, or the recording or filing of
any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of Existing Lessor and (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.
<PAGE>
6.5.5 VALID AND BINDING AGREEMENTS
The Existing Lessor Agreements have been duly authorized, executed and
delivered by Existing Lessor and, assuming the due authorization, execution and
delivery by the other party or parties thereto, constitute the legal, valid and
binding obligations of Existing Lessor and are enforceable against Existing
Lessor in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
6.5.6 TITLE
On the Closing Date, Existing Lessor shall have, and the Bills of Sale
shall convey to Owner Trustee good and marketable title to the Aircraft, free
and clear of all claims, Liens and encumbrances of any nature, except Permitted
Liens.
6.5.7 LITIGATION
There are no pending or, to the Actual Knowledge of Existing Lessor,
threatened actions or proceedings against Existing Lessor before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Existing Lessor, would materially adversely affect
the ability of Existing Lessor to perform its obligations under the Existing
Lessor Agreements.
6.5.8 SECURITIES LAWS
Neither Existing Lessor nor any person Existing Lessor has authorized to
act on its behalf has directly or indirectly offered any beneficial interest in
or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the Securities Act or applicable state
securities Laws.
6.5.9 BROKER'S FEES
No Person acting on behalf of Existing Lessor is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions.
<PAGE>
6.6 EXISTING MORTGAGEE'S REPRESENTATIONS AND WARRANTIES
Existing Mortgagee represents and warrants to Lessee, each Participant,
Subordination Agent, Owner Trustee, Existing Lessor, Airframe Manufacturer and
Mortgagee that:
6.6.1 ORGANIZATION, ETC.
Existing Mortgagee is a corporation duly incorporated, validly existing
under the Laws of England and has the corporate power and authority to conduct
the business in which it is currently engaged and to own or hold under lease its
properties and to enter into, and perform its obligations under the Existing
Mortgagee Agreements.
6.6.2 CORPORATE AUTHORIZATION
Existing Mortgagee has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Existing Mortgagee Agreements, and the
performance of its obligations thereunder.
6.6.3 NO VIOLATION
The execution and delivery by Existing Mortgagee of the Existing Mortgagee
Agreements, the performance by Existing Mortgagee of its obligations thereunder
and the consummation by Existing Mortgagee on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the constitutional documents of Existing Mortgagee, (b) violate any Law
applicable to or binding on Existing Mortgagee or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Mortgagee), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Mortgagee is a
party or by which Existing Mortgagee or any of its properties is bound.
6.6.4 APPROVALS
The execution and delivery by Existing Mortgagee of the Existing Mortgagee
Agreements, the performance by Existing Mortgagee of its obligations thereunder
and the consummation by Existing Mortgagee on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
<PAGE>
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Existing Mortgagee
and (b) any Government Entity, other than the filing of the FAA Filed Documents
and the Financing Statements.
6.6.5 VALID AND BINDING AGREEMENTS
The Existing Mortgagee Agreements have been duly authorized, executed and
delivered by Existing Mortgagee and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid
and binding obligations of Existing Mortgagee and are enforceable against
Existing Mortgagee in accordance with the respective terms thereof, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
6.6.6 LITIGATION
There are no pending or, to the Actual Knowledge of Existing Mortgagee,
threatened actions or proceedings against Existing Mortgagee before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Existing Mortgagee, would materially adversely affect
the ability of Existing Mortgagee to perform its obligations under the Existing
Mortgagee Agreements.
6.6.7 SECURITIES LAWS
Neither Existing Mortgagee nor any person Existing Mortgagee has authorized
to act on its behalf has directly or indirectly offered any beneficial interest
in or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the Securities Act or applicable state
securities Laws.
6.6.8 BROKER'S FEES
No Person acting on behalf of Existing Mortgagee is or will be entitled to
any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
<PAGE>
6.7 AIRFRAME MANUFACTURER'S REPRESENTATIONS AND WARRANTIES
Airframe Manufacturer represents and warrants to Lessee, each Participant,
Existing Mortgagee, Subordination Agent, Owner Trustee and Mortgagee that:
6.7.1 ORGANIZATION, ETC.
Airframe Manufacturer is a corporation duly incorporated, validly existing
and in good standing under the Laws of Brazil, and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into, and perform its obligations
under the Airframe Manufacturer Agreements.
6.7.2 CORPORATE AUTHORIZATION
Airframe Manufacturer has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Airframe Manufacturer Agreements, and
the performance of its obligations thereunder.
6.7.3 NO VIOLATION
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
obligations thereunder and the consummation by Airframe Manufacturer on the
Closing Date of the transactions contemplated thereby, do not and will not (a)
violate any provision of the constitutional documents of Airframe Manufacturer,
(b) violate any Law applicable to or binding on Airframe Manufacturer or (c)
violate or constitute any default under (other than any violation or default
that would not result in a Material Adverse Change to Airframe Manufacturer), or
result in the creation of any Lien (other than as provided for or otherwise
permitted in the Operative Agreements) upon the Trust Estate under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document to
which Airframe Manufacturer is a party or by which Airframe Manufacturer or any
of its properties is bound.
6.7.4 APPROVALS
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
obligations thereunder and the consummation by Airframe Manufacturer on the
<PAGE>
Closing Date of the transactions contemplated thereby do not and will not
require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
Debt of Airframe Manufacturer and (b) any Government Entity, other than the
filing of the FAA Filed Documents and the Financing Statements.
6.7.5 VALID AND BINDING AGREEMENTS
The Airframe Manufacturer Agreements have been duly authorized, executed
and delivered by Airframe Manufacturer and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Airframe Manufacturer and are
enforceable against Airframe Manufacturer in accordance with the respective
terms thereof, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar Laws
affecting the rights of creditors generally and general principles of equity,
whether considered in a proceeding at law or in equity.
6.7.6 TITLE
On the Closing Date, Existing Lessor shall have, and the Bills of Sale
shall convey to the Owner Trustee, good and marketable title to, the Aircraft,
free and clear of all claims, Liens and encumbrances of any nature, except
Permitted Liens.
6.7.7 TAXES
The Existing Lessor has filed or will cause to be filed all Federal and all
material state, local and foreign tax returns which are required to be filed by
it and have paid or will cause to be paid all Taxes which are due and payable in
connection with the Aircraft.
6.7.8 LITIGATION
There are no pending or, to the Actual Knowledge of Airframe Manufacturer,
threatened actions or proceedings against Airframe Manufacturer before any
court, governmental body, arbitration board, administrative agency or tribunal
which, if determined adversely to Airframe Manufacturer, would materially
adversely affect the ability of Airframe Manufacturer to perform its obligations
under the Airframe Manufacturer Agreements.
<PAGE>
6.7.9 SECURITIES LAWS
Neither Airframe Manufacturer nor any person Airframe Manufacturer has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the Securities
Act or applicable state securities Laws.
6.7.10 BROKER'S FEES
No Person acting on behalf of Airframe Manufacturer is or will be entitled
to any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS
7.1 COVENANTS OF LESSEE
Lessee covenants and agrees with Owner Participant, Loan Participant, Owner
Trustee and Mortgagee as follows:
7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Lessee shall at all times maintain its corporate existence, except as
permitted by Section 13.2 of the Lease, and shall at all times remain a U.S. Air
Carrier.
7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Lessee will give Owner Participant, Owner Trustee and Mortgagee timely
written notice (but in any event within 30 days prior to the expiration of the
period of time specified under applicable Law to prevent lapse of perfection) of
any relocation of its chief executive office (as such term is defined in Article
9 of the UCC) from its then present location and will promptly take any action
required by Section 7.1.3(c) as a result of such relocation.
7.1.3 CERTAIN ASSURANCES
(a) Lessee shall duly execute, acknowledge and deliver, or shall cause to
be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
<PAGE>
further acts and things, in any case, as Owner Participant, Owner Trustee or
Mortgagee shall reasonably request for accomplishing the purposes of this
Agreement and the other Operative Agreements, 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 Agreement.
(b) Lessee shall promptly take such action with respect to the recording,
filing, re-recording and re-filing of the Lease, the Trust Agreement and the
Trust Indenture and the respective supplements thereto, including, without
limitation, Lease Supplement No. 1 and the initial Trust Indenture Supplement,
as shall be necessary to establish, perfect and protect the interests and rights
of Owner Trustee in and to the Aircraft and under the Lease and the perfection
and priority of the Lien created by the Trust Indenture, and Lessee shall pay
all out-of-pocket costs and expenses thereof to the extent not paid by another
party as Transaction Expenses. Lessee shall furnish to Owner Participant or
Owner Trustee such information (other than with respect to the citizenship of
Owner Participant and Owner Trustee) in Lessee's possession or otherwise
reasonably available to Lessee as may be required to enable Owner Participant or
Owner Trustee to make application for registration of the Aircraft under the Act
(subject to Lessee's rights under Section 7.1.2 of the Lease).
(c) Lessee will cause the FAA Filed Documents, the Financing Statements and
all continuation statements (and any amendments necessitated by any combination,
consolidation or merger pursuant to Section 13.2 of the Lease, or any relocation
of its chief executive office) in respect of the Financing Statements to be
prepared and, subject only to the execution and delivery thereof by Owner
Trustee and Mortgagee, as applicable, duly and timely filed and recorded, or
filed for recordation, to the extent permitted under the Act (with respect to
the FAA Filed Documents) or the UCC or similar law of any other applicable
jurisdiction (with respect to such other documents).
(d) If the Aircraft has been registered in a country other than the United
States pursuant to Section 7.1.2 of the Lease, Lessee will furnish to Owner
Trustee, Mortgagee and each Participant annually after such registration,
commencing with the calendar year after such registration is effected, an
opinion of special counsel reasonably satisfactory to Owner Trustee and
Mortgagee stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, re-recording and
re-filing of the Operative Agreements and any supplements and amendments thereto
as is necessary to establish, perfect and protect Owner Trustee's and
<PAGE>
Mortgagee's respective right, title and interest in and to the Aircraft and the
Operative Agreements, reciting the details of such actions, or (ii) no such
action is necessary to maintain the perfection of such right, title and
interest.
7.1.4 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf will directly
or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any person in violation of the Securities Act or applicable state or foreign
securities Laws.
7.2 COVENANTS OF OWNER PARTICIPANT
Owner Participant covenants and agrees with Lessee, and except with respect
to Section 7.2.4, Loan Participant, Owner Trustee and Mortgagee as follows:
7.2.1 LIENS
Owner Participant (a) will not directly or indirectly create, incur, assume
or suffer to exist any Lessor Lien attributable to it on or with respect to all
or any part of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b)
will, at its own cost and expense, take such action as may be necessary to
discharge any Lessor Lien attributable to Owner Participant on all or any part
of the Trust Estate, the Trust Indenture Estate or the Aircraft, PROVIDED that
Owner Participant shall not be in breach of its obligations under this sentence
so long as (i) Owner Participant shall, at its own cost and expense, be
diligently contesting such Lessor Lien in good faith by appropriate proceedings
and (ii) such Lessor Lien and such proceedings do not involve (x) any material
danger of the sale, forfeiture, or loss of the Aircraft, the Airframe, any
Engine or any Part thereof or (y) any restriction on the use or operation of the
Aircraft or title thereto. Owner Participant will hold harmless and indemnify
Lessee, Owner Trustee, each Note Holder, Mortgagee, each of their respective
Affiliates, successors and permitted assigns, the Trust Estate and the Trust
Indenture Estate from and against (i) any and all Expenses, (ii) any reduction
in the amount payable out of the Trust Estate or the Trust Indenture Estate and
(iii) any interference with the possession, operation or other use of all or any
<PAGE>
part of the Aircraft, in each case imposed on, incurred by or asserted against
any of the foregoing as a consequence of any such Lessor Lien.
7.2.2 REVOCATION OF TRUST AGREEMENT
(a) Owner Participant will comply with the provisions of the Trust
Agreement applicable to it, and will not terminate or revoke the Trust Agreement
or the trusts created thereunder without the prior written consent of Lessee and
Mortgagee and will not amend, modify or supplement the Trust Agreement, or waive
any of the provisions thereof, if such amendment, modification, supplement or
waiver would have a material adverse effect on Lessee, without the consent of
Lessee, or on Mortgagee or any Note Holder, without the consent of Mortgagee.
(b) Notwithstanding Section 7.2.2(a), Owner Participant may at any time
remove Owner Trustee pursuant to Section 9.1 of the Trust Agreement or terminate
the Trust Agreement pursuant to Section 11.2 of the Trust Agreement.
7.2.3 CHANGE OF SITUS OF OWNER TRUST
If, at any time, any Tax Indemnitee or the Trust Estate becomes subject to
any Taxes for which it is indemnified pursuant to Section 9.3 of this Agreement
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
Owner Participant (which consent shall not be unreasonably withheld) and Owner
Participant will take whatever action may be reasonably necessary to accomplish
such removal; PROVIDED, that, in any event, (a) Lessee shall provide such
additional tax indemnification as Owner Participant and the Note Holders or the
Pass Through Trustees may reasonably request to cover any additional
unindemnified Taxes or loss of Tax benefits described in the assumptions in the
Tax Indemnity Agreement resulting from such change in the situs of the Trust (it
being agreed that if a Lease Event of Default shall have occurred and is then
continuing, it shall not be unreasonable for Owner Participant to withhold its
consent to moving the situs of the Trust, notwithstanding the provision by
Lessee of such additional tax indemnification, unless a Section 1110 Event shall
have occurred and is then continuing), (b) the rights and obligations under the
Operative Agreements of Owner Participant, the Note Holders, Pass Through
Trustees and Mortgagee shall not be adversely affected 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 Lessee and Owner
Trustee shall execute and deliver such documents as may be necessary or as may
reasonably be requested by Mortgagee to protect and maintain the perfection and
priority of such Lien, (d) Owner Participant, Pass Through Trustees and
<PAGE>
Mortgagee shall have received an opinion or opinions of counsel (which counsel
is reasonably satisfactory to Owner Participant, Pass Through Trustees and
Mortgagee) in scope, form and substance reasonably satisfactory to Owner
Participant, Pass Through Trustees and Mortgagee 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) covering such other matters as Owner
Participant, Pass Through Trustees or Mortgagee may reasonably request, (e) if
such removal involves the replacement of Owner Trustee, then Owner Participant,
Pass Through Trustees and Mortgagee shall have received an opinion of counsel to
such successor Owner Trustee in form and substance reasonably satisfactory to
Owner Participant, Pass Through Trustees and Mortgagee covering the matters
described in the opinion delivered pursuant to Section 5.1.2(xxv)(D) and (f)
Lessee shall indemnify and hold harmless Owner Participant, Note Holders, Pass
Through Trustees and First Security, in its individual capacity and as Owner
Trustee, on a net after-tax basis against any and all reasonable out-of-pocket
costs and expenses including attorneys' fees and disbursements, fees and
expenses of any new owner trustee, registration, recording or filing fees and
taxes incurred by Owner Participant, Note Holders, Pass Through Trustees or
Owner Trustee in connection with such change of situs. 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, except that if a Lease
Event of Default shall have occurred and is then continuing, except during a
Section 1110 Period, such consent shall not be required.
7.2.4 COMPLIANCE WITH LEASE PROVISIONS
Owner Participant will, solely for the benefit of Lessee, comply with the
express provisions applicable to it contained in the Lease.
7.2.5 SECURITIES ACT
Owner Participant will not directly or indirectly offer any beneficial
interest or security relating to the ownership of the Aircraft or any interest
in the Trust Estate or any of the Equipment Notes or any other interest in or
security under the Trust Indenture for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
<PAGE>
any Person in violation of the registration provisions of the Securities Act or
applicable state or foreign securities Laws, provided that the foregoing shall
not be deemed to impose on Owner Participant any responsibility with respect to
any such offer, sale or solicitation by any other party hereto.
7.2.6 REGARDING THE OWNER TRUSTEE
Owner Participant will instruct Owner Trustee to perform its obligations
under each Owner Trustee Agreement.
7.3 COVENANTS OF FIRST SECURITY AND OWNER TRUSTEE
First Security, in its individual capacity and/or as Owner Trustee, as
provided below, covenants and agrees with Lessee, Owner Participant, each Note
Holder and Mortgagee as follows:
7.3.1 LIENS
First Security (a) will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it or Owner Trustee with respect
to all or any part of the Trust Estate, the Trust Indenture Estate or the
Aircraft, (b) will, at its own cost and expense, take such action as may be
necessary to discharge any Lessor Lien attributable to First Security or Owner
Trustee on all or any part of the Trust Estate, the Trust Indenture Estate or
the Aircraft, PROVIDED that First Security shall not be in breach of its
obligations under this sentence so long as (i) First Security shall, at its own
cost and expense, be diligently contesting such Lessor Lien in good faith by
appropriate proceedings and (ii) such Lessor Lien and such proceedings do not
involve (x) any material danger of the sale, forfeiture, or loss of the
Aircraft, the Airframe, any Engine or any Part thereof or (y) any restriction on
the use or operation of the Aircraft or title thereto First Security will in its
individual capacity hold harmless and indemnify Lessee, Owner Participant, each
Note Holder, Mortgagee, each of their respective Affiliates, successors and
permitted assigns, the Trust Estate and the Trust Indenture Estate from and
against (i) any and all Expenses, (ii) any reduction in the amount payable out
of the Trust Estate or the Trust Indenture Estate and (iii) any interference
with the possession, operation or other use of all or any part of the Aircraft,
in each case imposed on, incurred by or asserted against any of the foregoing as
a consequence of any such Lessor Lien.
7.3.2 OTHER BUSINESS
Owner Trustee will not enter into any business or other activity except as
contemplated by the Operative Agreements.
<PAGE>
7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
First Security, in its individual capacity and as Owner Trustee, will give
Lessee, each Participant and Mortgagee 30 days' prior written notice of any
relocation of its chief executive office (as such term is defined in Article 9
of the UCC) from its then present location and will promptly take any action
required by Section 7.3.8 as a result of such relocation.
7.3.4 SECURITIES ACT
First Security, in its individual capacity and as Owner Trustee, will not
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicit any offer to acquire any such interest or security from,
or sell any such interest or security to, any Person in violation of the
registration provisions of the Securities Act or applicable state or foreign
securities Laws, provided that the foregoing shall not be deemed to impose on
First Security in its individual capacity or as Owner Trustee, any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
7.3.5 PERFORMANCE OF AGREEMENTS
Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.
7.3.6 RELEASE OF LIEN OF TRUST INDENTURE
Owner Trustee, in each instance referred to in the Lease in which a
transfer of any property is required to be made by Owner Trustee to Lessee or
any other Person (other than Mortgagee or Owner Participant), shall, at Lessee's
request and expense, use its reasonable efforts to procure from Mortgagee the
prompt release of the Lien of the Trust Indenture with respect to such property.
7.3.7 NOTICES; DOCUMENTS
In the event any claim with respect to any liabilities is filed against the
Owner Trustee in its capacity as such and Owner Trustee shall have Actual
Knowledge thereof, the Owner Trustee shall promptly notify Lessee and Mortgagee
in writing thereof. Owner Trustee further agrees to provide to Lessee promptly
any documents (including the certificate of aircraft registration) that it
receives from the FAA with respect to the Aircraft.
<PAGE>
7.3.8 FILINGS
After the Closing Date, Owner Trustee shall duly execute and deliver to
Lessee all filings and recordings (including, without limitation, all filings
and UCC financing statements under the Act and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office), prepared and delivered to it by Lessee required to perfect Owner
Trustee's title to the Aircraft and the liens of and security interests granted
by the Trust Indenture (or to maintain such perfection) and to make such title,
liens and security interests valid and enforceable.
7.3.9 TRUST AGREEMENT
Each of First Security and Owner Trustee hereby agrees with Lessee, Loan
Participant and Mortgagee not to revoke the trust created by the Trust Agreement
so long as the Trust Indenture remains undischarged or if such revocation would
have an adverse effect on the Lessee. Nothing contained in this Agreement shall
impair any right under the Trust Agreement of First Security to resign as Owner
Trustee in accordance with the provisions of the Trust Agreement.
7.4 COVENANTS OF WTC
WTC in its individual capacity or as Mortgagee, each Applicable Pass
Through Trustee or Subordination Agent, as the case may be, covenants and agrees
with Lessee, Owner Participant and Owner Trustee as follows:
7.4.1 LIENS
WTC (a) will not directly or indirectly create, incur, assume or suffer to
exist any Lessor Lien attributable to it on or with respect to all or any part
of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b) will, at
its own cost and expense, promptly take such action as may be necessary to
discharge any Lessor Lien attributable to WTC on all or any part of the Trust
Estate, the Trust Indenture Estate or the Aircraft and (c) will in its
individual capacity hold harmless and indemnify Lessee, Owner Participant, each
Note Holder, Owner Trustee, each of their respective Affiliates, successors and
permitted assigns, the Trust Estate and the Trust Indenture Estate from and
against (i) any and all Expenses, (ii) any reduction in the amount payable out
of the Trust Estate or the Trust Indenture Estate and (iii) any interference
with the possession, operation or other use of all or any part of the Aircraft,
<PAGE>
in each case imposed on, incurred by or asserted against any of the foregoing as
a consequence of any such Lessor Lien.
7.4.2 SECURITIES ACT
WTC in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, will not offer any beneficial interest or Security relating
to the ownership of the Aircraft or any interest in the Trust Indenture Estate,
or any of the Equipment Notes or any other interest in or security under the
Trust Indenture for sale to, or solicit any offer to acquire any such interest
or security from, or sell any such interest or security to, any Person in
violation of the Securities Act or applicable state or foreign securities Laws,
provided that the foregoing shall not be deemed to impose on WTC any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
7.4.3 PERFORMANCE OF AGREEMENTS
WTC, in its individual capacity and as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, shall perform its obligations under the
Indenture Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements in accordance with the terms thereof.
7.4.4 WITHHOLDING TAXES
WTC shall indemnify (on an after-tax basis) and hold harmless Lessee,
Lessor and Owner Participant against any United States withholding taxes (and
related interest, penalties and additions to tax) as a result of the failure by
WTC to withhold on payments to any Note Holder if such Note Holder failed to
provide to Mortgagee necessary certificates or forms to substantiate the right
to exemption from such withholding tax.
7.5 COVENANTS OF NOTE HOLDERS
Each Note Holder (including Subordination Agent) as to itself only
covenants and agrees with Lessee, Owner Participant, Owner Trustee and Mortgagee
as follows:
7.5.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on an
after-tax basis) and hold harmless Lessee, Lessor, Owner Participant and
Mortgagee against any United States withholding taxes (and related interest,
penalties and additions to tax) as a result of the inaccuracy or invalidity of
<PAGE>
any certificate or form provided by such Note Holder to Mortgagee in connection
with such withholding taxes. Any amount payable hereunder shall be paid within
30 days after receipt by a Note Holder of a written demand therefor.
7.5.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (i) not transfer any Equipment Note or interest
therein in violation of the Securities Act or applicable state or foreign
securities Law; PROVIDED, that the foregoing provisions of this section shall
not be deemed to impose on such Note Holder any responsibility with respect to
any such offer, sale or solicitation by any other party hereto, and (ii) perform
and comply with the obligations specified to be imposed on it (as a Note Holder)
under each of the Trust Indenture and the form of Equipment Note set forth in
the Trust Indenture.
(b) Except as otherwise required by the terms of Section 2.13 of the Trust
Indenture, each Note Holder will not sell, assign, convey, exchange or otherwise
transfer any Equipment Note or any interest in, or represented by, any Equipment
Note (it being understood that this provision is not applicable to the Pass
Through Certificates) unless the proposed transferee thereof first provides
Lessee and Owner Participant with both of the following:
(i) a written representation and covenant that either (a) no
portion of the funds it uses to purchase, acquire and hold such Equipment
Note or interest directly or indirectly constitutes, or may be deemed under
the Code or ERISA or any rulings, regulations or court decisions thereunder
to constitute, the assets of any Plan or (b) the transfer, and subsequent
holding, of such Equipment Note or interest shall not involve or give rise
to a transaction that constitutes a prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code involving
Lessee, Owner Participant, a Pass Through Trustee, the Subordination Agent
or the proposed transferee (other than a transaction that is exempted from
the prohibitions of such sections by applicable provisions of ERISA or the
Code or administrative exemptions or regulations issued thereunder); and
(ii) a written covenant that it will not transfer any Equipment
Note or any interest in, or represented by, any Equipment Note unless the
subsequent transferee also makes the representation described in clause (i)
above and agrees to comply with this clause (ii) and the other covenants of
the Note Holders contained in the Operative Agreements.
<PAGE>
7.6 AGREEMENTS
7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES
Lessee, the Owner Participant and Owner Trustee agree that for all
purposes, after the Closing, Owner Trustee will be the owner of the Aircraft
(except that Owner Participant will be the owner for income tax purposes) and
Lessee will be the lessee thereof. No transfer, by operation of Law or
otherwise, of the beneficial interest of Owner Participant in and to the Trust
Estate shall operate to transfer legal title to any part of the Trust Estate to
any transferee thereof.
7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS
Lessee, each Participant, each Note Holder, First Security, Owner Trustee,
WTC and Mortgagee agree for the benefit of each of the others that it will not
commence or join in any proceeding under the Bankruptcy Code to commence a case
under Section 303 of the Bankruptcy Code against the Trust Estate. Nothing
contained herein shall be deemed to preclude any Participant, any Note Holder,
First Security, Owner Trustee, WTC or Mortgagee from filing any claim against
the Trust Estate in any case commenced against the Trust Estate.
7.6.3 CERTAIN BANKRUPTCY MATTERS
If (a) all or any part of the Trust Estate becomes the property of, or
Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy Code,
First Security or Owner Participant is required, by reason of First Security or
Owner Participant being held to have recourse liability to any Note Holder or
Mortgagee directly or indirectly (other than the recourse liability of First
Security or Owner Participant under this Agreement, the Trust Indenture or by
separate agreement), to make payment on account of any amount payable as
principal, Make-Whole Amount, if any, interest or other amounts on the Equipment
Notes, and (c) any Note Holder or Mortgagee actually receives any Excess Amount,
as defined below, which reflects any payment by First Security or Owner
Participant on account of (b) above, then such Note Holder or Mortgagee, as the
case may be, shall promptly refund to First Security or Owner Participant
(whichever shall have made such payment) such Excess Amount.
For purposes of this Section 7.6.3, "Excess Amount" means the amount by
which such payment exceeds the amount that would have been received by a Note
Holder or Mortgagee if First Security or Owner Participant had not become
subject to the recourse liability referred to in clause (b) above, and such Note
<PAGE>
Holder or Mortgagee receives written notice that such amount is an Excess Amount
prior to its distribution thereof. Nothing contained in this Section 7.6.3 shall
prevent a Note Holder or Mortgagee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of First Security or Owner
Participant under this Agreement (other than as referred to in clause (b) above)
or the Trust Indenture (and any exhibits or annexes thereto) or from retaining
any amount paid by Owner Participant under Sections 2.13 or 4.03 of the Trust
Indenture.
7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING
(a) Owner Participant, each Pass Through Trustee, Subordination Agent, each
Note Holder, Owner Trustee and Mortgagee agrees as to itself with Lessee that,
so long as no Lease Event of Default shall have occurred and be continuing, such
Person shall not (and shall not permit any Affiliate or other Person claiming
by, through or under it to) interfere with Lessee's rights in accordance with
the Lease to the quiet enjoyment, possession and use of the Aircraft during the
Term.
(b) Any assignment, sale, transfer or other conveyance of the Aircraft by
Owner Trustee made pursuant to the terms of this Agreement or the Lease shall
bind Owner Participant and shall be effective to transfer or convey all right,
title and interest of Owner Trustee, 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 Owner Trustee, as regards Owner Participant.
7.6.5 RELEASE OF LIEN TRUST INDENTURE
Each of Lessee, Lessor and Mortgagee agrees that in each instance referred
to in the Lease in which a transfer of any property is required to be made by
Lessor to Lessee or any other Person (other than Mortgagee), Mortgagee shall,
upon request of Lessor and compliance with the applicable provisions of the
Lease and Trust Indenture, promptly execute (at Lessee's cost and expense) such
instruments as Lessor or Lessee may reasonably request to evidence the release
of the Lien of the Trust Indenture with respect to such property.
7.6.6 NON-RECOURSE
Loan Participant and Mortgagee agree that (a) obligations of Owner Trustee
under the Trust Indenture or any other Operative Agreement and with respect to
<PAGE>
the Equipment Notes shall be non-recourse to Owner Participant and to First
Security and (b) they will look solely to the income and proceeds from the Trust
Estate and the Trust Indenture Estate to the extent available for distribution
to Note Holder or Mortgagee as provided in the Trust Indenture and that neither
Owner Participant nor First Security will be personally liable to Loan
Participant or Mortgagee for any amounts payable by Owner Trustee under the
Trust Indenture or any other Operative Agreement; PROVIDED, HOWEVER, that the
foregoing is not intended nor shall it be construed to limit any recourse
liability of Owner Participant or First Security to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any representation or warranty
or covenant given by such Person (in the case of First Security, in its
individual capacity).
7.6.7 OTHER DOCUMENTS; AMENDMENT
(a) Each of the Owner Participant and the Owner Trustee hereby agrees with
Lessee, the Loan Participant, and the Mortgagee not to amend, supplement or
otherwise modify any provision of the Trust Agreement in a manner that could
materially adversely affect such party without the prior written consent of such
party. Notwithstanding the foregoing, so long as the Lease has not been
terminated or expired, each Participant, the Mortgagee and the Owner Trustee
hereby agree for the benefit of Lessee that without the consent of Lessee they
will not amend, supplement or otherwise modify (i) Article III, Article IX or
Sections 2.05 or 2.15 of the Trust Indenture, (ii) any provision of any
Operative Agreement that will affect the stated principal amount of or premium
or interest on the Equipment Notes or (iii) any other provision of the Trust
Indenture or Equipment Notes in a manner that could materially adversely affect
Lessee. Mortgagee and Owner Trustee agree promptly to furnish to Lessee copies
of any supplement, amendment, waiver or modification of any of the Operative
Agreements to which Lessee is not a party. Loan Participant agrees that it will
not take any action in respect of the Trust Indenture Estate except through the
Mortgagee pursuant to the Trust Indenture or as otherwise permitted by Trust
Indenture.
(b) Owner Trustee agrees to join with Lessee to the extent that action on
its part is necessary or appropriate (i) to cause the following to be duly
accomplished in accordance with applicable United States federal Law by the time
the Aircraft is delivered under this Agreement and the Lease: (A) the
application for registration of the Aircraft in the name of Owner Trustee and
(B) all related action necessary in order for Lessee to have temporary or
<PAGE>
permanent authority to operate the Aircraft as contemplated by the Lease and
(ii) forthwith upon delivery of the Aircraft under this Agreement and the Lease,
to cause all necessary documents to be duly filed for recording in accordance
with applicable United States federal Law.
7.6.8 CONSENTS
Owner Participant, and Owner Trustee each covenants and agrees, for the
benefit of Lessee, that it shall not unreasonably withhold its consent to any
consent or approval requested of it or of Owner Trustee or Mortgagee under the
terms of any of the Operative Agreements which by its terms is not to be
unreasonably withheld.
7.6.9 INSURANCE
Each of Owner Participant, the Pass Through Trustees, the Subordination
Agent and the Owner Trustee agrees not to obtain or maintain insurance for its
own account as permitted by Section 11.2 of the Lease if such insurance would
limit or otherwise materially adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to Section 11 and Annex
D of the Lease.
7.6.10 EXTENT OF INTEREST OF NOTE HOLDERS
A Note Holder shall not, as such, have any further interest in, or other
right with respect to, the Trust Estate or the Trust Indenture Estate when and
if the principal and Make-Whole Amount, if any, of and interest on the Equipment
Note held by such Holder, and all other sums, then due and payable to such
Holder hereunder and under any other Operative Agreement, shall have been paid
in full.
7.6.11 FOREIGN REGISTRATION
Each Participant, Owner Trustee and Mortgagee hereby agree, for the benefit
of Lessee but subject to the provisions of Section 7.1.2 of the Lease:
(a) that Lessee shall be entitled to register the Aircraft or cause the
Aircraft to be registered in a country other than the United States subject to
compliance with the following:
(i) each of the following requirements is satisfied:
(A) such registration shall be made only after the Tax Attribute
Period, unless Lessee prepays on a lump sum basis calculated
pursuant to Section 5(f) of the Tax Indemnity Agreement any
<PAGE>
liability due under the Tax Indemnity Agreement as a result of
such registration based upon the assumption that such
registration would continue for the remainder of the term of the
Permitted Sublease described in clause (C) below, PROVIDED, that
notwithstanding the foregoing, such registration may be made
during the taxable year in which the seventh anniversary of the
Closing Date occurs so long as the Aircraft is not "used
predominantly outside the United States" within the meaning of
Section 168(g) of the Code during such taxable years;
(B) no Lease Event of Default shall have occurred and be continuing
at the time of such registration;
(C) such proposed change of registration is made in connection with a
Permitted Sublease to a Permitted Air Carrier;
(D) such country is a Permitted Country with which the United States
then maintains normal diplomatic relations.
(ii) the Owner Trustee, Owner Participant and Mortgagee shall have
received an opinion, in form and substance reasonably satisfactory to the
Owner Participant (subject to customary exceptions) of counsel reasonably
satisfactory to the Owner Participant addressed to each such party to the
effect that:
(A) such country would recognize the Owner Trustee's title to,
ownership interest in and right to possession of, the Aircraft;
(B) the obligations of Lessee, and the rights and remedies of
Owner Trustee, under the Lease are valid, binding and enforceable
under the laws of such country (or the laws of the country to which
the laws of such country would refer as the applicable governing law);
(C) after giving effect to such change in registration, the Lien
of the Trust Indenture on the Owner Trustee's right, title and
interest in and to the Aircraft and the Lease shall continue as a
valid and duly perfected first priority security interest and all
filing, recording or other action necessary to protect the same shall
have been accomplished (or, if such opinion cannot be given at the
time of such proposed change in registration because such change in
<PAGE>
registration is not yet effective, (1) the opinion shall detail what
filing, recording or other action is necessary and (2) Owner Trustee
and the Mortgagee shall have received a certificate from Lessee 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 Owner Trustee and the Mortgagee on or
prior to the effective date of such change in registration;
(D) it is not necessary, solely as a consequence of such change
in registration and without giving effect to any other activity of
Owner Trustee, the Owner Participant or the Mortgagee (or any
Affiliate thereof), as the case may be, for Owner Trustee, the Owner
Participant or the Mortgagee to qualify to do business in such country
as a result of such reregistration;
(E) there is no tort liability of the owner or lessor of an
aircraft not in possession thereof under the laws of such country (it
being agreed 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
is provided to cover such risk); and
(F) unless Lessee shall have agreed to provide insurance
reasonably satisfactory to Owner Participant covering the risk of
requisition of use of the Aircraft by the government of such country
(so long as the Aircraft is registered under the laws of such
country), the laws of such country require fair compensation by the
government of such country payable in currency freely convertible into
Dollars and freely removable from such country (without license or
permit, unless Lessee prior to such proposed reregistration has
obtained such license or permit) for the taking or requisition by such
government of such use.
(b) In addition, as a condition precedent to any change in registration
Lessee shall have given to Lessor and Mortgagee assurances reasonably
satisfactory to each of them:
<PAGE>
(i) to the effect that the provisions of Section 11 of the Lease have
been complied with after giving effect to such change of
registration; and
(ii) of the payment by Lessee of all reasonable out-of-pocket expenses
at no after-tax cost to any Participant of Lessor, each
Participant and Mortgagee in connection with such change of
registry, including, without limitation (1) the reasonable fees
and disbursements of counsel to Lessee, Lessor and Mortgagee, (2)
any filing or recording fees, Taxes or similar payments incurred
in connection with the change of registration of the Aircraft and
the creation and perfection of the security interest therein in
favor of Mortgagee for the benefit of Note Holders, (3) all costs
and expenses incurred in connection with any filings necessary to
continue in the United States the perfection of the security
interest in the Aircraft and the Lease in favor of Mortgagee for
the benefit of Note Holders and (4) costs in connection with the
calculation of the lump sum payment described in clause (i)(A) of
this Section 7.6.11.
7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED
Notwithstanding anything to the contrary set forth in any Operative
Agreement:
(a) Except as set forth in the Purchase Agreement Assignment, nothing
contained in the Operative Agreements shall constitute or be deemed to be a
waiver by Lessee of any rights, remedies or claims it may have against Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either;
and the Operative Agreements do not and shall not be construed or deemed to
create any rights, waivers, immunities or indemnities in favor of Airframe
Manufacturer, Engine Manufacturer or any subcontractor or supplier of either
with respect to any such rights, remedies or claims of Lessee; and
(b) The Airframe Manufacturer, by its execution and delivery of the Consent
and Agreement, shall not be deemed to have waived any rights, remedies or claims
which Airframe Manufacturer (or any subcontractor or supplier of Airframe
Manufacturer) may have against Lessee; and the Operative Agreements do not and
shall not be construed or deemed to create any rights, waivers, immunities or
indemnities in favor of Lessee with respect to any such rights, remedies or
<PAGE>
claims of Airframe Manufacturer (or any subcontractor or supplier of Airframe
Manufacturer).
7.6.13 INTEREST IN CERTAIN ENGINES
Each Participant, Owner Trustee, and Mortgagee agree, for the benefit of
each of the lessor, conditional seller, mortgagee or secured party of any
airframe or engine leased to, or purchased by, Lessee or any Permitted Sublessee
subject to a lease, conditional sale, trust indenture or other security
agreement that it will not acquire or claim, as against such lessor, conditional
seller, mortgagee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such mortgagee or secured
party.
SECTION 8. CONFIDENTIALITY
Lessee, Owner Participant, Note Holders, Owner Trustee, Mortgagee, Existing
Lessor, Existing Mortgagee and Airframe Manufacturer shall keep Annexes B, C and
D and Schedules 1, 2, 3 and 4 to the Lease, the Purchase Agreement Assignment
and the Tax Indemnity Agreement confidential and shall not disclose, or cause to
be disclosed, the same to any Person, except (A) to prospective and permitted
transferees of Lessee's, Owner Participant's, a Note Holder's, a Liquidity
Provider's, Owner Trustee's, Mortgagee's or other Indenture Indemnitee's
interest or their respective counsel or special counsel, independent insurance
brokers, auditors, or other agents who agree to hold such information
confidential, (B) to Lessee's, Owner Participant's, a Note Holder's, a Liquidity
Provider's, a Pass Through Trustee's, Owner Trustee's, Mortgagee's or other
Indenture Indemnitee's counsel or special counsel, independent insurance
brokers, auditors, or other agents, Affiliates or investors who agree to hold
such information confidential, (C) as may be required by any statute, court or
administrative order or decree, legal process or governmental ruling or
regulation, including those of any applicable insurance regulatory bodies
(including, without limitation, the National Association of Insurance
Commissioners), federal or state banking examiners, Internal Revenue Service
auditors or any stock exchange, (D) with respect to Lessee and Owner
Participant, by mutual agreement of such parties, (E) with respect to a Note
Holder or any Pass Through Trustee, to a nationally recognized rating agency for
the purpose of obtaining a rating on the Equipment Notes or the Pass Through
Certificates or to support an NAIC rating for the Equipment Notes or (F) such
<PAGE>
other Persons as are reasonably deemed necessary by the disclosing party in
order to protect the interests of such party or for the purposes of enforcing
such documents by such party; provided, that any and all disclosures permitted
by clauses (C), (D), (E) or (F) above shall be made only to the extent necessary
to meet the specific requirements or needs of the Persons making such
disclosures.
SECTION 9. INDEMNIFICATION AND EXPENSES
9.1 GENERAL INDEMNITY
9.1.1 INDEMNITY
If the Closing occurs, Lessee shall indemnify, protect, defend and hold
harmless each Indemnitee from, against and in respect of, and shall pay on a net
after-tax basis, any and all Expenses of any kind or nature whatsoever that may
be imposed on, incurred by or asserted against any Indemnitee, relating to,
resulting from, or arising out of or in connection with, any one or more of the
following:
(a) The Operative Agreements, the Pass Through Agreements, or the
enforcement of any of the terms of any of the Operative Agreements or the Pass
Through Agreements;
(b) The Aircraft, the Airframe, any Engine or any Part, including, without
limitation, with respect thereto, (i) the manufacture, design, purchase,
acceptance, nonacceptance or rejection, ownership, registration, reregistration,
deregistration, delivery, nondelivery, lease, sublease, assignment, possession,
use or non-use, operation, maintenance, testing, repair, overhaul, condition,
alteration, modification, addition, improvement, storage, airworthiness,
replacement, repair, sale, substitution, return, abandonment, redelivery or
other disposition of the Aircraft, any Engine or any Part, (ii) any claim or
penalty arising out of violations of applicable Laws by Lessee (or any Permitted
Sublessee), (iii) tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed), (iv) death or property
damage of passengers, shippers or others, (v) environmental control, noise or
pollution and (vi) any Liens in respect of the Aircraft, any Engine or any Part;
(c) The offer, sale, or delivery of any Equipment Notes, Pass Through
Certificates or any interest therein or represented thereby; and
(d) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by Lessee under any Lessee Operative Agreement or any Pass Through
<PAGE>
Agreement or the falsity of any representation or warranty of Lessee in any
Lessee Operative Agreement or any Pass Through Agreement other than in the Tax
Indemnity Agreement.
9.1.2 EXCEPTIONS
Notwithstanding anything contained in Section 9.1.1, Lessee shall not be
required to indemnify, protect, defend and hold harmless any Indemnitee pursuant
to Section 9.1.1 in respect of any Expense of such Indemnitee:
(a) For any Taxes or a loss of Tax benefit, whether or not Lessee is
required to indemnify therefor pursuant to Section 9.3 or the Tax Indemnity
Agreement;
(b) Except to the extent attributable to acts or events occurring prior
thereto, acts or events (other than acts or events related to the performance or
failure to perform by Lessee of its obligations pursuant to the terms of the
Lessee Operative Agreements) that occur after the earliest of: (i) with respect
to the Airframe, any Engine or any Part, the return of possession (it being
understood that the date of the placement of the Aircraft in storage as provided
in Section 5 of the Lease constitutes the date of return of the Aircraft under
the Lease) of such Airframe, Engine or Part pursuant to the terms of and in
compliance with the Lease (other than pursuant to Section 15 thereof, in which
case Lessee's liability under this Section 9.1 shall survive for so long as
Lessor or Mortgagee shall be entitled to exercise remedies under such Section
15) or (ii) the termination of the Term in accordance with the Lease;
(c) To the extent attributable to any Transfer (voluntary or involuntary)
by or on behalf of such Indemnitee of any Equipment Note or interest therein,
except (i) for out-of-pocket costs and expenses incurred as a result of any such
Transfer pursuant to the exercise of remedies under any Operative Agreement
resulting from a Lease Event of Default and (ii) as otherwise required by the
terms of Section 2.13 of the Trust Indenture;
(d) To the extent attributable to any Transfer (voluntary or involuntary)
by or on behalf of Owner Participant of any interest in the Aircraft, or the
Trust Estate except for costs and expenses incurred as a result of such
Transfer, if such Transfer arises directly from a Lease Event of Default that
shall have occurred and be continuing;
(e) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
<PAGE>
(other than gross negligence or willful misconduct imputed to such person by
reason of its interest in the Aircraft or any Operative Agreement);
(f) In the case of First Security, to the extent attributable to matters
enumerated in the proviso to Section 14;
(g) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Agreement or any Pass Through
Agreement;
(h) To the extent attributable to the failure by such Indemnitee or any
related Indemnitee to perform or observe any agreement, covenant or condition on
its part to be performed or observed in any Operative Agreement or any Pass
Through Agreement;
(i) To the extent attributable to the offer or sale by such Indemnitee or
any related Indemnitee of any interest in the Aircraft, the Equipment Notes, the
Pass Through Certificates, the Trust Estate or the Trust Agreement or any
similar interest, in violation of the Securities Act or other applicable
federal, state or foreign securities Laws (other than any offer or sale thereof
caused by the acts or omissions of Lessee);
(j) (i) With respect to any Indemnitee (other than Mortgagee), to the
extent attributable to the failure of the Mortgagee to distribute funds received
and distributable by it in accordance with the Trust Indenture, (ii) with
respect to any Indemnitee (other than the Owner Trustee), to the extent
attributable to the failure of the Owner Trustee to distribute funds received
and distributable by it in accordance with the Trust Agreement, (iii) with
respect to any Indemnitee (other than the Subordination Agent), to the extent
attributable to the failure of the Subordination Agent to distribute funds
received and distributable by it in accordance with the Intercreditor Agreement,
(iv) with respect to any Indemnitee (other than the Pass Through Trustees), to
the extent attributable to the failure of a Pass Through Trustee to distribute
funds received and distributable by it in accordance with the Pass Through Trust
Agreements, (v) with respect to Mortgagee, to the extent attributable to the
negligence or willful misconduct of Mortgagee in the distribution of funds
received and distributable by it in accordance with the Trust Indenture, (vi)
with respect to Owner Trustee, to the extent attributable to the negligence or
willful misconduct of Owner Trustee in the distribution of funds received and
distributable by it in accordance with the Trust Agreement, (vii) with respect
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to the Subordination Agent, to the extent attributable to the negligence or
willful misconduct of the Subordination Agent in the distribution of funds
received and distributable by it in accordance with the Intercreditor Agreement,
and (viii) with respect to the Pass Through Trustees, to the extent attributable
to the negligence or willful misconduct of a Pass Through Trustee in the
distribution of funds received and distributable by it in accordance with the
Pass Through Trust Agreements.
(k) Other than during the continuation of a Lease Event of Default, to the
extent attributable to the authorization or giving or withholding of any future
amendments, supplements, waivers or consents with respect to any Operative
Agreement or Pass Through Agreement other than such as have been requested by
Lessee or as are required by or made pursuant to the terms of the Operative
Agreements or Pass Through Agreements (unless such requirement results from the
actions of an Indemnitee not required by or made pursuant to the Operative
Agreements or the Pass Through Agreements);
(l) To the extent attributable to any amount which any Indemnitee expressly
agrees to pay or such Indemnitee expressly agrees shall not be paid by or be
reimbursed by Lessee;
(m) To the extent that it is an ordinary and usual operating or overhead
expense;
(n) With respect to the Owner Participant or the Owner Trustee, or any
related Indemnitee, to the extent attributable to the deregistration of the
Aircraft under the Act as a result of Owner Participant's or Owner Trustee's (or
any related Indemnitee of either) not being a Citizen of the United States as a
result of any act (other than reregistration of the Aircraft pursuant to Section
7.1.2 of the Lease) of Owner Participant or Owner Trustee, or any related
Indemnitee of either of the foregoing (not taken at the request of the Lessee);
(o) For any Lessor Lien attributable to such Indemnitee or any related
Indemnitee;
(p) If another provision of an Operative Agreement or a Pass Through
Agreement specifies the extent of Lessee's responsibility or obligation with
respect to such Expense, to the extent arising from other than failure of Lessee
to comply with such specified responsibility or obligation;
(q) To the extent it is a Transaction Expense;
(r) To the extent constituting principal, Make-Whole Amount or interest on
the Equipment Notes attributable solely to an Event of Default not constituting
a Lease Event of Default; or
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(s) To the extent incurred by or asserted against an Indemnitee as a result
of any "prohibited transaction", within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code.
For purposes of this Section 9.1, a Person shall be considered a "related"
Indemnitee with respect to an Indemnitee if such Person is an Affiliate or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such Indemnitee or any such Affiliate or a successor or permitted assignee of
any of the foregoing.
9.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
9.1.4 NOTICE
If a claim for any Expense that an Indemnitee shall be indemnified against
under this Section 9.1 is made, such Indemnitee shall give prompt written notice
thereof to Lessee. Notwithstanding the foregoing, the failure of any Indemnitee
to notify Lessee as provided in this Section 9.1.4, or in Section 9.1.5, shall
not release Lessee from any of its obligations to indemnify such Indemnitee
hereunder, except to the extent that such failure results in an additional
Expense to Lessee (in which event Lessee shall not be responsible for such
additional Expense) or materially impairs Lessee's ability to contest such
claim.
9.1.5 Notice of Proceedings; Defense of Claims; Limitations
(a) In case any action, suit or proceeding shall be brought against any
Indemnitee for which Lessee is responsible under this Section 9.1, such
Indemnitee shall notify Lessee of the commencement thereof and Lessee may, at
its expense, participate in and to the extent that it shall wish (subject to the
provisions of the following paragraph), assume and control the defense thereof
and, subject to Section 9.1.5(c), settle or compromise the same.
(b) Lessee or its insurer(s) shall have the right, at its or their expense,
to investigate or, if Lessee or its insurer(s) shall agree in writing not to
dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 9.1.5 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
any action, suit or proceeding, relating to any Expense for which
<PAGE>
indemnification is sought pursuant to this Section 9.1, and each Indemnitee
shall cooperate with Lessee or its insurer(s) with respect thereto; provided,
that Lessee shall not be entitled to control the defense of any such action,
suit, proceeding or compromise any such Expense (i) during the continuance of
any Lease Event of Default arising under Section 14.1 of the Lease, (ii) if such
proceedings would entail a material risk of the sale, forfeiture or loss of the
Aircraft or (iii) if such proceedings would entail a risk of criminal liability
or greater than de minimis risk of material civil penalties being imposed on
such Indemnitee. In connection with any such action, suit or proceeding being
controlled by Lessee, such Indemnitee shall have the right to participate
therein, at its sole cost and expense, with counsel reasonably satisfactory to
Lessee; provided, that such Indemnitee's participation does not, in the
reasonable opinion of the independent counsel appointed by the Lessee or its
insurers to conduct such proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of
Lessee, 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 9.1.
(d) In the case of any Expense indemnified by the Lessee hereunder which is
covered by a policy of insurance maintained by Lessee pursuant to Section 11 of
the Lease, at Lessee's expense, each Indemnitee agrees to cooperate with the
insurers in the exercise of their rights to investigate, defend or compromise
such Expense as may be required to retain the benefits of such insurance with
respect to such Expense.
(e) If an Indemnitee is not a party to this Agreement, Lessee may require
such Indemnitee to agree in writing to the terms of this Section 9 and Section
15.8 prior to making any payment to such Indemnitee under this Section 9.
(f) Nothing herein shall be deemed to be an assumption by Lessee of
obligations of Owner Trustee with respect to, or a guarantee by Lessee of, any
amounts payable by Owner Trustee upon Equipment Notes or a guarantee of any
residual value of the Aircraft.
(g) Nothing contained in this Section 9.1.5 shall be deemed to require an
Indemnitee to contest any Expense or to assume responsibility for or control of
any judicial proceeding with respect thereto.
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9.1.6 INFORMATION
Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Lessee's control or is
reasonably available to Lessee, which such Indemnitee may reasonably request and
will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under Section 9.1.5. The Indemnitee shall supply Lessee
with such information not within the control of Lessee, as is in such
Indemnitee's control or is reasonably available to such Indemnitee, which Lessee
may reasonably request to control or participate in any proceeding to the extent
permitted by Section 9.1.5.
9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION;
FURTHER ASSURANCES
Upon the payment in full by Lessee of any indemnity provided for under this
Agreement, Lessee, without any further action and to the full extent permitted
by Law, will be subrogated to all rights and remedies of the person indemnified
(other than with respect to any of such Indemnitee's insurance policies or in
connection with any indemnity claim such Indemnitee may have under Section 5.03
or 7.01 of the Trust Indenture or Section 5.3 or 7 of the Trust Agreement) in
respect of the matter as to which such indemnity was paid. Each Indemnitee will
give such further assurances or agreements and cooperate with Lessee to permit
Lessee to pursue such claims, if any, to the extent reasonably requested by
Lessee and at Lessee's expense.
9.1.8 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with respect to
any Expense paid by Lessee hereunder, it will promptly pay the amount refunded
(but not an amount in excess of the amount Lessee or any of its insurers has
paid in respect of such Expense) over to Lessee unless a Lease Event of Default
shall have occurred and be continuing, in which case such amounts shall be paid
over to Owner Trustee (or, so long as the Trust Indenture shall not have been
discharged, to Mortgagee) to hold as security for Lessee's obligations under the
Lessee Operative Agreements or, if requested by Lessee, applied to satisfy such
obligations.
9.2 EXPENSES
9.2.1 TRANSACTION EXPENSES
Owner Participant shall pay all Transaction Expenses (other than the
ongoing fees, disbursements and expenses of Mortgagee and the Owner Trustee), up
<PAGE>
to an aggregate amount equal to the Expense Limit. Airframe Manufacturer shall
pay all Transaction Expenses in excess of the Expense Limit and the ongoing
fees, disbursements and expenses of Mortgagee and the Owner Trustee. Lessee
shall have no liability or obligation with respect to Transaction Expenses.
9.2.2 PAYMENT OF OTHER EXPENSES
Lessee will be responsible for the fees and charges of its counsel incurred
in connection with the preparation, execution and delivery of the Operating
Agreements. All out-of-pocket costs and expenses of Lessee (including, without
limitation, reasonable attorney's fees and charges) incurred in performance of
Sections 7.1.3(a), (b) and (c) (other than with respect to the first
parenthetical of Section 7.1.3(c)) to the extent constituting Transaction
Expenses, shall be paid pursuant to Section 9.2.1 and, otherwise, shall be paid
by Airframe Manufacturer. Existing Lessor and Airframe Manufacturer shall each
pay all costs and expenses incurred by it in connection with the Operative
Agreements.
9.3 GENERAL TAX INDEMNITY
9.3.1 GENERAL
Except as provided in Section 9.3.2, Lessee agrees that each payment of
Rent paid by Lessee pursuant to the Lease, and any other payment or indemnity
paid by Lessee to a Tax Indemnitee under any Operative Agreement, shall be free
of all withholdings or deductions with respect to Taxes of any nature (other
than U.S. federal withholding taxes on, based on or measured by gross or net
income), and in the event that Lessee shall be required by applicable law to
make any such withholding or deduction for any such payment (x) Lessee shall
make all such withholdings or deductions, (y) the amount payable by Lessee shall
be increased so that after making all required withholdings or deductions such
Tax Indemnitee receives (at no after-Tax cost to the Tax Indemnitee) the same
amount that it would have received had no such withholdings or deductions been
made, and (z) Lessee shall pay the full amount withheld or deducted to the
relevant Taxing Authority in accordance with applicable law. Lessee further
agrees that, in the event it is required to withhold from any payment of Basic
Rent, Termination Value, Stipulated Loss Value (and amounts determined by
reference thereto), and amounts payable upon exercise of Lessee's purchase
option pursuant to Section 17.3 of the Lease, any Tax imposed upon Owner
Participant or Owner Trustee (including any withholding Tax based on income or
receipts of Owner Participant or Owner Trustee) and such Tax is excluded from
indemnification pursuant to Section 9.3.2, Lessee shall pay such additional
<PAGE>
amount, if any, required so that the total amount paid by Lessee (after making
all required withholdings) is equal to (assuming timely payment of the Equipment
Notes prior to the relevant Payment Date) the aggregate principal amount of
scheduled installments due on the Equipment Notes outstanding on the relevant
Payment Date, together with accrued and unpaid interest, due on the Equipment
Notes; Owner Participant or Owner Trustee, as the case may be, shall reimburse
Lessee for any such additional amounts within two Business Days after demand
therefor. Except as provided in Section 9.3.2 and whether or not any of the
transactions contemplated hereby are consummated, Lessee shall pay, indemnify,
protect, defend and hold each Tax Indemnitee harmless from all Taxes imposed by
any Taxing Authority that may from time to time be imposed on or asserted
against any Tax Indemnitee or the Aircraft, the Airframe, any Engine or any Part
or any interest in any of the foregoing (whether or not indemnified against by
any other Person), upon or with respect to the Operative Agreements or the
transactions or payments contemplated thereby, including but not limited to any
Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine,
any Part, any Operative Agreement (including without limitation any Equipment
Notes) or any data or any other thing delivered or to be delivered under an
Operative Agreement, (y) the purchase, manufacture, acceptance, rejection, sale,
transfer of title, return, ownership, mortgaging, delivery, transport, charter,
rental, lease, re-lease, sublease, assignment, possession, repossession,
presence, use, condition, storage, preparation, maintenance, modification,
alteration, improvement, operation, registration, transfer or change of
registration, reregistration, repair, replacement, overhaul, location, control,
the imposition of any Lien (other than a Lessor Lien), financing, refinancing
requested by the Lessee, abandonment or other disposition of the Aircraft, the
Airframe, any Engine, any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, or (z) rent, interest, fees or any other
income, proceeds, receipts or earnings, whether actual or deemed, arising upon,
in connection with, or in respect of, any of the Operative Agreements (including
the property or income or other proceeds with respect to property held as part
of the Trust Estate) or the transactions contemplated thereby.
9.3.2 CERTAIN EXCEPTIONS
The provisions of Section 9.3.1 shall not apply to, and Lessee shall have
no liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the United
States or any Taxing Authority of any jurisdiction within the United States in
which such Tax Indemnitee is incorporated or maintains its principal place of
<PAGE>
business or is otherwise subject to Taxes of such type as a result of
transactions or activities other than those contemplated by the Operative
Agreements (i) on, based on, or measured by, gross or net income or gross or net
receipts, including capital gains taxes, excess profits taxes, minimum taxes
from tax preferences, alternative minimum taxes, branch profits taxes,
accumulated earnings taxes, personal holding company taxes, succession taxes and
estate taxes, and any withholding taxes on, based on or measured by gross or net
income or receipts or (ii) on, or with respect to, or measured by, capital or
net worth or in the nature of a franchise tax or a tax for the privilege of
doing business (other than, in the case of clause (i) or (ii), sales, use,
license or property Taxes, value added taxes imposed in lieu of any of the
foregoing, airport excise taxes or any excise taxes imposed in the nature of or
in lieu of any of the foregoing or any Hawaii general excise tax and related
county surcharges imposed as a result of the use or location of the Aircraft in
Hawaii by a Lessee Person; and other than, in the case of clause (ii), any doing
business taxes imposed by a taxing authority in any jurisdiction (other than a
jurisdiction within which such Tax Indemnitee is incorporated or maintains its
principal place of business) if such doing business taxes attributable to the
transactions contemplated by the Operative Agreements were subject to indemnity
pursuant to the provisions of this clause 9.3.2(a) (without regard to this
parenthetical) solely as a result of the usage or location of the Aircraft in
such jurisdiction by a Lessee Person when such Tax Indemnitee was not
incorporated or doing business or otherwise subject to Taxes of such type in
such jurisdiction, if in a subsequent taxable period such Tax Indemnitee becomes
subject to Taxes of such type as a result of activities or transactions other
than those contemplated by the Operative Agreements, to the extent that such
Taxes (and in an amount no more than the amount of such Taxes that) would have
continued to be imposed solely as a result of the usage or location of the
Aircraft by a Lessee Person in such jurisdiction in the absence of any
additional nexus between such Tax Indemnitee and such jurisdiction);
(b) any Taxes imposed in connection with the sale or transfer of the
Aircraft from the Existing Lessor to the Owner Trustee or the purchase by Owner
Trustee for the benefit of the Owner Participant of the Aircraft from the
Existing Lessor;
(c) on, or with respect to, or measured by, any trustee fees, commissions
or compensation received by Owner Trustee, Pass Through Trustee, Subordination
Agent or Mortgagee;
<PAGE>
(d) on the Trust or the Trust Estate that result from treatment of the
Trust or the Trust Estate as an entity, such as a corporation, separate and
apart from the Owner Participant;
(e) that are being contested as provided in Section 9.3.4 hereof, for so
long as such contest is continuing;
(f) imposed on any Tax Indemnitee to the extent that such Taxes result from
the gross negligence or willful misconduct of such Tax Indemnitee, a related Tax
Indemnitee or any Affiliate thereof;
(g) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is imposed on, or is
collected from, the transferee) as a result of a transfer or other disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of the Owner Participant, by Owner Trustee
(unless requested by the Lessee), or, in the case of Taxes imposed on a
transferee, by the transferor) of any interest in the Aircraft, the Airframe,
any Engine or any Part, the Rent (other than the assignment of Rent to the Loan
Trustee pursuant to the Trust Indenture), the Trust, the Trust Estate, the Trust
Indenture Estate, the Lease or any interest arising under the Operative
Agreements or any Equipment Note or a transfer or disposition (including a
deemed transfer or disposition) of any interest in a Tax Indemnitee (other than
(A) a substitution or replacement of the Aircraft, the Airframe, any Engine or
any Part by a Lessee Person that is treated for Tax purposes as a transfer or
disposition, (B) a transfer pursuant to an exercise of remedies upon a Lease
Event of Default that shall have occurred and have been continuing, or (C) a
transfer to Lessee pursuant to Section 17.3 of the Lease);
(h) except with respect to gross-ups, imposed subsequent to (and not in
respect of) a transfer or other disposition described in paragraph (g) above and
in excess of those that would have been imposed had there not been a transfer or
other disposition by or to such Tax Indemnitee or a related Tax Indemnitee
described in paragraph (g) above;
(i) imposed on the Owner Participant and indemnified by Lessee pursuant to
the Tax Indemnity Agreement;
(j) imposed with respect to any period after the expiration or earlier
termination of the Term and, if required pursuant to the terms of the Lease, the
return of possession of the Aircraft to Lessor or placement in storage at the
request of Lessor in accordance with the Lease (provided that this exclusion (j)
<PAGE>
shall not apply to Taxes imposed after such period arising as a result of events
occurring prior to such expiration or earlier termination);
(k) consisting of any interest, penalties or additions to tax imposed on a
Tax Indemnitee resulting from a failure of such Tax Indemnitee or a related Tax
Indemnitee to file any return properly and timely, unless such failure shall be
caused by the failure of Lessee to fulfill its obligations, if any, under
Section 9.3.6 with respect to such return, provided that if any such return is
required to be filed in a jurisdiction outside the United States, which return
would not have been required to be filed in the absence of the transactions
contemplated under the Operative Agreements or Lessee's transactions or
activities in such jurisdiction, this exclusion shall not apply if (A) Lessee
has not informed the Tax Indemnitee in writing of the need to file such return
at least 30 days prior to the due date thereof (or such shorter period as would
reasonably allow the Tax Indemnitee to file such return if, under the
circumstances, the Lessee could not have reasonably informed the Tax Indemnitee
of the need to file at least 30 days prior to the due date thereof), or (B) the
Tax Indemnitee had determined in good faith that such filing would subject it or
any Affiliate to adverse consequences in such jurisdiction for which it had not
been (and would not have been) indemnified;
(l) resulting from, or that would not have been imposed but for, any Lessor
Liens arising as a result of claims against, or acts or omissions of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee;
(m) imposed on any Tax Indemnitee as a result of the breach by such Tax
Indemnitee or a related Tax Indemnitee of any covenant of such Tax Indemnitee or
any Affiliate thereof contained in any Operative Agreement or the inaccuracy of
any representation or warranty by such Tax Indemnitee or any Affiliate thereof
in any Operative Agreement;
(n) in the nature of an intangible or similar Tax (i) upon or with respect
to the value or principal amount of the interest of Loan Participant or any Note
Holder in any Equipment Note or the loan evidenced thereby or (ii) upon or with
respect to the value of the interest of the Owner Participant in the Trust
Estate or the Trust, in each case only if such Taxes are in the nature of
franchise Taxes or result from the Tax Indemnitee doing business in the taxing
jurisdiction and are imposed because of the place of incorporation or the
activities unrelated to the transactions contemplated by the Operative
Agreements in the taxing jurisdiction of such Tax Indemnitee;
<PAGE>
(o) that are included in Lessor's Cost and paid to the appropriate Taxing
Authority;
(p) imposed on a Tax Indemnitee by a Taxing Authority of a jurisdiction
outside the United States within which such Tax Indemnitee is incorporated or
maintains its principal place of business or to the extent that such Taxes would
not have been imposed but for a connection between the Tax Indemnitee or a
related Tax Indemnitee and such jurisdiction imposing such Tax unrelated to the
transactions contemplated by the Operative Agreements; or
(q) Taxes relating to ERISA or Section 4975 of the Code.
For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees that
are successors, assigns, agents, servants or Affiliates of such Tax Indemnitee
shall be related Tax Indemnitees.
9.3.3 PAYMENT
(a) Lessee's indemnity obligation to a Tax Indemnitee under this Section
9.3 shall equal the amount which, after taking into account any Tax imposed upon
the receipt or accrual of the amounts payable under this Section 9.3 and any tax
benefits actually recognized by such Tax Indemnitee as a result of the
indemnifiable Tax (including, without limitation, any benefits recognized as a
result of an indemnifiable Tax being utilized by such Tax Indemnitee as a credit
against Taxes not indemnifiable under this Section 9.3), shall equal the amount
of the Tax indemnifiable under this Section 9.3.
(b) At Lessee's request, the computation of the amount of any indemnity
payment owed by Lessee or any amount owed by a Tax Indemnitee to Lessee pursuant
to this Section 9.3 shall be verified and certified by an independent public
accounting firm selected by such Tax Indemnitee and reasonably satisfactory to
Lessee. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Lessee
unless such verification shall result in an adjustment in Lessee's favor of 5%
or more of the net present value (computed using a discount rate equal to the
Debt Rate, compounded semiannually) of the payment as computed by such Tax
Indemnitee, in which case the costs shall be paid by such Tax Indemnitee.
(c) Each Tax Indemnitee shall provide Lessee with such certifications,
information and documentation as shall be in such Tax Indemnitee's possession
and as shall be reasonably requested by Lessee to minimize any indemnity payment
pursuant to this Section 9.3; provided, that notwithstanding anything to the
<PAGE>
contrary contained herein, no Tax Indemnitee shall be required to provide Lessee
with any Tax returns.
(d) Each Tax Indemnitee shall promptly forward to Lessee any written
notice, bill or advice received by it from any Taxing Authority concerning any
Tax for which it seeks indemnification under this Section 9.3. Lessee shall pay
any amount for which it is liable pursuant to this Section 9.3 directly to the
appropriate Taxing Authority if legally permissible or upon demand of a Tax
Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a
contest occurs in accordance with Section 9.3.4, within 30 days after a Final
Determination (as defined below)), but in no event more than two Business Days
prior to the date the Tax to which such amount payable hereunder relates is due.
If requested by a Tax Indemnitee in writing, Lessee shall furnish to the
appropriate Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of any Tax paid by Lessee or such other evidence of payment of
such Tax as is acceptable to such Tax Indemnitee. Lessee shall also furnish
promptly upon written request such data as any Tax Indemnitee may reasonably
require to enable such Tax Indemnitee to comply with the requirements of any
taxing jurisdiction unless such data is not reasonably available to Lessee or,
unless such data is specifically requested by a Taxing Authority, is not
customarily furnished by domestic air carriers under similar circumstances. For
purposes of this Section 9.3, a "Final Determination" shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction that
occurs pursuant to the provisions of Section 9.3.4, which decision, judgment,
decree or other order has become final and unappealable (by law or by Lessee
hereunder), (ii) a closing agreement or settlement agreement entered into in
accordance with Section 9.3.4 that has become binding and is not subject to
further review or appeal (absent fraud, misrepresentation, etc.), or (iii) the
termination of administrative proceedings and the expiration of the time for
instituting a claim in a court proceeding.
(e) If any Tax Indemnitee shall actually realize a tax savings by reason of
any Tax paid or indemnified by Lessee pursuant to this Section 9.3 (whether such
tax savings shall be by means of a foreign tax credit, depreciation or cost
recovery deduction or otherwise) and such savings is not otherwise taken into
account in computing such payment or indemnity, such Tax Indemnitee shall pay to
Lessee (within 30 days after the realization of such tax savings) an amount
equal to the lesser of (i) the amount of such tax savings, plus any additional
tax savings recognized as the result of any payment made pursuant to this
sentence, when, as, if, and to the extent, realized or (ii) the amount of all
<PAGE>
payments (other than in respect of contest costs) pursuant to this Section 9.3
by Lessee to such Tax Indemnitee (less any payments previously made by such Tax
Indemnitee to Lessee pursuant to this Section 9.3.3 (e)) (and the excess, if
any, of the amount described in clause (i) over the amount described in clause
(ii) shall be carried forward and applied to reduce pro tanto any subsequent
obligations of Lessee to make payments to such Tax Indemnitee pursuant to this
Section 9.3); provided, that such Tax Indemnitee shall not be required to make
any payment pursuant to this sentence so long as a Lease Event of Default of a
monetary nature has occurred and is continuing. If a tax benefit is later
disallowed or denied, the disallowance or denial shall be treated as a Tax
indemnifiable under Section 9.3.1 without regard to the provisions of Section
9.3.2 (other than Section 9.3.2 (f)). Each such Tax Indemnitee shall in good
faith use reasonable efforts in filing its tax returns and in dealing with
Taxing Authorities to seek and claim any such tax benefit.
(f) For purposes of this Section 9.3, items of foreign Tax of any Tax
Indemnitee shall be deemed to be utilized by such Tax Indemnitee as credits or
deductions for any taxable year in accordance with the following priorities:
(x) First, all utilizable foreign Taxes (taking into account the
limitations of Section 904(d) of the Code) other than those described in clause
(y) below;
(y) Second, all utilizable foreign Taxes (taking into account the
limitations of Section 904(d) of the Code) arising out of the transactions
contemplated by the Operative Agreements and other equipment leasing
transactions to the extent such Tax Indemnitee is indemnified or held harmless
for such Taxes by the Lessee or a lessee on a pari passu basis.
9.3.4 CONTEST
(a) If a written claim is made against a Tax Indemnitee for Taxes with
respect to which Lessee could be liable for payment or indemnity hereunder, or
if a Tax Indemnitee makes a determination that a Tax is due for which Lessee
could have an indemnity obligation hereunder, such Tax Indemnitee shall promptly
give Lessee notice in writing of such claim (provided, that failure to so notify
Lessee shall not relieve Lessee of its indemnity obligations hereunder unless
such failure to notify forecloses Lessee's rights to require a contest of such
claim) and shall take no action with respect to such claim without the prior
written consent of Lessee for 30 days following the receipt of such notice by
Lessee; provided, that, in the case of a claim made against a Tax Indemnitee, if
such Tax Indemnitee shall be required by law to take action prior to the end of
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such 30-day period, such Tax Indemnitee shall, in such notice to Lessee, so
inform Lessee, and such Tax Indemnitee shall take no action for as long as it is
legally able to do so (it being understood that a Tax Indemnitee shall be
entitled to pay the Tax claimed and sue for a refund prior to the end of such
30-day period if (i)(A) the failure to so pay the Tax would result in
substantial penalties (unless immediately reimbursed by Lessee) and the act of
paying the Tax would not materially prejudice the right to contest or (B) the
failure to so pay would result in criminal penalties and (ii) such Tax
Indemnitee shall take any action so required in connection with so paying the
Tax in a manner that, in its good faith opinion, is the least prejudicial to the
pursuit of the contest). In addition, such Tax Indemnitee shall (provided, that
Lessee shall have agreed to keep such information confidential other than to the
extent necessary in order to contest the claim) furnish Lessee with copies of
any requests for information from any Taxing Authority relating to such Taxes
with respect to which Lessee may be required to indemnify hereunder. If
requested by Lessee in writing within 30 days after its receipt of such notice,
such Tax Indemnitee shall, at the expense of Lessee (including, without
limitation, all reasonable costs, expenses and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law to be contested by the Lessee in its own name, allow Lessee to
contest) through appropriate administrative and judicial proceedings the
validity, applicability or amount of such Taxes by (I) resisting payment
thereof, (II) not paying the same except under protest if protest is necessary
and proper or (III) if the payment is made, using reasonable efforts to obtain a
refund thereof in an appropriate administrative and/or judicial proceeding. If
requested to do so by Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to pursue any appeals to the United States Supreme Court. If and to the
extent the Tax Indemnitee is able to separate the contested issue or issues from
other issues arising in the same administrative or judicial proceeding that are
unrelated to the transactions contemplated by the Operative Agreements without,
in the good faith judgment of such Tax Indemnitee, adversely affecting such Tax
Indemnitee, such Tax Indemnitee shall permit Lessee to contest such matter in
its own name, if permitted by applicable law, and shall provide to Lessee (at
Lessee's cost and expense) such information or data that is in such Tax
Indemnitee's control or possession that is reasonably necessary to conduct such
contest (other than such Tax Indemnitee's federal income tax returns). In the
case of a contest controlled by a Tax Indemnitee, such Tax Indemnitee shall
consult with Lessee in good faith regarding the manner of contesting such claim
and shall keep Lessee reasonably informed regarding the progress of such
<PAGE>
contest. A Tax Indemnitee shall not fail to take any action expressly required
by this Section 9.3.4 (including, without limitation, any action regarding any
appeal of an adverse determination with respect to any claim) or settle or
compromise any claim without the prior written consent of the Lessee (except as
contemplated by Section 9.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee be
required to pursue any contest (or to permit Lessee to pursue any contest)
unless (i) Lessee shall have agreed to pay such Tax Indemnitee on demand all
reasonable costs and expenses incurred by such Tax Indemnitee in connection with
contesting such Taxes, including, without limitation, all reasonable out of
pocket costs and expenses and reasonable attorneys' and accountants' fees and
disbursements, (ii) if such contest shall involve the payment of the claim,
Lessee shall advance the amount thereof (to the extent indemnified hereunder)
plus interest, penalties and additions to tax with respect thereto that are
required to be paid prior to the commencement of such contest on an
interest-free and after-Tax basis to such Tax Indemnitee (and such Tax
Indemnitee shall promptly pay to the Lessee any net realized tax benefits
resulting from such advance including any tax benefits resulting from making
such payment), (iii) such Tax Indemnitee shall have reasonably determined that
the action to be taken will not result in any material risk of forfeiture, sale
or loss of the Aircraft (unless Lessee shall have made provisions to protect the
interests of any such Tax Indemnitee and the Owner Participant in a manner
reasonably satisfactory to such Tax Indemnitee and the Owner Participant)
(provided, that such Tax Indemnitee agrees to notify Lessee in writing promptly
after it becomes aware of any such risk), (iv) no Lease Event of Default shall
have occurred and be continuing unless Lessee has provided adequate security for
its obligations hereunder by advancing to such Tax Indemnitee before proceeding
or continuing with such contest, the amount of the Tax being contested, plus any
interest and penalties and an amount estimated in good faith by such Tax
Indemnitee for expenses, and (v) prior to commencing any judicial action
controlled by Lessee, Lessee shall have acknowledged its liability for such
claim hereunder, provided that Lessee shall not be bound by its acknowledgment
if the Final Determination articulates conclusions of law and fact that
demonstrate that Lessee has no liability for the contested amounts hereunder.
Notwithstanding the foregoing, if any Tax Indemnitee shall release, waive,
compromise or settle any claim which may be indemnifiable by Lessee pursuant to
this Section 9.3 without the written permission of Lessee, Lessee's obligation
to indemnify such Tax Indemnitee with respect to such claim (and all directly
related claims and claims based on the outcome of such claim) shall terminate,
subject to Section 9.3.4(c), and subject to Section 9.3.4(c), such Tax
<PAGE>
Indemnitee shall repay to Lessee any amount previously paid or advanced to such
Tax Indemnitee with respect to such claim (other then contest costs), plus
interest at the rate that would have been payable by the relevant Taxing
Authority with respect to a refund of such Tax.
(c) Notwithstanding anything contained in this Section 9.3, a Tax
Indemnitee will not be required to contest the imposition of any Tax and shall
be permitted to settle or compromise any claim without Lessee's consent if such
Tax Indemnitee (i) shall waive its right to indemnity under this Section 9.3
with respect to such Tax (and any directly related claim and any claim the
outcome of which is determined based upon the outcome of such claim), (ii) shall
pay to Lessee any amount previously paid or advanced by Lessee pursuant to this
Section 9.3 (other than contest costs) with respect to such Tax, plus interest
at the rate that would have been payable by the relevant Taxing Authority with
respect to a refund of such Tax, and (iii) shall agree to discuss with Lessee
the views or positions of any relevant Taxing Authority with respect to the
imposition of such Tax.
9.3.5 REFUND
If any Tax Indemnitee shall receive a refund of, or be entitled to a credit
against other liability for, all or any part of any Taxes paid, reimbursed or
advanced by Lessee, such Tax Indemnitee shall pay to Lessee within 30 days of
such receipt an amount equal to the lesser of (a) the amount of such refund or
credit plus any net tax benefit (taking into account any Taxes incurred by such
Tax Indemnitee by reason of the receipt of such refund or realization of such
credit) actually realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence (including this clause (a))
and (b) such tax payment, reimbursement or advance by Lessee to such Tax
Indemnitee theretofore made pursuant to this Section 9.3 (and the excess, if
any, of the amount described in clause (a) over the amount described in clause
(b) shall be carried forward and applied to reduce pro tanto any subsequent
obligation of Lessee to make payments to such Tax Indemnitee pursuant to this
Section 9.3). If, in addition to such refund or credit, such Tax Indemnitee
shall receive (or be credited with) an amount representing interest on the
amount of such refund or credit, such Tax Indemnitee shall pay to Lessee within
30 days of such receipt or realization of such credit that proportion of such
interest that shall be fairly attributable to Taxes paid, reimbursed or advanced
by Lessee prior to the receipt of such refund or realization of such credit.
<PAGE>
9.3.6 TAX FILING
If any report, return or statement is required to be filed with respect to
any Tax which is subject to indemnification under this Section 9.3, Lessee shall
timely file the same (except for any such report, return or statement which a
Tax Indemnitee has timely notified the Lessee in writing that such Tax
Indemnitee intends to file or which a Tax Indemnitee is required by law to file
in its own name); provided, that the relevant Tax Indemnitee shall furnish
Lessee with any information in such Tax Indemnitee's possession or control that
is reasonably necessary to file any such return, report or statement and is
reasonably requested in writing by Lessee (it being understood that the Tax
Indemnitee shall not be required to furnish copies of its actual tax returns,
although it may be required to furnish relevant information contained therein).
Lessee shall either file such report, return or statement and send a copy of
such report, return or statement to such Tax Indemnitee, and Owner Trustee if
the Tax Indemnitee is not Owner Trustee, or, where Lessee is not permitted to
file such report, return or statement, or if the same is required by law to be
filed in the Tax Indemnitee's own name, it shall notify such Tax Indemnitee in
writing of such requirement and prepare and deliver such report, return or
statement to such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
within a reasonable time prior to the time such report, return or statement is
to be filed.
9.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Lessee or Loan
Trustee or to such other person as Lessee or Loan Trustee may designate, at
Lessee's or Loan Trustee's request, such duly executed and properly completed
forms as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(x) such reduction or exemption is available to such Tax Indemnitee, (y) Lessee
has provided such Tax Indemnitee with any information necessary to complete such
form not otherwise reasonably available to such Tax Indemnitee, and (z) if such
return is required to be filed in a jurisdiction outside the United States, the
Tax Indemnitee has not made a good faith determination that such filing would
subject it or any Affiliate to any adverse consequences in such jurisdiction for
which it has not been (and would not have been) indemnified.
9.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Lessee may require
the Tax Indemnitee to agree in writing, in a form reasonably acceptable to
<PAGE>
Lessee, to the terms of this Section 9.3 and Section 15.8 prior to making any
payment to such Tax Indemnitee under this Section 9.3.
9.3.9 SUBROGATION
Upon payment of any Tax by Lessee pursuant to this Section 9.3 to or on
behalf of a Tax Indemnitee, Lessee, without any further action, shall be
subrogated to any claims that such Tax Indemnitee may have relating thereto.
Such Tax Indemnitee shall cooperate with Lessee (to the extent such cooperation
does not result in any unreimbursed cost, expense or liability to such Tax
Indemnitee) to permit Lessee to pursue such claims.
9.3.10 FOREIGN TAX ON LOAN PAYMENTS
If an Owner Participant is incorporated or organized, or maintains a place
of business or conducts activities (other than any activities of the Owner
Participant resulting from its participation in the transactions contemplated by
the Operative Agreements or resulting from any activities of Lessee in such
jurisdiction) in a country other than the United States or in a territory,
possession or commonwealth of the United States (within the meaning of the tax
law of that foreign jurisdiction) and if as a result thereof any foreign Taxes
(including withholding Taxes) are imposed on the Pass Through Trustees, Pass
Through Trusts, or Note Holders, then Owner Participant shall reimburse Lessee
for any payments Lessee is required to make to or on behalf of any Pass Through
Trustee, Pass Through Trust, or Note Holder under this Section 9.3 as a result
of the imposition of such Taxes. The amount payable by Owner Participant to
Lessee shall be an amount which, after taking into account any such Taxes, any
Tax imposed upon the receipt or accrual by Lessee of such payment by Owner
Participant and any tax benefits or tax savings realized by Lessee with respect
to the payment of such withholding Tax or the payment hereunder, shall equal the
amount of Lessee's payment to or on behalf of such Pass Through Trustee, or Note
Holder.
9.4 PAYMENTS
Any payments made pursuant to Section 9.1 and Section 9.3 shall be due on
the 60th day after demand is made to the indemnifying party therefor (other than
any payments for which a different time is provided under Section 9.3.3 hereof)
and shall be made directly to the relevant Indemnitee or Tax Indemnitee or to
Lessee, in immediately available funds at such bank or to such account as
specified by such Indemnitee or Tax Indemnitee or Lessee, as the case may be, in
written directives to the payor, or, if no such direction shall have been given,
by check of the payor payable to the order of, and mailed to, such Indemnitee or
<PAGE>
Tax Indemnitee or Lessee, as the case may be, by certified mail, postage
prepaid, at its address as set forth in this Agreement.
9.5 INTEREST
If any amount, payable by Lessee, any Indemnitee or any Tax Indemnitee
under Section 9.1 or 9.3 is not paid when due, the person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the same is paid, at the
Payment Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.
9.6 BENEFIT OF INDEMNITIES
The obligations of Lessee in respect of all indemnities, obligations,
adjustments and payments in Section 9.1 or 9.3 are expressly made for the
benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee
entitled thereto, without declaring the Lease to be in default or taking other
action thereunder, and notwithstanding any provision of the Trust Indenture.
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS
10.1 PARTICIPANTS, OWNER TRUSTEE AND NOTE HOLDERS
10.1.1 OWNER PARTICIPANT
(a) Owner Participant shall not Transfer any or all of its right, title or
interest in the Trust Estate or the Trust Agreement and to this Agreement
unless:
(i) The Transferee shall have full power, authority and legal right to
execute and deliver and to perform the obligations of Owner Participant
under this Agreement and the other Owner Participant Agreements and shall
provide reasonably satisfactory evidence of such power and authority to
Lessee, Owner Trustee and Mortgagee;
(ii) The Transferee shall enter into one or more legal, valid, binding
and enforceable agreements effective to confirm that such Transferee agrees
to be bound by all the terms of, and to undertake all of the obligations
arising after such transfer of, the transferring Owner Participant
contained in the Owner Participant Agreements and in which it makes
<PAGE>
representations and warranties substantially the same as those contained in
Section 6.2 of this Participation Agreement;
(iii) Lessee shall not be obligated to pay any greater amount or incur
any greater obligation than that which it would have been obliged to pay or
incur under the Lease or other Lessee Operative Agreement if no transfer or
assignment had taken place, and the terms and conditions of the Lease and
the other Lessee Operative Agreements insofar as they relate to the rights
and obligations of Lessee or the Loan Participants shall not be altered;
(iv) Owner Participant shall deliver to Lessee, Owner Trustee and
Mortgagee an opinion of counsel reasonably satisfactory to each of them
(which, if the Transferee is an Affiliate of the Owner Participant, may be
in-house counsel to such Owner Participant) to the effect that such
agreement or agreements referred to in Section 10.1.1(a)(ii) and, if
applicable, 10.1.1(a)(vi) are legal, binding and enforceable in accordance
with its or their terms and that such transfer will not violate applicable
securities laws, the Act or any other applicable law and is in accordance
with this Section 10.1.1;
(v) The Transferee is a Citizen of the United States (it being
understood that the existence of any such requirement is to be determined
without giving consideration to Section 47.9 of the FAA Regulations or any
other provision that would restrict Lessee's use or operation of the
Aircraft), or shall use a voting powers trust or similar arrangement in
order to hold an interest in the Trust Estate such that the Aircraft can be
registered in the United States (without giving consideration to Section
47.9 of the FAA Regulations or any other provision that would restrict
Lessee's use or operation of the Aircraft);
(vi) The Transferee shall be one person and shall be either (A) a
Permitted Institution or (B) any other person (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a
freight forwarder or an Affiliate of any of the foregoing) the obligations
of which under the Owner Participant Agreements are guaranteed by a
Permitted Institution in any case, pursuant to a written guaranty, in form
and substance reasonably satisfactory to Lessee, Owner Trustee and
Mortgagee; and
(vii) The Transferee shall be a "U.S. Person" as defined in Section
7701(a)(30) of the Code (or any successor provision thereto).
<PAGE>
(b) Owner Participant shall give written notice to Lessee, Mortgagee and
Owner Trustee at least 10 days prior to any such Transfer, specifying the name
and address of the proposed Transferee, and providing financial statements of
the proposed Transferee evidencing satisfaction of the requirements described in
Section 10.1.1(a)(vi)(A) or (B) above.
(c) Any fees, charges and expenses, including the reasonable legal fees,
charges and expenses incurred by Lessee, Owner Participant, Mortgagee, any Note
Holder or Owner Trustee in connection with any Transfer by Owner Participant
permitted by this Section 10.1.1, or by the Transferee in any such case, will be
paid for by Owner Participant.
10.1.2 OWNER TRUSTEE
Owner Trustee may transfer its interests in the Trust Agreement pursuant to
Section 9 thereof.
10.1.3 NOTE HOLDERS
Subject to Section 7.5.2 hereof and Section 2.07 of the Trust Indenture,
any Note Holder may, at any time and from time to time, Transfer or grant
participations in all or any portion of the Equipment Notes and/or all or any
portion of its beneficial interest in its Equipment Notes and the Trust
Indenture Estate to any person (it being understood that the sale or issuance of
Pass Through Certificates by a Pass Through Trustee shall not be considered a
Transfer or participation); provided, that any participant in any such
participations shall not have any direct rights under the Operative Agreements
or any Lien on all or any part of the Aircraft or Trust Indenture Estate and
neither Lessee, Lessor, nor Owner Participant shall have any increased liability
or obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be deemed to be bound by all of the covenants of Note
Holders contained in the Operative Agreements.
10.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with Section 10.1.1, 10.1.2 or 10.1.3
(other than any Transfer by any Note Holder, to the extent it only grants
participations in Equipment Notes or in its beneficial interest therein),
Transferee shall be deemed an "Owner Participant," "Owner Trustee" or a "Note
Holder," respectively, for all purposes of this Agreement and the other
Operative Agreements and, in the case of a Transferee of any Participant or Note
Holder, shall be deemed to have paid its ratable portion of Lessor's Cost
previously made by Owner Participant or Loan Participant, respectively, making
such conveyance and represented by the interest being conveyed, and each
<PAGE>
reference herein to Owner Participant, Owner Trustee or Note Holder,
respectively, shall thereafter be deemed a reference to such Transferee for all
purposes, and the transferring Owner Participant, Owner Trustee, Loan
Participant or Note Holder shall be released (except, in the case of Owner
Participant, to the extent of any guaranty provided by it under Section
10.1.1(a)(vi)) from all of its liabilities and obligations under this Agreement
and any other Operative Agreements to the extent such liabilities and
obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the transferee; PROVIDED, that such
transferring Owner Participant, Owner Trustee or Note Holder (and its respective
Affiliates, successors, assigns, agents, servants, representatives, directors
and officers) will continue to have the benefit of any rights or indemnities
under any Operative Agreement vested or relating to circumstances, conditions,
acts or events prior to such Transfer.
SECTION 11. [RESERVED]
SECTION 12. SECTION 1110
It is the intention of each of Lessee, Owner Participant, Loan Participant,
the Note Holders (such intention being evidenced by each of their acceptance of
an Equipment Note), Owner Trustee and Mortgagee that Owner Trustee, as lessor
under the Lease (and Mortgagee as assignee of Owner Trustee under the Trust
Indenture), shall be entitled to the benefits of Section 1110 in the event of a
case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor. Lessee
shall at all times be certificated and registered to the extent necessary to
entitle Owner Trustee to the rights afforded to lessors of aircraft equipment
under Section 1110 of the United States Bankruptcy Code.
SECTION 13. CHANGE OF CITIZENSHIP
13.1 GENERALLY
Without prejudice to the representations, warranties or covenants regarding
the status of any party hereto as a Citizen of the United States:
(a) Each of Lessee, First Security and WTC agrees that it will, immediately
upon obtaining knowledge of any facts that would cast doubt upon its continuing
status as a Citizen of the United States and promptly upon public disclosure of
negotiations in respect of any transaction which would or might adversely affect
<PAGE>
such status, notify in writing all parties hereto of all relevant matters in
connection therewith; and
(b) Owner Participant agrees that, in the event its status is to change or
has changed as a Citizen of the United States, or it makes public disclosure of
circumstances as a result of which it believes that such status is likely to
change, it will notify all the other parties to this Participation Agreement of
(i) such change in status promptly after obtaining Actual Knowledge thereof or
(ii) such belief as soon as practicable after such public disclosure but in any
event within ten Business Days after such public disclosure.
13.2 OWNER PARTICIPANT
Owner Participant agrees, solely for the benefit of Lessee and the Note
Holders that if, during such time as the Aircraft is registered in the United
States, (a) it shall not be a Citizen of the United States and (b) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
Owner Trustee under the Act and regulations then applicable thereunder (without
giving consideration to Section 47.9 of the FAA Regulations or any other
provision that may restrict Lessee's use or operation of the Aircraft), then
Owner Participant shall as soon as is reasonably practicable, but in any event
within 30 days after obtaining Actual Knowledge of such ineligibility and of
such loss of citizenship, (y) effect voting trust or other similar arrangements
(in which case any provisions contained in the Operative Agreements restricting
Owner Participant's or Owner Trustee's ability to amend the Trust Agreement
shall not apply to the extent necessary to permit the use of such a voting trust
or other similar arrangement) or take any other action as may be necessary to
prevent any deregistration or maintain the United States registration of the
Aircraft or (z) transfer in accordance with the terms of this Agreement all its
right, title and interest in and to this Agreement, the Trust Estate and the
Trust Agreement in accordance with Section 10.1.
13.3 OWNER TRUSTEE
Upon First Security giving any notice in accordance with Section 13.1(a),
Owner Trustee shall, subject to Section 9.1.1 of the Trust Agreement, resign as
Owner Trustee. Upon its receipt of such notice, Owner Participant shall as
promptly as practicable appoint a Citizen of the United States as successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement.
<PAGE>
13.4 Mortgagee
Upon WTC giving any notice in accordance with Section 13.1(a), Mortgagee
shall (if and so long as such citizenship is necessary under the Act as in
effect at such time or, if it is not necessary, if and so long as Mortgagee's
citizenship could have any adverse effect on Lessee, any Participant or any Note
Holder), subject to Section 8.02 of the Trust Indenture, resign as Mortgagee
promptly upon its ceasing to be such a citizen.
SECTION 14. CONCERNING OWNER TRUSTEE
It is understood and agreed that, except as otherwise expressly provided
herein or in the Trust Agreement or the Trust Indenture, Owner Trustee is
entering into this Agreement solely in its capacity as trustee as provided in
the Trust Agreement and not in its individual capacity and in no case whatsoever
will it be liable or accountable in its individual capacity for any of the
statements, representations, warranties, agreements or obligations of Owner
Trustee hereunder, or for any loss in respect thereof, as to all of which the
parties agree to look solely to the Trust Estate; PROVIDED, that nothing in this
Section 14 shall be deemed to limit in scope or substance the personal liability
of First Security (a) to Owner Participant as expressly set forth in the Trust
Agreement, (b) in respect of the representations, warranties and agreements of
First Security expressly made as such herein or in any other Operative Agreement
to which it is a party, and (c) for the consequences of its own gross
negligence, willful misconduct, and, in receiving, handling or remitting of
funds only, its willful misconduct or simple negligence as a trustee.
SECTION 15. MISCELLANEOUS
15.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
<PAGE>
communication, course of dealing or performance or other manner not set forth in
an agreement, document or instrument in writing and signed by the party against
which enforcement of the same is sought.
15.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or unenforceable in
any respect in any jurisdiction, then, to the extent permitted by Law, (a) all
other provisions hereof shall remain in full force and effect in such
jurisdiction and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. If, however, any Law pursuant to which such provisions are held
invalid, illegal or unenforceable may be waived, such Law is hereby waived by
the parties hereto to the full extent permitted, to the end that this Agreement
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
15.3 SURVIVAL
The indemnities set forth herein shall survive the delivery or return of
the Aircraft, the Transfer of any interest of Owner Participant in this
Agreement, the Trust Estate and the Trust Agreement, the Transfer of any
interest by any Note Holder of its Equipment Note and the expiration or other
termination of this Agreement or any other Operative Agreement.
15.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction likewise is
admissible in evidence.
15.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements hereto
may be executed in any number of counterparts (or upon separate signature pages
<PAGE>
bound together into one or more counterparts), each of which when so executed
shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
15.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by any
party hereto in exercising, any of its respective rights, powers, remedies or
privileges under this Agreement or provided at Law, in equity or otherwise shall
impair, prejudice or constitute a waiver of any such right, power, remedy or
privilege or be construed as a waiver of any breach hereof or default hereunder
or as an acquiescence therein nor shall any single or partial exercise of any
such right, power, remedy or privilege preclude any other or further exercise
thereof by it or the exercise of any other right, power, remedy or privilege by
it. No notice to or demand on any party hereto in any case shall, unless
otherwise required under this Agreement, entitle such party to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any party hereto to any other or further action in any
circumstances without notice or demand.
15.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile or telecommunication transmission (which in either
case provides written confirmation to the sender of its delivery), sent by
registered mail or certified mail, return receipt requested, postage prepaid, or
sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other
address, facsimile or other number as each party hereto may hereafter specify by
notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by facsimile
or telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
<PAGE>
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS ITSELF
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE
CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE
OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 15.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 15.8(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(D) TO THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY OF THE ABOVE-NAMED COURTS OR FROM ANY LEGAL
PROCESS THEREIN, SUCH PARTY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, SUCH IMMUNITY, AND EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY
WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING
BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, (i) THE DEFENSE OF SOVEREIGN
IMMUNITY, (ii) THAT IT OR ANY OF ITS PROPERTY IS IMMUNE FROM THE ABOVE DESCRIBED
LEGAL PROCESS AND (iii) THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
15.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person not a
party hereto (other than the Liquidity Provider, which is an intended third
party beneficiary with respect to the provisions of Section 9.1, and the other
persons referred to in Section 7.6.13, who are intended third party
beneficiaries of such Section) with any rights of any nature whatsoever against
any of the parties hereto and no person not a party hereto (other than the
Liquidity Provider, with respect to the provisions of Section 9.1, and the other
persons referred to in Section 7.6.13, with respect to such Section) shall have
any right, power or privilege in respect of any party hereto, or have any
benefit or interest, arising out of this Agreement.
15.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and as of
the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, among any of the parties
hereto with respect to such subject matter are hereby superseded in their
entireties (except that the letter agreement, dated May 14, 1997, among Lessee,
Existing Mortgagee and Airframe Manufacturer shall not be superseded).
15.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge and deliver or shall cause to
be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as any other party hereto shall reasonably
request in connection with the administration of, or to carry out more
effectively the purposes of, or to better assure and confirm into such other
party the rights and benefits to be provided under this Agreement and the other
Operative Agreements.
[This space intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Participation
Agreement to be duly executed and delivered as of the day and year first above
written.
CONTINENTAL AIRLINES, INC.,
By:_____________________________________
Name:
Title:
ICX CORPORATION,
Owner Participant
By:_____________________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity, except
as expressly provided herein, but
solely as Owner Trustee
By:_____________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Mortgagee
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3A
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3B
By:_____________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Pass Through Trustee under
the Pass Through Trust Agreement for
the Continental Airlines Pass Through
Trust, 1997-3C
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but
solely as Subordination Agent
By:_____________________________________
Name:
Title:
CORCIM, INC.,
Existing Lessor
By:_____________________________________
Name:
Title:
<PAGE>
ROLLS-ROYCE PLC,
Existing Mortgagee
By:_____________________________________
Name:
Title:
EMBRAER-EMPRESA BRASILEIRA DE
AERONAUTICA S.A.,
Airframe Manufacturer
By:_____________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided, a
reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner
Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted transferee,
permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and
words importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex,
schedule or exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Agreement, that agreement,
instrument or document, or annex, schedule or exhibit, or part,
respectively, as amended, modified or supplemented from time to time in
accordance with its terms and in accordance with the Operative Agreements,
and any agreement, instrument or document entered into in substitution or
replacement therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or reenacted prior
to the Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby,"
"herein," "hereto," "hereof" and "hereunder" and words of similar import
when used in any Operative Agreement refer to such Operative Agreement as a
whole and not to any particular provision of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
<PAGE>
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule"
in any Operative Agreement, or in any annex thereto, is a reference to a
section of, or an exhibit, an annex or a schedule to, such Operative
Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or Mortgagee,
as the case may be, actual knowledge of a responsible officer in the Corporate
Trust Department or the Corporate Trust Office, respectively, and (b) as it
applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee and
Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering the
Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" MEANS all technical data, manuals and log books, and
all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (provided, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from time
to time installed thereon) manufactured by Airframe Manufacturer and identified
by Airframe Manufacturer's model number, United States registration number and
Airframe Manufacturer's serial number set forth in Lease Supplement No. 1 and
(b) any and all Parts incorporated or installed in or attached or appurtenant to
such airframe, and any and all Parts removed from such airframe, unless title to
such Parts shall not be vested in Lessor in accordance with Section 8.1 and
Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de Aeronautica
S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the Participation
Agreement, the Purchase Agreement and the Consent and Agreement.
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as of any
Payment Date, the amount determined by multiplying the percentage set forth
<PAGE>
opposite such Date on the Amortization Schedule by the Original Amount of such
Equipment Note.
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note, the
amortization schedule for such Equipment Note delivered pursuant to Section 2.02
of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to be,
and is, registered with any other Government Entity under and in accordance with
Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. ss.
101 et seq.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section 14.5 of
the Lease.
"BASE LEASE TERM" means the period beginning on and including the Closing
Date and ending on the Scheduled Expiration Date, or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
"BASIC RENT" means the rent payable for the Aircraft pursuant to Section
3.2.1 of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
<PAGE>
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required by law to close in New York,
New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of the
Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code or the
regulations promulgated thereunder or any change in the interpretation of the
Code or such regulations in a decision by the United States Supreme Court, the
United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events: (i) sale
of the Aircraft to the Owner Trustee and the filing of the FAA Bill of Sale with
the FAA in connection therewith; (ii) payment of Lessor's Cost by Owner Trustee
to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee to Lessee
<PAGE>
pursuant to the Lease; and (iv) completion of the other events contemplated by
the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement No. 1
as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; provided, that
when used in relation to a Plan, "Code" shall mean the Internal Revenue Code of
1986 and any regulations and rulings issued thereunder, all as amended and in
effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its participation in
the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the Participation
Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement ____,
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "Trust Office" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee located at
Mortgagee's address for notices under the Participation Agreement or such other
office at which Mortgagee's corporate trust business shall be administered which
Mortgagee shall have specified by notice in writing to Lessee, Owner Trustee and
each Note Holder.
"CRAF" means the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C. ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
<PAGE>
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice or
the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to Lessee,
Existing Lessor, each Participant, Owner Trustee and Mortgagee by Existing
Mortgagee pursuant to Section 4.3 of the Participation Agreement, which delayed
Closing Date shall be a Business Day not later than the Commitment Termination
Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to Lessee
by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of the
United States.
"DOT" means the Department of Transportation of the United States or any
Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine Manufacturer
and identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number set forth in Lease Supplement No. 1 and originally installed on
the Airframe on delivery thereof pursuant to the Lease, and any Replacement
Engine, in any case whether or not from time to time installed on such Airframe
or installed on any other airframe or aircraft, and (b) any and all Parts
incorporated or installed in or attached or appurtenant to such engine, and any
and all Parts removed from such engine, unless title to such Parts shall not be
vested in Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Engine under and in accordance with the Lease,
such Replacement Engine shall become subject to the Lease and shall be an
"Engine" for all purposes of the Lease and the other Operative Agreements and
thereupon the Engine for which the substitution is made shall no longer be
subject to the Lease, and such replaced Engine shall cease to be an "Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
<PAGE>
"EQUIPMENT NOTES" means and includes any equipment notes issued under the
Trust Indenture in the form specified in Section 2.01 thereof (as such form may
be varied pursuant to the terms of the Trust Indenture) and any Equipment Note
issued under the Trust Indenture in exchange for or replacement of any Equipment
Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations and rulings issued thereunder all as amended and in effect from time
to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit for
normal use by Lessee;
(b) the actual or constructive total loss of such property or any damage
to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property
on the basis of a total loss or constructive or compromised total
loss;
(c) any theft, hijacking or disappearance of such property for a period of
180 consecutive days or more or, if earlier, the end of the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government Entity or
purported Government Entity (other than a requisition of use by the
U.S. Government) for a period exceeding 180 consecutive days or, if
earlier, at the end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition of use
of such property by the U.S. Government that continues until the last
day of the Term, PROVIDED that no such Event of Loss shall exist if
Lessor shall have elected not to treat such event as an Event of Loss
pursuant to Section 10.6 of the Lease; and
<PAGE>
(f) as a result of any law, rule, regulation, order or other action by the
Aviation Authority or by any Government Entity of the government of
registry of the Aircraft or by any Government Entity otherwise having
jurisdiction over the operation or use of the Aircraft, the use of
such property in the normal course of Lessee's business of passenger
air transportation is prohibited for a period of 180 consecutive days,
unless Lessee, prior to the expiration of such 180 day period, shall
have undertaken and shall be diligently carrying forward such steps as
may be 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 720 days, provided that no Event of Loss
shall be deemed to have occurred if such prohibition has been
applicable to Lessee's (or a Permitted Sublessee's) entire U.S. fleet
of such property and Lessee (or a Permitted Sublessee), prior to the
expiration of such 720-day period, shall have conformed at least one
unit of such property 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 and shall be
diligently carrying forward, in a manner which does not discriminate
against such property in so conforming such property, 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 three years or such use shall be prohibited at the
expiration of the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by Lessee
to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) any
amount payable to the Owner Participant by any transferee as the purchase price
of the Owner Participant's interest in the Trust Estate, (vi) any interest that
<PAGE>
pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (v) above, (vii) proceeds of
any right to enforce the payment of any amount described in clauses (i) through
(vi) above (PROVIDED, that the rights referred to in this clause (vii) shall not
be deemed to include the exercise of any remedies provided for in the Lease
other than the right to sue for specific performance of any covenant to make
such payment or to sue for damages in respect of the breach of any such
covenant) and (viii) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized under
the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement and the
Termination Agreement with respect to the Existing Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in Schedule 3
to the Participation Agreement.
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the date
of the Existing Participation Agreement, between Lessee and Express relating to
the Aircraft.
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the Participation
Agreement.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary of
Lessee.
<PAGE>
"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date of
the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner Trustee on
the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the Express
Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars for
the Aircraft that would apply in an arm's-length transaction between an informed
and willing buyer under no compulsion to buy, and an informed and willing seller
under no compulsion to sell, the Aircraft, in a transaction that would close on
or about the relevant time of determination, assuming (except as otherwise
provided in Section 15.4 of the Lease) that (a) the Aircraft has been maintained
in accordance with, and is in the condition required by, the Lease and (b) the
Aircraft would be delivered to such informed and willing buyer in the return
condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing statements
(i) covering the Trust Indenture Estate, by Owner Trustee, as debtor, showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction that,
in the opinion of Mortgagee, is necessary to perfect its Lien on the Trust
Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
<PAGE>
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
such principles may at any time or from time to time be varied by any applicable
financial accounting rules or regulations issued by the SEC and, with respect to
any person, shall mean such principles applied on a basis consistent with prior
periods except as may be disclosed in such person's financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) Owner
Participant Parent, (vi) the Trust Estate and the Trust Indenture Estate, (vii)
the Subordination Agent, (viii) the Liquidity Providers, (ix) the Pass Through
Trustees, (x) each Affiliate of the persons described in clauses (i) through
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(v), inclusive, (xi) each Affiliate of the persons described in clauses (vi),
(vii), (viii) and (ix), (xii) the respective directors, officers, employees,
agents and servants of each of the persons described in clauses (i) through (v)
inclusive and in clause (x), (xiii) the respective directors, officers,
employees, agents and servants of each of the persons described in clauses
(vii), (viii), (ix) and (xi), (xiv) the successors and permitted assigns of the
persons described in clauses (i) through (v), inclusive, and in clauses (x) and
(xii), and (xv) the successors and permitted assigns of the persons described in
clauses (vii), (viii), (ix), (xi) and (xiii); PROVIDED THAT the persons
described in clauses (vii), (viii), (ix), (xi) (xiii) and (xv) are Indemnitees
only for purposes of Section 9.1 of the Participation Agreement. If any
Indemnitee is Airframe Manufacturer or Engine Manufacturer or any subcontractor
or supplier of either thereof, such Person shall be an Indemnitee only in its
capacity as Owner Participant, Loan Participant or Note Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease, the
Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each separate
or additional trustee appointed pursuant to the Trust Indenture, (iii) the
Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through Trustee
and (vi) each of the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (v) inclusive
above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement among
the Pass Through Trustees, the Liquidity Providers and the Subordination Agent,
dated as of the Issuance Date, provided that, for purposes of any obligation of
Lessee, no amendment, modification or supplement to, or substitution or
replacement of, such Intercreditor Agreement shall be effective unless consented
to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
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"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that, with
the giving of notice, the lapse of time or both, would constitute a Lease Event
of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of Exhibit
A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Continental Airlines, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the Lease,
Lease Supplement No. 1, the Express Sublease, the Termination Agreement with
respect to the Existing Sublease and the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or other
user or person in possession of the Aircraft, Airframe or an Engine with or
without color of right, or any Affiliate of any of the foregoing (excluding any
Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any person
using or claiming any rights with respect to the Aircraft, Airframe or an Engine
directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
<PAGE>
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
"LESSOR RENT" means, with respect to any Payment Date, the amount set forth
in Schedule 4 to the Participation Agreement with respect to such Payment Date.
"LESSOR'S COST" means the amount paid by Owner Trustee to Existing Lessor
to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider
(as such terms are defined in the Intercreditor Agreement) under the respective
Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been consummated,
the Pass Through Trustees, and after the Closing shall have been consummated,
each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date of
determination, the holders of a majority in aggregate unpaid Original Amount of
<PAGE>
all Equipment Notes outstanding as of such date (excluding any Equipment Notes
held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of any such
party or any interests of Owner Trustee or Owner Participant therein by reason
of subrogation pursuant to Section 4.03 of the Trust Indenture (unless all
Equipment Notes then outstanding shall be held by Owner Trustee, Lessee, Owner
Participant or any Affiliate of any thereof)); PROVIDED that for the purposes of
directing any action or casting any vote or giving any consent, waiver or
instruction hereunder any Note Holder of an Equipment Note or Equipment Notes
may allocate, in such Note Holder's sole discretion, any fractional portion of
the principal amount of such Equipment Note or Equipment Notes in favor of or in
opposition to any such action, vote, consent, waiver or instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
<PAGE>
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity but solely as loan trustee under the Trust
Indenture.
"MORTGAGEE AGREEMENTS" means, collectively, the Participation Agreement and
the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization proceeding
involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the trustee in
such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax yield
utilizing the multiple investment sinking fund method of analysis and aggregate
net after-tax cash flow, computed on the basis of the same methodology and
assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
"NET WORTH" means, for any person, the excess of its total assets over its
total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person, as
defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or more
Equipment Notes.
<PAGE>
"OFFICER'S CERTIFICATE" means, in respect of any party to the Participation
Agreement, a certificate signed by the Chairman, the President, any Vice
President (including those with varying ranks such as Executive, Senior,
Assistant or Staff Vice President), the Treasurer or the Secretary of such
party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation Agreement,
the Trust Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the initial
Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity Agreement, the
Owner Participant Guaranty, the Equipment Notes, the Letter Agreement and the
Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes have
been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the stated
original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation Agreement
as "Owner Participant" or, if a second person becomes an "Owner Participant"
pursuant to Section 10.1.1 of the Participation Agreement, both of such persons;
PROVIDED that if an Owner Participant Transfers 100% of its interest to a
successor Owner Participant, such transferring Owner Participant shall
thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT GUARANTY" means the Guaranty by Corporate Affiliate of
Owner Participant dated the Delivery Date from Owner Participant Parent to the
beneficiaries named therein.
"OWNER PARTICIPANT PARENT" means the person executing the Owner Participant
Guaranty.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.
<PAGE>
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ____ dated as
of September 25, 1997 among Lessee, Owner Participant, Owner Trustee, the Pass
Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor, the
Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing gear,
instruments, appurtenances, accessories, furnishings, seats and other equipment
of whatever nature (other than (a) Engines or engines, and (b) any items leased
by Lessee from a third party other than Lessor)), that may from time to time be
installed or incorporated in or attached or appurtenant to the Airframe or any
Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as defined
in the Intercreditor Agreement), provided, that no amendment, modification or
supplement to, or substitution or replacement of, any such Fee Letter shall be
effective for purposes of any obligation of Lessee, unless consented to by
Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates issued by
the Pass Through Trusts (and any other pass through certificates for which such
pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through trusts
created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, in its capacity as trustee under each Pass Through Trust Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement, the
Pass Through Trust Agreements, and the Intercreditor Agreement.
<PAGE>
"PAYMENT DATE" means the Closing Date and each March 24, June 24, September
24 and December 24 during the Term, commencing with the first such date to occur
after the Closing Date.
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of Basic
Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive quarterly periods during the
Term ending on a Payment Date, the first such period commencing on and including
the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier, (ii)
any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its principal
executive offices in any Permitted Country and which is authorized to conduct
commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance company,
financial institution or corporation (other than, without Lessee's consent, a
commercial air carrier, a commercial aircraft operator, a freight forwarder or
Affiliate of any of the foregoing), in each case with a combined capital and
surplus or net worth of at least $25,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the -------------- Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7 of the
Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
<PAGE>
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the Series
A Equipment Notes, April 30, 2004 in the case of the Series B Equipment Notes
and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee, the
percentage of Lessor's Cost allocated to such Pass Through Trustee in Schedule 2
to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement Assignment
____, dated as of even date with the Participation Agreement, between Existing
Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or any
Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
<PAGE>
"RENEWAL RENT" for the Aircraft means the rent payable therefor in respect
of a Renewal Lease Term determined pursuant to Section 17.2.2 of the Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine pursuant to
the Lease.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement, dated
as of the date the Aircraft is returned to Lessor pursuant to Section 5 of the
Lease, by Lessor and Lessee substantially in the form of Exhibit B to the Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the first
Renewal Lease Term, the second anniversary of the Scheduled Expiration Date, and
in the case of the second Renewal Lease Term, the fourth anniversary of the
Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of such Securities and
Exchange Commission.
"Section 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy Code and the trustee
or debtor-in-possession in such proceedings (i) having agreed to perform its
obligations under the Lease with the approval of the applicable court and
thereafter having continued to perform such obligations in accordance with
Section 1110 or (ii) having assumed the Lease with the approval of the relevant
court and thereafter having continued to perform its obligations under the
Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such other
period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code,
plus an additional period, if any, resulting from the trustee or
<PAGE>
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the Securities
Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series A" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series B" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series C" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a) during the
Base Lease Term, the amount determined by multiplying (i) the percentage set
forth in Schedule 3 to the Lease (as adjusted from time to time in accordance
with Section 3.2.3 of the Lease) opposite the Stipulated Loss Value Date by (ii)
Lessor's Cost and (b) during any Renewal Term, the amount determined pursuant to
Section 17.2.3 of the Lease. Notwithstanding anything to the contrary in any
Operative Agreement, Stipulated Loss Value shall always be sufficient to pay in
full, as of the date of payment thereof (assuming timely payment of the
Equipment Notes prior to such date), the aggregate unpaid principal amount of
all Equipment Notes outstanding as of such date, together with accrued and
unpaid interest on all such Equipment Notes as of such date.
<PAGE>
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such month
specified in Schedule 3 to the Lease or, if such day is not a Business Day, the
immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as subordination
agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement, the
Liquidity Facilities and the Intercreditor Agreement.
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), provided that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and provided, further, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax Indemnity
Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC and
Mortgagee, (c) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
<PAGE>
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as of
even date with the Participation Agreement, between Lessee and Owner
Participant.
"TAXES" means all license, recording, documentary, registration and other
similar fees and all taxes, levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever imposed by any Taxing Authority, together
with any penalties, additions to tax, fines or interest thereon or additions
thereto.
"TAXING AUTHORITY" means any federal, state or local government or other
taxing authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority or
any territory or possession of the United States or any taxing authority
thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION AGREEMENTS" means, collectively, the termination agreement
with respect to the Existing Lease, the termination agreement with respect to
the Existing Sublease and the release from the Lien of the Existing Mortgage, in
each case delivered pursuant to Section 5.1.2(xiii) of the Participation
Agreement.
"TERMINATION DATE" means any Payment Date occurring after the end of the
Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
<PAGE>
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the Participation
Agreement and the other Operative Agreements to occur on the Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements (including,
without limitation, the reasonable fees and expenses of counsel for such
parties), (b) all costs and expenses for the recording or filing of any
documents, certificates or instruments in accordance with any Operative
Agreement, including, without limitation, the FAA Filed Documents and the
Financing Statements, (c) one ninth of (i) the underwriting fees and expenses
attributable to the offering and sale of the Pass Through Certificates and (ii)
all costs and expenses incurred by Existing Mortgagee, the Pass Through
Trustees, the Subordination Agent, Owner Trustee and Mortgagee in connection
with the preparation, execution and delivery of the Pass Through Agreements
(including, without limitation, the reasonable fees and expenses of counsel for
such parties), (d) the equity placement fee and expenses of Equity Advisor
attributable to the Aircraft, (e) the reasonable fees and disbursements of
special counsel in Oklahoma City, Oklahoma, in connection with the Closing, (f)
all initial and ongoing fees, disbursements and expenses of Owner Trustee and
Mortgagee, and (g) the fees and expenses of the Appraiser contemplated by
Section 5.1.2(xv) of the Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance of all
or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner Trustee
or any Loan Participant or Note Holder purports or intends to Transfer any or
all of its right, title or interest in the Trust Estate or in its Equipment Note
and the Trust Indenture Estate, respectively, as described in Section 10.1.1(a),
10.1.2 or 10.1.3 (but excluding participants in any participation referred to in
Section 10.1.3), respectively, of the Participation Agreement.
<PAGE>
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ____, dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner Trustee
in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the Trust
Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage ____
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" OR "U.S." means the United States of America; provided,
that for geographic purposes, "United States" means, in aggregate, the 50 states
and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is 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
<PAGE>
States Code for aircraft capable of carrying 10 or more individuals or 6000
pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any specified
Debt, at the time of the determination thereof the number of years obtained by
dividing the then Remaining Dollar-years of such Debt by the then outstanding
principal amount of such Debt. The term "Remaining Dollar-years" shall mean the
amount obtained by (1) multiplying the amount of each then-remaining principal
payment on such Debt by the number of years (calculated at the nearest
one-twelfth) that will elapse between the date of determination of the Weighted
Average Life to Maturity of such Debt and the date of that required payment and
(2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted Sublessee
agrees to furnish the Aircraft, Airframe or any Engine to a third party pursuant
to which the Aircraft, Airframe or Engine shall at all times be in the
operational control of Lessee or a Permitted Sublessee, provided that Lessee's
obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking corporation, not
in its capacity as Mortgagee under the Trust Indenture, but in its individual
capacity.
<PAGE>
-----------------------------
| SCHEDULE 1 |
| TO |
|Participation Agreement ___|
-----------------------------
ACCOUNTS; ADDRESSES
<TABLE>
<CAPTION>
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
<S> <C> <C>
CONTINENTAL The Chase Manhattan Bank Continental Airlines, Inc.
AIRLINES, INC. New York, New York 10081 2929 Allen Parkway
Account No.: 910-2-499291 Suite 2010
ABA#: 021-000021 Houston, Texas 77019
Attention: Paul Trupia Attention: Executive Vice
Voice: 212-552-2829 President and Chief
Facsimile: 212-552-0107 Financial Officer
Reference: Continental Facsimile: (713) 520-6329
Lease ____
ICX CORPORATION Charter One Bank F.S.B. ICX Corporation
1215 Superior Avenue 3 Summit Park Dr.
Cleveland, OH 44114 Suite 200
ABA#: 241070417 Cleveland, OH 44131
Account No.: 400113830 Attention: General Counsel
Attention: Chief Financial
Officer
Facsimile: (216) 328-8710
Facsimile: (216) 328-8714
FIRST SECURITY BANK, First Security Bank,
NATIONAL ASSOCIATION National Association First Security Bank,
79 South Main Street National Association
Salt Lake City, Utah 84111 79 South Main Street
Account No.: 051-0922115 Salt Lake City, Utah 84111
Corporate Trust Department Attention: Corporate Trust Department
ABA#: 124-0000-12 Facsimile: (801) 246-5053
Reference: Continental
Lease ____
WILMINGTON TRUST The Chase Manhattan Bank
COMPANY, AS MORTGAGEE New York, New York 10081 Wilmington Trust Company
Account No.: 920-1-014363 One Rodney Square
ABA#: 021-000021 1100 North Market Street
Attention: Corporate Trust Wilmington, Delaware 19890
Administration Attention: Corporate Trust Administration
Reference: Continental Facsimile: (302) 651-8882
Lease ____
<PAGE>
WILMINGTON TRUST The Chase Manhattan Bank
COMPANY, AS New York, New York 10081 Wilmington Trust Company
SUBORDINATION AGENT Account No.: 920-1-014363 One Rodney Square
ABA#: 021-000021 1100 North Market Street
Attention: Corporate Trust Wilmington, Delaware 19890
Administration Attention: Corporate Trust
Reference: Continental Administration
Lease ____ Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank
AS PASS THROUGH TRUSTEE New York, New York 10081 Wilmington Trust Company
FOR THE 1997-3A PASS Account No.: 920-1-014363 One Rodney Square
THROUGH TRUST ABA#: 021-000021 1100 North Market Street
Attention: Corporate Trust Wilmington, Delaware 19890
Administration Attention: Corporate Trust
Reference: Continental Administration
Lease ____ Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank
AS PASS THROUGH TRUSTEE New York, New York 10081 Wilmington Trust Company
FOR THE 1997-3B PASS Account No.: 920-1-014363 One Rodney Square
THROUGH TRUST ABA#: 021-000021 1100 North Market Street
Attention: Corporate Trust Wilmington, Delaware 19890
Administration Attention: Corporate Trust
Reference: Continental Administration
Lease ____ Facsimile: (302) 651-8882
WILMINGTON TRUST COMPANY, The Chase Manhattan Bank
AS PASS THROUGH TRUSTEE New York, New York 10081 Wilmington Trust Company
FOR THE 1997-3C PASS Account No.: 920-1-014363 One Rodney Square
THROUGH TRUST ABA#: 021-000021 1100 North Market Street
Attention: Corporate Trust Wilmington, Delaware 19890
Administration Attention: Corporate Trust
Reference: Continental Administration
Lease ____ Facsimile: (302) 651-8882
CORCIM, INC. None CT Corporation System
1209 Orange Street
Wilmington, Delaware 19801
Attention: Mark Ferrucci
Facsimile: (302) 658-5459
With copy to:
EMBRAER-Empresa Brasileira de Aeronautica S.A.
<PAGE>
EMBRAER-EMPRESA Banco do Brasil S.A. EMBRAER-Empresa Brasileira de Aeronautica S.A.
BRASILEIRA Av. Nelson D'Avila, 149 Av. Brigadeiro Faria Lima, 2170
DE AERONAUTICA S.A. 12245-030, Sao Jose dos 12227-901 Sao Jose dos Campos -SP Brazil
Campos-SP Brazil Attention: General Counsel
Swift Code: BRASBRRJSJC Facsimile: (55-123) 41-1679
Account No.: 9405-6
Reference: COEX Lease
ROLLS-ROYCE PLC Citibank, NA Rolls-Royce plc
New York, New York 10005 65 Buckingham Gate
Account No. 36855852 London SW1E 6AT, England
For further credit: 794-508 Attn: Company Secretary
ABA#: 021-000089 Facsimile: 011-44-171-233-1733
Reference: Paying Agent
</TABLE>
<PAGE>
-----------------------------
| SCHEDULE 2 |
| TO |
|PARTICIPATION AGREEMENT ___|
-----------------------------
COMMITMENTS
<TABLE>
<CAPTION>
PARTICIPANT PERCENTAGE OF LESSOR'S DOLLAR AMOUNT
----------- ---------------------- -------------
COST
----
<S> <C> <C>
OWNER PARTICIPANT OWNER PARTICIPANT'S
PERCENTAGE
PASS THROUGH TRUSTEE LOAN PARTICIPANT'S
PTT PERCENTAGE
TOTAL 100%
</TABLE>
<PAGE>
-----------------------------
| SCHEDULE 3 |
| TO |
|PARTICIPATION AGREEMENT ___|
-----------------------------
CERTAIN TERMS
<TABLE>
<CAPTION>
DEFINED TERM DEFINITION
<S> <C>
Commitment Termination Date October 15, 1997
Existing Lease Lease Agreement ____, dated as of ,
between Existing Lessor and Lessee
Existing Mortgage Aircraft Mortgage and Security Agreement-____,
dated as of , between Existing
Lessor, as Debtor, and Existing Mortgagee, as
Secured Party
Existing Participation Participation Agreement ____, dated as of
Agreement ________, among Lessee, Existing Lessor,
Express, Airframe Manufacturer and Existing
Mortgagee
Equity Advisor Babcock & Brown, Inc.
Expense Limit
Lessor's Cost $12,600,000
Local Counsel to the Owner Michael Babbbitt
Participant
Local Counsel to the Owner Robert T. Modney
Participant Parent
OP Jurisdiction Ohio
Special Counsel to the Owner Chadbourne & Parke LLP
Participant and Owner
Participant Parent
Special Tax Counsel to the Chadbourne & Parke LLP
Owner Participant
</TABLE>
----------------------------------------------------------
| CONFIDENTIAL: SUBJECT TO RESTRICTIONS ON DISSEMINATION |
| SET FORTH IN SECTION 8 OF THIS AGREEMENT |
----------------------------------------------------------
================================================================================
PARTICIPATION AGREEMENT ____
Dated as of September 25, 1997
Among
CONTINENTAL AIRLINES, INC.,
Lessee,
METLIFE CAPITAL CREDIT L.P.,
Owner Participant,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its individual capacity
except as expressly provided herein,
but solely as Owner Trustee,
Owner Trustee,
WILMINGTON TRUST COMPANY,
Not in its individual capacity
except as expressly provided herein,
but solely as Mortgagee, Subordination Agent
under the Intercreditor Agreement, and Pass Through
Trustee under each of the Pass Through Agreements,
Mortgagee and Loan Participant,
CORCIM, INC.
Existing Lessor,
ROLLS-ROYCE PLC,
Existing Mortgagee and Equity Guarantor
and
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A.
Airframe Manufacturer
----------------------------
One Embraer Model EMB-145 Aircraft
Bearing Manufacturer's Serial No. 145.___
and U.S. Registration No. N_____
with Two Allison Model AE3007A Engines
================================================================================
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION........................................................................... 2
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES; TERMINATION OF
OBLIGATION TO PARTICIPATE.............................................................................. 2
2.1 Participation in Lessor's Cost............................................................... 2
2.2 Nature of Obligations of Participants........................................................ 3
2.3 Termination of Obligation to Participate..................................................... 3
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT......................................................... 3
3.1 Sale of Aircraft............................................................................. 3
3.2 Commitment to Lease.......................................................................... 5
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT OF
SCHEDULED CLOSING DATE................................................................................. 6
4.1 Notices of Scheduled Closing Date............................................................ 6
4.2 Payment of Lessor's Cost..................................................................... 6
4.3 Postponement of Scheduled Closing Date....................................................... 7
4.4 Closing...................................................................................... 8
SECTION 5. CONDITIONS PRECEDENT................................................................................... 8
5.1 Conditions Precedent to Obligations of Participants.......................................... 8
5.2 Conditions Precedent to Obligations of Owner Trustee......................................... 16
5.3 Conditions Precedent to Obligations of Mortgagee............................................. 16
5.4 Conditions Precedent to Obligations of Lessee................................................ 17
5.5 Conditions Precedent to Obligations of Existing Lessor and Existing
Mortgagee.................................................................................... 18
5.6 Post-Registration Opinion.................................................................... 18
SECTION 6. REPRESENTATIONS AND WARRANTIES......................................................................... 18
6.1 Lessee's Representations and Warranties...................................................... 18
6.2 Owner Participant's Representations and Warranties........................................... 22
6.3 First Security's Representations and Warranties.............................................. 25
6.4 WTC's Representations and Warranties......................................................... 28
6.5 Existing Lessor's Representations and Warranties............................................. 32
6.6 Existing Mortgagee's Representations and Warranties.......................................... 34
6.7 Airframe Manufacturer's Representations and Warranties....................................... 36
<PAGE>
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS................................................................. 38
7.1 Covenants of Lessee.......................................................................... 38
7.2 Covenants of Owner Participant............................................................... 40
7.3 Covenants of First Security and Owner Trustee................................................ 43
7.4 Covenants of WTC............................................................................. 46
7.5 Covenants of Note Holders.................................................................... 47
7.6 Agreements................................................................................... 48
SECTION 8. CONFIDENTIALITY........................................................................................ 57
SECTION 9. INDEMNIFICATION AND EXPENSES........................................................................... 58
9.1 General Indemnity............................................................................ 58
9.2 Expenses..................................................................................... 64
9.3 General Tax Indemnity........................................................................ 65
9.4 Payments..................................................................................... 77
9.5 Interest..................................................................................... 78
9.6 Benefit of Indemnities....................................................................... 78
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS.................................................................... 78
10.1 Participants, Owner Trustee and Note Holders................................................. 78
10.2 Effect of Transfer........................................................................... 81
SECTION 11. [RESERVED]............................................................................................. 81
SECTION 12. SECTION 1110........................................................................................... 81
SECTION 13. CHANGE OF CITIZENSHIP.................................................................................. 82
13.1 Generally.................................................................................... 82
13.2 Owner Participant............................................................................ 82
13.3 Owner Trustee................................................................................ 83
13.4 Mortgagee.................................................................................... 83
SECTION 14. CONCERNING OWNER TRUSTEE............................................................................... 83
SECTION 15. MISCELLANEOUS.......................................................................................... 84
15.1 Amendments................................................................................... 84
15.2 Severability................................................................................. 84
15.3 Survival..................................................................................... 84
15.4 Reproduction of Documents.................................................................... 84
15.5 Counterparts................................................................................. 85
15.6 No Waiver.................................................................................... 85
15.7 Notices...................................................................................... 85
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE............................................. 86
15.9 Third-Party Beneficiary...................................................................... 87
15.10 Entire Agreement............................................................................. 87
15.11 Further Assurances........................................................................... 88
</TABLE>
ANNEX, SCHEDULES AND EXHIBITS
ANNEX A - Definitions
SCHEDULE 1 - Accounts; Addresses
SCHEDULE 2 - Commitments
SCHEDULE 3 - Certain Terms
SCHEDULE 4 - Lessor Rent
EXHIBIT A - Opinion of special counsel to Lessee
EXHIBIT B - Opinion of corporate counsel to Lessee
EXHIBIT C-1 - Opinion of corporate counsel to Airframe Manufacturer
EXHIBIT C-2 - Opinion of special counsel to Airframe Manufacturer
EXHIBIT D - Opinion of special counsel to Owner Trustee
EXHIBIT E - Opinion of special counsel to Mortgagee
EXHIBIT F-1 - Opinion of special counsel to Owner Participant and Owner
Participant Parent
EXHIBIT F-2 - Opinion of local counsel to Owner Participant
and Owner Participant Parent
EXHIBIT G - Opinion of special counsel to Existing Lessor
EXHIBIT H - Opinion of special counsel to Existing Mortgagee
EXHIBIT I - Opinion of special counsel in Oklahoma City, Oklahoma
EXHIBIT J - Delivery Receipt
<PAGE>
PARTICIPATION AGREEMENT ____
PARTICIPATION AGREEMENT ____, dated as of September 25, 1997 (this
"Agreement"), among (a) CONTINENTAL AIRLINES, INC., a Delaware corporation
("Lessee"), (b) METLIFE CAPITAL CREDIT L.P. ("Owner Participant"), (c) FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee (this and all other capitalized terms used but not defined herein shall
have the respective meanings ascribed thereto in Section 1) (in its capacity as
Owner Trustee, "Owner Trustee" or "Lessor," and in its individual capacity,
"First Security"), (d) WILMINGTON TRUST COMPANY, a Delaware banking corporation,
not in its individual capacity, except as expressly provided herein, but solely
as Mortgagee (in its capacity as Mortgagee, "Mortgagee" and in its individual
capacity, "WTC"), (e) WILMINGTON TRUST COMPANY, not in its individual capacity,
except as expressly provided herein, but solely as Pass Through Trustee under
each of the Pass Through Trust Agreements, (each, a "Pass Through Trustee"), (f)
WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly
provided herein, but solely as Subordination Agent under the Intercreditor
Agreement ("Subordination Agent"), (g) CORCIM, INC., a Delaware corporation (the
"Existing Lessor"), (h) ROLLS-ROYCE PLC, a corporation organized under the laws
of England (the "Existing Mortgagee" or "Equity Guarantor"), and (i)
EMBRAER-EMPRESA BRASILEIRA DE AERONAUTICA S.A., a company organized under the
laws of Brazil ("Airframe Manufacturer").
RECITALS
A. Express and Airframe Manufacturer have entered into the Purchase
Agreement, pursuant to which, among other things, Airframe Manufacturer has
agreed to manufacture and sell to Express and Express has agreed to purchase
from Airframe Manufacturer certain aircraft, including the Aircraft.
B. Prior to the date hereof, in connection with the interim financing
of the Aircraft, (i) certain of Express' rights under the Purchase Agreement
with respect to the Aircraft were assigned to Existing Lessor, (ii) the Aircraft
was purchased by Existing Lessor, leased to Lessee pursuant to the Existing
Lease and subleased to Express pursuant to the Existing Sublease and (iii) the
Existing Lessor granted to Existing Mortgagee a security interest in, among
other things, the Aircraft and the Existing Lease pursuant to the Existing
Mortgage.
C. In order to effectuate the long-term financing of the Aircraft,
the parties hereto intend that (i) the Owner Trustee purchase the Aircraft from
<PAGE>
the Existing Lessor utilizing the proceeds of the sale of the Equipment Notes to
the Pass Through Trustees and the investment by Owner Participant, (ii) the
Aircraft be leased to Lessee and subleased to Express, (iii) Owner Trustee grant
a security interest to Mortgagee in the Aircraft and the Lease for the benefit
of the Note Holders and (iv) the Existing Lease be terminated and the Aircraft
released from the Lien of the Existing Mortgagee.
D. Concurrently with the execution and delivery hereof, Owner
Participant Parent has, for the benefit of Lessee, Owner Trustee and Mortgagee,
issued the Owner Participant Guaranty, pursuant to which Owner Participant
Parent will guarantee the obligations of Owner Participant under the Operative
Agreements.
E. In order to induce Owner Participant to participate in the
financing of the Aircraft contemplated hereby, Equity Guarantor has agreed to
provide the Equity Guaranty.
F. The parties hereto wish to set forth in this Agreement the terms
and conditions upon and subject to which the aforesaid transactions shall be
effected.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE
2.1 PARTICIPATION IN LESSOR'S COST
Subject to the terms and conditions of this Agreement, on the Closing
Date, Owner Participant and each Pass Through Trustee shall participate in the
payment of Lessor's Cost as follows:
(a) Owner Participant shall participate in the payment of Lessor's
Cost for the Aircraft by making an equity investment in the
beneficial ownership of the Aircraft in the amount in Dollars
equal to Owner Participant's Percentage multiplied by Lessor's
Cost; and
<PAGE>
(b) Each Pass Through Trustee shall make a non-recourse secured loan
to Owner Trustee to finance, in part, the Owner Trustee's payment
of Lessor's Cost in the amount in Dollars equal to such Pass
Through Trustee's PTT Percentage multiplied by Lessor's Cost,
such loan to be evidenced by one or more Equipment Notes, dated
the Closing Date, issued to the Subordination Agent as the
registered holder on behalf of each such Pass Through Trustee for
the related Pass Through Trust by Owner Trustee in accordance
with this Agreement and the Trust Indenture, in an aggregate
principal amount equal to the Commitment of each such Pass
Through Trustee.
2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS
The obligations hereunder of each Participant are several, and not
joint, and a Participant shall have no obligation to make available to Owner
Trustee any portion of any amount not paid hereunder by any other Participant.
The failure by any Participant to perform its obligations hereunder shall not
affect the obligations of Lessee toward the other Participants, except to the
extent provided in Section 5.4.
2.3 TERMINATION OF OBLIGATION TO PARTICIPATE
Notwithstanding any other provision of this Agreement, if the Closing
does not occur on or before the Commitment Termination Date, the Commitment of
each Participant and its obligation to participate in the payment of Lessor's
Cost shall expire and be of no further force and effect; PROVIDED, that the
liability of any Participant that has defaulted in the payment of its Commitment
shall not be released.
SECTION 3. SALE OF AIRCRAFT; COMMITMENT TO LEASE AIRCRAFT
3.1 SALE OF AIRCRAFT
Subject to the terms and conditions hereof, at the Closing, Existing
Lessor hereby agrees to sell to Owner Trustee and Owner Trustee hereby agrees to
purchase from Existing Lessor the Aircraft, on the following terms:
3.1.1 DELIVERY
The Aircraft shall be delivered by Existing Lessor to Owner Trustee
at such place as may be designated by Lessee and approved by Existing Lessor
(which approval shall not be unreasonably withheld). Upon Existing Lessor's
delivery of the Aircraft to Owner Trustee, Owner Trustee shall execute and
deliver to Existing Lessor a Delivery Receipt therefor in the form annexed
<PAGE>
hereto as Exhibit J. This purchase and sale shall not be effective as to the
Aircraft unless and until the Aircraft is concurrently delivered under the
Lease.
3.1.2 PURCHASE PRICE
The full purchase price for the Aircraft in the amount of Lessor's
Cost shall be paid to Existing Lessor in immediately available funds on delivery
of the Aircraft.
3.1.3 DISCLAIMER
Existing Lessor does not make, has not made and shall not be deemed
to have made, and expressly disclaims, any representation or warranty, express
or implied, as to:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY PARTICULAR
PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME,
ANY ENGINE OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
The foregoing disclaimer shall in no way affect or limit (i) Existing
Lessor's obligations under the Operative Agreements, or (ii) Existing
Lessor's representations and warranties in Section 6.5 of this
Agreement, in the Aircraft Bill of Sale, including without limitation
the warranty of good title, or any other express representation or
warranty in any Operative Agreement.
3.1.4 TERMINATION OF EXISTING FINANCING AGREEMENTS
(a) The Existing Lease and Existing Sublease for the Aircraft shall
be terminated, and each of the Existing Lessor and Lessee shall take such action
<PAGE>
to evidence such termination as Owner Trustee or Mortgagee shall reasonably
request, including execution and delivery of a termination agreement for the
Existing Lease and Existing Sublease in form and substance reasonably acceptable
to Owner Trustee and satisfactory for filing with the FAA, and UCC-3 termination
statements with respect to the termination of the Existing Lease and Existing
Sublease.
(b) The Aircraft, Aircraft Documents and other collateral shall be
released from the Lien of the Existing Mortgage, and the Existing Lessor and
Existing Mortgagee shall take such action to evidence such release as Owner
Trustee, Mortgagee or Lessee shall reasonably request, including the execution
and delivery of a Lien release with respect to the Existing Mortgage in form and
substance reasonably acceptable to Owner Trustee, Mortgagee and Lessee and
satisfactory for filing with the FAA, and UCC-3 termination statements with
respect to the release of the Aircraft from the Lien of the Existing Mortgage.
(c) The Existing Participation Agreement shall be terminated,
effective as of the Closing, and the parties thereto shall have no further
obligation thereunder except for Sections 7, 10, 11 and 12 thereof and for any
breach of such Agreement arising prior to the Closing.
(d) Existing Lessor shall refund to Lessee "Basic Rent" (as defined
in the Existing Lease) paid in advance by Lessee attributable to periods on and
after the Closing Date determined by multiplying such Basic Rent by a fraction,
the numerator of which shall be the number of days remaining in the month in
which the Closing Date occurs (from and including the Closing Date) and the
denominator of which shall be the total number of days in such month.
3.1.5 TAXES
Existing Lessor shall pay and discharge all applicable sales, use or
similar Taxes, duties or fees assessed or levied by any federal, state,
provincial or local taxing authority as a result of the sale and delivery of the
Aircraft to Owner Trustee contemplated by this Agreement. Existing Lessor, Owner
Trustee and Lessee will cooperate in order to minimize Taxes applicable to the
sale and delivery of the Aircraft to Owner Trustee contemplated by this
Agreement.
3.2 COMMITMENT TO LEASE
Subject to the terms and conditions of this Agreement, concurrently
with the issuance of the Equipment Notes and the purchase of the Aircraft by the
<PAGE>
Owner Trustee on the Closing Date, Owner Trustee shall lease the Aircraft to
Lessee, and Lessee shall lease the Aircraft from Owner Trustee, under the Lease.
SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT
OF SCHEDULED CLOSING DATE
4.1 NOTICES OF SCHEDULED CLOSING DATE
Existing Mortgagee agrees to give Lessee, Existing Lessor,
Participants, Owner Trustee, and Mortgagee at least five Business Days' written
notice of the Scheduled Closing Date. Each Participant agrees that making
available its respective Commitment shall constitute a waiver of such notice.
Owner Trustee and Mortgagee shall be deemed to have waived such notice if
Mortgagee shall have received from each Participant funds in the full amount of
its respective Commitment.
4.2 PAYMENT OF LESSOR'S COST
(a) Each Participant agrees, subject to the terms and conditions of
this Agreement, to make the Dollar amount of its respective Commitment
available, by wire transfer of immediately available funds to WTC's account no.
0016-1728 at Citibank, NA, New York, New York ABA# 021-000-089, reference
Continental Lease ____, at or before 12:00 Noon, New York City time, on the
Scheduled Closing Date. All such funds made available by each Participant to WTC
shall, until payment thereof to Existing Lessor as provided in Section
4.2(b)(ii) or return thereof to the respective Participant as provided in
Section 4.3.2, be held by WTC in trust for the benefit of the respective
Participant, as the sole and exclusive property of the respective Participant
and not as part of the Trust Estate or the Trust Indenture Estate.
(b) Subject to the satisfaction or waiver by the applicable party of
the conditions precedent set forth in Section 5, and simultaneously with the
receipt by the parties hereto of all amounts to be paid to them on the Closing
Date pursuant to this Section 4.2, Owner Trustee shall:
(i) purchase, take title to, and accept delivery of the Aircraft,
and in connection therewith execute the Delivery Receipt in the form
of Exhibit J hereto;
(ii) in consideration of the transfer of title to the Aircraft to
Owner Trustee, direct WTC to pay, from the funds made available to WTC
hereunder by the Participants, Lessor's Cost to Existing Lessor by
wire transfer of immediately available funds to Existing Lessor's
<PAGE>
account set forth in Schedule 1 or as otherwise directed by Existing
Lessor;
(iii) execute an application for registration of the Aircraft
with the FAA and Lease Supplement No. 1, in each case with respect to
the Aircraft;
(iv) execute the Trust Indenture and the initial Trust Indenture
Supplement and issue the Equipment Notes to the Subordination Agent in
accordance with Section 2.1(b);
(v) lease the Aircraft to Lessee pursuant to the Lease; and
(vi) take such other action as may be required to be taken by the
Owner Trustee on the Closing Date by the terms of any Operative
Agreement.
4.3 POSTPONEMENT OF SCHEDULED CLOSING DATE
4.3.1 POSTPONEMENT
If for any reason whatsoever the Closing is not consummated on the
Scheduled Closing Date, Existing Mortgagee may by telephonic notice, given by
5:00 p.m., New York City time (such telephonic notice to be promptly confirmed
in writing by personal delivery or facsimile), on the Scheduled Closing Date to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee,
designate a Delayed Closing Date.
4.3.2 RETURN OF FUNDS
If the Closing fails to occur on the Scheduled Closing Date, WTC
shall promptly return to each Participant that makes funds available to it in
accordance with Section 4.2(a) such funds, together with interest or income
earned thereon.
4.3.3 INVESTMENT OF FUNDS; INTEREST
(a) If the Closing fails to occur on the Scheduled Closing Date, WTC
shall, if so instructed in the notice from Existing Mortgagee, use reasonable
efforts to invest, at the risk of Existing Mortgagee, the funds received by it
from Participants in Cash Equivalents. Any such obligations purchased by WTC,
whether directly or through a repurchase agreement, shall be held in trust by
WTC for the benefit of the respective Participants that provided such funds, and
not as part of the Trust Estate or the Trust Indenture Estate.
<PAGE>
(b) If the Closing fails to occur on the Scheduled Closing Date,
unless WTC returns all funds to the Participants by 2:00 p.m., New York City
time, on the Scheduled Closing Date, Existing Mortgagee shall, on the Scheduled
Closing Date or on the date funds are required to be returned to Participants
pursuant to Section 4.3.2, reimburse each Participant that has made funds
available pursuant to Section 4.2 for the loss of the use of its funds, by
paying to such Participant in immediately available funds an amount equal to the
excess, if any, of (i) interest at the Debt Rate on the amount of such funds for
the period from and including the Scheduled Closing Date to but excluding the
Closing Date or, if earlier, the day on which such Participant's funds are
returned if such return is made by 2:00 p.m., New York City time (or to but
excluding the next following Business Day if such return is not made by such
time) over (ii) any amount paid to such Participant in respect of interest or
income earned by WTC pursuant to Section 4.3.3(a).
(c) On the Closing Date or on the date funds are required to be
returned to Participants pursuant to Section 4.3.2, Existing Mortgagee shall
reimburse WTC, for the benefit of Participants that provided funds which are
invested by WTC hereunder, for any losses incurred on such investments. All
income and profits on the investment of such funds shall be for the respective
accounts of such Participants, and WTC shall not be liable for failure to invest
such funds or for any losses incurred on such investments, except for its own
negligence or willful misconduct.
4.4 CLOSING
The Closing shall occur at the offices of Hughes Hubbard & Reed LLP,
One Battery Park Plaza, New York, New York 10004, or such other place as the
parties shall agree.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTICIPANTs
The obligation of each Participant to make the Dollar amount of its
respective Commitment available for payment as directed by the Owner Trustee on
the Closing Date is subject to satisfaction or waiver by each such Participant,
at or prior to the Closing, of the conditions precedent set forth below in this
Section 5.1; PROVIDED, that it shall not be a condition precedent to the
obligation of any Participant that any document be produced or action taken that
is to be produced or taken by such Participant or by a Person within such
Participant's control; PROVIDED, FURTHER, that Sections 5.1.2(iii), (xv) and
(xxv) (G) and 5.1.15 shall not be conditions precedent to the obligation of Loan
<PAGE>
Participant, and Section 5.1.2 (xxviii) and Section 5.1.5 shall not be a
condition precedent to the obligation of Owner Participant.
5.1.1 NOTICE
Such Participant shall have received the notice described in Section
4.1 or, in the case of a Delayed Closing Date, 4.3, when and as required
thereby, or shall have waived such notice.
5.1.2 DELIVERY OF DOCUMENTS
Such Participant shall, except as noted below, have received executed
counterparts of the following agreements, instruments, certificates or
documents, and each of such counterparts (a) shall have been duly authorized,
executed and delivered by the respective party or parties thereto, (b) shall be
reasonably satisfactory in form and substance to such Participant and (c) shall
be in full force and effect:
(i) the Lease; PROVIDED, that only Mortgagee shall receive the
sole executed chattel paper original thereof;
(ii) Lease Supplement No. 1; PROVIDED, that only Mortgagee shall
receive the sole executed chattel paper original thereof;
(iii) the Tax Indemnity Agreement; PROVIDED, that only Owner
Participant and Lessee shall receive copies of the Tax Indemnity
Agreement;
(iv) the Trust Agreement;
(v) the Trust Indenture;
(vi) the initial Trust Indenture Supplement;
(vii) the Purchase Agreement Assignment;
(viii) the Consent and Agreement;
(ix) the Equipment Notes dated the Closing Date; PROVIDED, that
only the Subordination Agent shall receive the authenticated Equipment
Notes;
(x) an excerpted copy of the Purchase Agreement to the extent
relating to Airframe Manufacturer's warranties or related obligations
or any right in the Purchase Agreement assigned to Owner Trustee
pursuant to the Purchase Agreement Assignment; PROVIDED, that only
Owner Trustee and Mortgagee shall receive copies of such agreements
<PAGE>
(copies of which may be inspected by Participants and their respective
special counsel on the Closing Date, but after the Closing Date such
copies shall be retained by Owner Trustee and Mortgagee and may be
inspected and reviewed by Owner Participant or Loan Participant or
their respective counsel if and only if there shall have occurred and
be continuing a Lease Default or Lease Event of Default);
(xi) the Bills of Sale;
(xii) the Express Sublease;
(xiii) termination agreements with respect to the Existing Lease
and the Existing Sublease and a release of the Aircraft, Aircraft
Documents and other collateral from the Lien of the Existing Mortgage,
as contemplated by Section 3.1.4;
(xiv) the broker's report and insurance certificates required by
Section 11 of the Lease;
(xv) an appraisal or appraisals from an Appraiser, which
appraisal or appraisals shall be reasonably satisfactory in form and
substance to Owner Participant; PROVIDED, that only Owner Participant
shall receive a copy of its appraisal (the "Appraisal");
(xvi) (A) a copy of the Certificate of Incorporation and By-Laws
of Lessee and resolutions of the board of directors of Lessee and/or
the executive committee thereof, in each case certified as of the
Closing Date, by the Secretary or an Assistant Secretary of Lessee,
duly authorizing the execution, delivery and performance by Lessee of
the Lessee Operative Agreements required to be executed and delivered
by Lessee on or prior to the Closing Date in accordance with the
provisions hereof and thereof; (B) an incumbency certificate of
Lessee, Existing Lessor, Existing Mortgagee, Airframe Manufacturer,
Owner Participant, Owner Participant Parent, First Security and WTC as
to the person or persons authorized to execute and deliver the
relevant Operative Agreements on behalf of such party; and (C) a copy
of the Certificate of Incorporation or Articles of Incorporation and
By-Laws and general authorizing resolutions of the boards of directors
(or executive committees) or other satisfactory evidence of
authorization of Existing Lessor, Existing Mortgagee, Airframe
Manufacturer, Owner Participant's General Partner, Owner Participant
Parent, First Security and WTC, and a copy of Owner Participant's
Certificate of Limited Partnership and Agreement of Limited
Partnership certified as of the Closing Date by the Secretary or an
<PAGE>
Assistant or Attesting Secretary of Existing Lessor, Existing
Mortgagee, Airframe Manufacturer, Owner Participant, Owner Participant
Parent, First Security and WTC, respectively, which authorize the
execution, delivery and performance by Existing Lessor, Existing
Mortgagee, Airframe Manufacturer, Owner Participant, Owner Participant
Parent, First Security and WTC, respectively, of each of the Operative
Agreements to which it is a party, together with such other documents
and evidence with respect to it as Lessee or any Participant may
reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement and the taking of all
corporate proceedings in connection therewith;
(xvii) an Officer's Certificate of Lessee, dated as of the
Closing Date, stating that its representations and warranties set
forth in this Agreement are true and correct as of the Closing Date
(or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xviii) an Officer's Certificate of First Security, dated as of
the Closing Date, stating that its representations and warranties, in
its individual capacity and as Owner Trustee, set forth in this
Agreement are true and correct as of the Closing Date (or, to the
extent that any such representation and warranty expressly relates to
an earlier date, true and correct as of such earlier date);
(xix) an Officer's Certificate of Owner Participant, dated as of
the Closing Date, stating that its representations and warranties set
forth in this Agreement are true and correct as of the Closing Date
(or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xx) an Officer's Certificate of WTC, dated as of the Closing
Date, stating that its representations and warranties in its
individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, set forth in this Agreement
are true and correct as of the Closing Date (or, to the extent that
any such representation and warranty expressly relates to an earlier
date, true and correct as of such earlier date);
(xxi) an Officer's Certificate of Existing Lessor, dated as of
the Closing Date, stating that its representations and warranties set
forth in this Agreement are true and correct as of the Closing Date
(or, to the extent that any such representation and warranty expressly
relates to an earlier date, true and correct as of such earlier date);
(xxii) an Officer's Certificate of Existing Mortgagee, dated as
of the Closing Date, stating that its representations and warranties
set forth in this Agreement are true and correct as of the Closing
Date (or, to the extent that any such representation and warranty
expressly relates to an earlier date, true and correct as of such
earlier date);
<PAGE>
(xxiii) an application for registration of the Aircraft with the
FAA in the name of Owner Trustee; PROVIDED, that only special counsel
in Oklahoma City, Oklahoma shall receive the sole executed copy
thereof for filing with the FAA;
(xxiv) the Financing Statements;
(xxv) the following opinions of counsel, in each case dated the
Closing Date:
(A) an opinion of Hughes Hubbard & Reed LLP, special counsel
to Lessee, substantially in the form of Exhibit A;
(B) an opinion of Lessee's Legal Department, substantially
in the form of Exhibit B;
(C) an opinion of (x) corporate counsel to Airframe
Manufacturer, substantially in the form of Exhibit C-1, and (y)
Condon & Forsyth, special counsel to Airframe Manufacturer,
substantially in the form of Exhibit C-2;
(D) an opinion of Ray, Quinney & Nebeker, special counsel to
Owner Trustee, substantially in the form of Exhibit D;
(E) an opinion of Morris, James, Hitchens & Williams,
special counsel to Mortgagee and Loan Participant, substantially
in the form of Exhibit E;
(F) an opinion of Special Counsel to Owner Participant and
Owner Participant Parent and an opinion of Local Counsel to Owner
Participant and Owner Participant Parent (each as defined in
Schedule 3 to this Agreement), substantially in the form of
Exhibit F-1 and F-2, respectively;
<PAGE>
(G) an opinion of Special Tax Counsel to Owner Participant
(as defined in Schedule 3 to this Agreement), with respect to
certain tax consequences of the transactions contemplated hereby;
PROVIDED, that only Owner Participant shall receive such opinion;
(H) an opinion of Condon & Forsyth, special counsel to
Existing Lessor, substantially in the form of Exhibit G;
(I) an opinion of Haight Gardner Holland & Knight, special
counsel to Existing Mortgagee, substantially in the form of
Exhibit H; and
(J) an opinion of Lytle Soule & Curlee, special counsel in
Oklahoma City, Oklahoma, substantially in the form of Exhibit I;
(xxvi) a copy of a current, valid Standard Certificate of
Airworthiness for the Aircraft duly issued by the FAA;
(xxvii) an Officer's Certificate of Airframe Manufacturer, dated
as of the Closing Date, stating that its representations and
warranties set forth in this Agreement are true and correct as of the
Closing Date (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of
such earlier date);
(xxviii) the Owner Participant Guaranty;
(xxix) the Equity Guaranty; PROVIDED that only Owner Participant,
Existing Mortgagee and Owner Trustee shall receive copies of the
Equity Guaranty; and
(xxix) the Participants and their respective counsel shall have
received copies of such documents and papers as such Participants may
reasonably request, other than (A) in the case of Loan Participant,
copies of the Purchase Agreement, provided that special counsel for
Loan Participant may inspect the Purchase Agreement in connection with
the transactions contemplated hereby or as a basis for such counsel's
closing opinion, and (B) in the case of parties other than Owner
Participant and its special counsel, the Tax Indemnity Agreement.
5.1.3 OTHER COMMITMENTS
Each other Participant shall have made available the Dollar amount of
its Commitment in accordance with Section 4.
<PAGE>
5.1.4 VIOLATION OF LAW
No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Lessee, Existing Lessor,
Existing Mortgagee, any Participant, Subordination Agent, Owner Trustee or
Mortgagee to execute, deliver and perform the Operative Agreements to which any
of them is a party or (b) any Participant to make the Dollar amount of its
Commitment available or, in the case of any Loan Participant, to acquire an
Equipment Note or to realize the benefits of the security afforded by the Trust
Indenture.
5.1.5 PERFECTED SECURITY INTEREST
On the Closing Date, after giving effect to the filing of the FAA
Filed Documents and the Financing Statements, Mortgagee shall have received a
duly perfected first priority security interest in all of Owner Trustee's right,
title and interest in the Aircraft and the Lease, subject only to Permitted
Liens.
5.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of each other party to this
Agreement made, in each case, in this Agreement and in any other Operative
Agreement to which it is a party, shall be true and accurate in all material
respects as of the Closing Date (unless any such representation and warranty
shall have been made with reference to a specified date, in which case such
representation and warranty shall be true and accurate as of such specified
date) and each other party to this Agreement shall have performed and observed,
in all material respects, all of its covenants, obligations and agreements in
this Agreement and in any other Operative Agreement to which it is a party to be
observed or performed by it as of the Closing Date.
5.1.7 NO EVENT OF DEFAULT
On the Closing Date, no event shall have occurred and be continuing,
or would result from the sale, mortgage or lease of the Aircraft, which
constitutes a Lease Default or Lease Event of Default, or an Indenture Default
or Indenture Event of Default.
5.1.8 NO EVENT OF LOSS
On the Closing Date, no Event of Loss with respect to the Airframe or
any Engine shall have occurred and no circumstance, condition, act or event
that, with the giving of notice or lapse of time or both, would give rise to or
constitute an Event of Loss with respect to the Airframe or any Engine shall
have occurred.
<PAGE>
5.1.9 TITLE
Owner Trustee shall have good title (subject to filing and
recordation of the FAA Bill of Sale with the FAA) to the Aircraft, free and
clear of Liens, except (a) the rights of Lessee under the Lease and Lease
Supplement No. 1, (b) the Lien created by the Trust Indenture and the initial
Trust Indenture Supplement and (c) other Permitted Liens.
5.1.10 CERTIFICATION
The Aircraft shall have been duly certificated by the FAA as to type
and airworthiness.
5.1.11 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee
of Owner Trustee under the Trust Indenture), shall be entitled to the benefits
of Section 1110 (as currently in effect) with respect to the right to take
possession of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
5.1.12 FILING
On the Closing Date (a) the FAA Filed Documents shall have been duly
filed for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Act and (b) each Financing
Statement shall have been duly filed (or shall be in the process of being so
duly filed) in the appropriate jurisdiction.
5.1.13 NO PROCEEDINGS
No action or proceeding shall have been instituted, nor shall any
action be threatened in writing, before any Government Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.
5.1.14 GOVERNMENTAL ACTION
All appropriate action required to have been taken prior to the
Closing Date by the FAA, or any governmental or political agency, subdivision or
instrumentality of the United States, in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders, permits,
<PAGE>
waivers, authorizations, exemptions and approvals of such entities required to
be in effect on the Closing Date in connection with the transactions
contemplated by this Agreement shall have been issued.
5.2 Conditions Precedent to Obligations of Owner Trustee
The obligation of Owner Trustee to apply the Commitments of the
Participants to pay Lessor's Cost on the Closing Date is subject to satisfaction
or waiver by Owner Trustee, at or prior to the Closing, of the conditions
precedent set forth below in this Section 5.2.
5.2.1 NOTICE
Owner Trustee shall have received the notice described in Section 4.1
or, in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
5.2.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Owner Trustee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Owner Trustee.
5.2.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Owner Trustee.
5.3 Conditions Precedent to Obligations of Mortgagee
The obligation of Mortgagee to authenticate the Equipment Notes on
the Closing Date is subject to the satisfaction or waiver by Mortgagee, at or
prior to the Closing, of the conditions precedent set forth below in this
Section 5.3.
5.3.1 NOTICE
Mortgagee shall have received the notice described in Section 4.1 or,
in the case of a Delayed Closing Date, 4.3, when and as required thereby, or
shall have waived such notice.
<PAGE>
5.3.2 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Mortgagee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Mortgagee.
5.3.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Mortgagee.
5.4 Conditions Precedent to Obligations of Lessee
The obligation of Lessee to lease the Aircraft on the Closing Date
and to take the other actions required by this Agreement to be taken by it at
the Closing is subject to the satisfaction or waiver by Lessee, at or prior to
the Closing, of the conditions precedent set forth below in this Section 5.4.
5.4.1 DOCUMENTS
Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Lessee, except
as specifically provided therein, and shall be satisfactory to Lessee, unless
the failure to receive any such agreement, instrument, certificate or document
is the result of any action or inaction by Lessee.
5.4.2 SALES TAX
Lessee shall be satisfied that no sales, use, value added, goods and
services or like tax, and no stamp tax duty, is payable with respect to the
delivery of the Aircraft on the Closing Date to the extent that Lessee has
liability therefor under Section 9.3.
5.4.3 OTHER CONDITIONS PRECEDENT
Each of the conditions set forth in Sections 5.1.3 (as to all
Participants), 5.1.4, 5.1.6, 5.1.7 (as to Indenture Defaults or Indenture Events
of Default not constituting Lease Defaults or Lease Events of Default,
respectively), 5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13 and 5.1.14 shall
have been satisfied or waived by Lessee, unless the failure of any such
condition to be satisfied is the result of any action or inaction by Lessee.
<PAGE>
5.5 CONDITIONS PRECEDENT TO OBLIGATIONS OF EXISTING LESSOR AND
EXISTING MORTGAGEE
The obligation of Existing Lessor to sell and transfer the Aircraft
to Owner Trustee at the time of the Closing and the respective obligations of
each of Existing Lessor and Existing Mortgagee to take the other actions
required by this Agreement to be taken by it at the Closing is subject to the
satisfaction or waiver by it, at or prior to the Closing, of the conditions
precedent set forth below in this Section 5.5.
5.5.1 TENDER OF LESSOR'S COST
Owner Trustee shall have tendered to Existing Lessor Lessor's Cost
pursuant to Section 4.2, subject to performance by Existing Lessor and Existing
Mortgagee of their respective obligations under this Agreement.
5.5.2 DOCUMENTS
In the case of Existing Mortgagee, in its capacity as Equity
Guarantor, executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Equity
Guarantor, except as specifically provided therein, unless the failure to
receive any such agreement, instrument, certificate or document is the result of
any action or inaction by Equity Guarantor.
5.5.3 OTHER CONDITIONS PRECEDENT
The condition set forth in Section 5.1.4(a) shall have been satisfied
with respect to it.
5.6 POST-REGISTRATION OPINION
Promptly upon the registration of the Aircraft and the recordation of
the FAA Filed Documents pursuant to the Act, Airframe Manufacturer will cause
Lytle Soule & Curlee, special counsel in Oklahoma City, Oklahoma, to deliver to
Lessee, Existing Lessor, Existing Mortgagee, each Participant, Owner Trustee and
Mortgagee a favorable opinion or opinions addressed to each of them with respect
to such registration and recordation.
SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to each Participant, Equity Guarantor,
Existing Mortgagee, Existing Lessor, Airframe Manufacturer, Subordination Agent,
Owner Trustee and Mortgagee that:
6.1.1 ORGANIZATION; QUALIFICATION
Lessee is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware and has the corporate
<PAGE>
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into and perform its
obligations under the Lessee Operative Agreements. Lessee is duly qualified to
do business as a foreign corporation in good standing in each jurisdiction in
which the nature and extent of the business conducted by it, or the ownership of
its properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to Lessee.
6.1.2 CORPORATE AUTHORIZATION
Lessee has taken, or caused to be taken, all necessary corporate
action (including, without limitation, the obtaining of any consent or approval
of stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Lessee Operative Agreements,
and the performance of its obligations thereunder.
6.1.3 NO VIOLATION
The execution and delivery by Lessee of the Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Closing Date of the transactions contemplated
thereby, do not and will not (a) violate any provision of the Certificate of
Incorporation or By-Laws of Lessee, (b) violate any Law applicable to or binding
on Lessee or (c) violate or constitute any default under (other than any
violation or default that would not result in a Material Adverse Change to
Lessee), or result in the creation of any Lien (other than as permitted under
the Lease) upon the Aircraft under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, lease, loan or other material
agreement, instrument or document to which Lessee is a party or by which Lessee
or any of its properties is bound.
6.1.4 APPROVALS
The execution and delivery by Lessee of the Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Closing Date of the transactions contemplated
thereby do not and will not require the consent or approval of, or the giving of
<PAGE>
notice to, or the registration with, or the recording or filing of any documents
with, or the taking of any other action in respect of, (a) any trustee or other
holder of any Debt of Lessee and (b) any Government Entity, other than the
filing of (x) the FAA Filed Documents and the Financing Statements (and
continuation statements periodically) and (y) filings, recordings, notices or
other ministerial actions pursuant to any routine recording, contractual or
regulatory requirements applicable to it.
6.1.5 VALID AND BINDING AGREEMENTS
The Lessee Operative Agreements have been duly authorized, executed
and delivered by Lessee and, assuming the due authorization, execution and
delivery thereof by the other party or parties thereto, constitute the legal,
valid and binding obligations of Lessee and are enforceable against Lessee in
accordance with the respective terms thereof, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
and other similar Laws affecting the rights of creditors generally and general
principles of equity, whether considered in a proceeding at law or in equity.
6.1.6 LITIGATION
Except as set forth in Lessee's most recent Annual Report on Form
10-K, as amended, filed by Lessee with the SEC on or prior to the Closing Date,
or in any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by
Lessee with the SEC subsequent to such Form 10-K and on or prior to the Closing
Date, no action, claim or proceeding is now pending or, to the Actual Knowledge
of Lessee, threatened, against Lessee, before any court, governmental body,
arbitration board, tribunal or administrative agency, which is reasonably likely
to be determined adversely to Lessee and if determined adversely to Lessee would
result in a Material Adverse Change.
6.1.7 FINANCIAL CONDITION
The audited consolidated balance sheet of Lessee with respect to
Lessee's most recent fiscal year included in Lessee's most recent Annual Report
on Form 10-K, as amended, filed by Lessee with the SEC, and the related
consolidated statements of operations and cash flows for the period then ended
have been prepared in accordance with GAAP and fairly present in all material
respects the financial condition of Lessee and its consolidated subsidiaries as
of such date and the results of its operations and cash flows for such period,
and since the date of such balance sheet, there has been no material adverse
change in such financial condition or operations of Lessee, except for matters
<PAGE>
disclosed in (a) the financial statements referred to above, (b) any subsequent
Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Lessee with
the SEC on or prior to the date hereof, or (c) any prospectus or prospectus
supplement filed by Lessee with the SEC in connection with the offering of the
Pass Through Certificates.
6.1.8 REGISTRATION AND RECORDATION
Except for (a) the registration of the Aircraft with the FAA pursuant
to the Act in the name of Owner Trustee, (b) the filing for recordation (and
recordation) of the FAA Filed Documents, (c) the filing of the Financing
Statements (and continuation statements relating thereto at periodic intervals),
(d) the taking of possession and retention by Mortgagee of the original
counterparts of the Lease and Lease Supplement No. 1 and (e) the affixation of
the nameplates referred to in Section 7.1.3 of the Lease, no further action,
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the right, title or interest of Owner Trustee, and the
Mortgagee's security interest, in the Aircraft and the Lease, as against Lessee
and any other Person, in each case, in any applicable jurisdiction in the United
States.
6.1.9 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of
the UCC) of Lessee is located at 2929 Allen Parkway, Houston, Texas 77019.
6.1.10 NO DEFAULT
No event which, if the Aircraft were subject to the Lease,
constitutes a Lease Event of Default has occurred and is continuing.
6.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to the Actual Knowledge of Lessee, no circumstance, condition, act
or event has occurred that, with the giving of notice or lapse of time or both
gives rise to or constitutes an Event of Loss with respect to the Airframe or
any Engine.
6.1.12 COMPLIANCE WITH LAWS
(a) Lessee is a Citizen of the United States and a U.S. Air Carrier.
<PAGE>
(b) Lessee holds all licenses, permits and franchises from the
appropriate Government Entities necessary to authorize Lessee to lawfully engage
in air transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to so hold any such license,
permit or franchise would not give rise to a Material Adverse Change to Lessee.
(c) Lessee is not an "investment company" or a company controlled by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
6.1.13 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or the Lease or any interest in the Trust Estate
and Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any person in violation of the Securities Act.
6.1.14 BROKER'S FEES
No Person acting on behalf of Lessee is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions.
6.1.15 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee
under the Trust Indenture), is entitled to the benefits of Section 1110 (as
currently in effect) with respect to the right to take possession of the
Airframe and Engines as provided in the Lease in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
6.2 Owner Participant's Representations and Warranties
Owner Participant represents and warrants to Lessee, Loan
Participant, Equity Guarantor, Existing Mortgagee, Existing Lessor, Airframe
Manufacturer, Subordination Agent, Owner Trustee and Mortgagee that:
6.2.1 ORGANIZATION, ETC.
Owner Participant is a limited partnership, duly formed and
organized, validly existing and in good standing under the Laws of the OP
<PAGE>
Jurisdiction, has full power and authority to conduct the business in which it
is currently engaged and to own or hold under lease its properties and to enter
into, and perform its obligations under the Owner Participant Agreements, and
the Owner Participant Parent has a tangible net worth (exclusive of goodwill)
greater than $25,000,000.
6.2.2 NECESSARY AUTHORIZATION
Owner Participant has taken, or caused to be taken, all necessary
action (including, without limitation, the obtaining of any consent or approval
required by its partnership agreement or other governing documents) to authorize
the execution and delivery of each of the Owner Participant Agreements, and the
performance of its obligations thereunder.
6.2.3 NO VIOLATION
The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the partnership agreement or other governing documents of Owner Participant,
(b) violate any Law applicable to or binding on Owner Participant or (c) violate
or constitute any default under (other than any violation or default that would
not result in a Material Adverse Change to Owner Participant), or result in the
creation of any Lien (other than as provided for or otherwise permitted in the
Operative Agreements) upon the Trust Estate under, any indenture, mortgage,
chattel mortgage, deed of trust, conditional sales contract, lease, loan or
other material agreement, instrument or document to which Owner Participant is a
party or by which Owner Participant or any of its properties is bound.
6.2.4 APPROVALS
The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Owner Participant and
(b) any Government Entity, other than the filing of the FAA Filed Documents and
the Financing Statements.
<PAGE>
6.2.5 VALID AND BINDING AGREEMENTS
The Owner Participant Agreements have been duly authorized, executed
and delivered by Owner Participant and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Owner Participant and are enforceable
against Owner Participant in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.2.6 CITIZENSHIP
Based on ss. 47.7 of the FAA Regulations and assuming that the Trust
Agreement has been duly executed by the Lessor, the citizenship status of Owner
Participant does not restrict the U.S. registration of the Aircraft pursuant to
the Act.
6.2.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to Owner
Participant in respect of all or any part of the Trust Estate.
6.2.8 INVESTMENT BY OWNER PARTICIPANT
Owner Participant's beneficial interest in the Trust Estate is being
acquired by it for its own account, for investment and not with a view to any
resale or distribution thereof, except that, subject to the restrictions on
transfer set forth in Section 10, the disposition by Owner Participant of its
beneficial interest in the Trust Estate shall at all times be within its
control.
6.2.9 ERISA
No part of the funds to be used by Owner Participant or Owner
Participant Parent to acquire or hold its interests in the Trust Estate to be
acquired by it under this Agreement directly or indirectly constitutes assets of
a Plan.
6.2.10 LITIGATION
There are no pending or, to the Actual Knowledge of Owner
Participant, threatened actions or proceedings against Owner Participant or
Owner Participant Parent before any court, governmental body, arbitration board,
administrative agency or tribunal which, if determined adversely to Owner
<PAGE>
Participant or Owner Participant Parent, would materially adversely affect the
ability of Owner Participant to perform its obligations under the Owner
Participant Agreements or Owner Participant Parent to perform its obligations
under the Owner Participant Guaranty.
6.2.11 SECURITIES LAWS
Neither Owner Participant nor any person Owner Participant has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the
registration provisions of the Securities Act or applicable state securities
Laws.
6.2.12 BROKER'S FEES
No Person acting on behalf of Owner Participant or Owner Participant
Parent is or will be entitled to any broker's fee, commission or finder's fee in
connection with the Transactions other than Nationsbanc Investments, the fees of
which are being paid by the Owner Participant.
6.3 FIRST SECURITY'S REPRESENTATIONS AND WARRANTIES
First Security represents and warrants to Lessee, Owner Participant,
Equity Guarantor, Existing Mortgagee, Existing Lessor, Airframe Manufacturer,
Loan Participants, Subordination Agent and Mortgagee that:
6.3.1 ORGANIZATION, ETC.
First Security is a national banking association duly organized,
validly existing and in good standing under the Laws of the United States,
holding a valid certificate to do business as a national banking association
with banking authority to execute and deliver, and perform its obligations
under, the Owner Trustee Agreements.
6.3.2 CORPORATE AUTHORIZATION
First Security has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by Law or by its Articles of Association or
By-Laws) to authorize the execution and delivery by First Security, in its
<PAGE>
individual capacity and as Owner Trustee, of each of the Owner Trustee
Agreements, and the performance of its obligations thereunder.
6.3.3 NO VIOLATION
The execution and delivery by First Security, in its individual
capacity and as Owner Trustee of the Owner Trustee Agreements, the performance
by First Security, in its individual capacity and as Owner Trustee, of its
obligations thereunder and the consummation by First Security in its individual
capacity and as Owner Trustee on the Closing Date of the transactions
contemplated thereby, do not and will not (a) violate any provision of the
Articles of Association or By-Laws of First Security, (b) violate any Law
applicable to or binding on Owner Trustee or First Security or (c) violate or
constitute any default under(other than any violation or default that would not
result in a Material Adverse Change to First Security, in its individual
capacity or as Owner Trustee), or result in the creation of any Lien (other than
the lien of the Trust Indenture) upon any property of First Security, in its
individual capacity and as Owner Trustee, or any of its subsidiaries under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document to
which First Security, in its individual capacity and as Owner Trustee, is a
party or by which First Security, in its individual capacity and as Owner
Trustee, or any of its properties is or may be bound or affected.
6.3.4 APPROVALS
The execution and delivery by First Security, in its individual
capacity and as Owner Trustee, of the Owner Trustee Agreements, the performance
by First Security, in its individual capacity and as Owner Trustee, of its
obligations thereunder and the consummation by First Security, in its individual
capacity and as Owner Trustee, on the Closing Date of the transactions
contemplated thereby do not and will not require the consent, approval or
authorization of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of First Security or (b)
any Government Entity, other than the filing of the FAA Filed Documents and the
Financing Statements.
6.3.5 VALID AND BINDING AGREEMENTS
The Owner Trustee Agreements have been duly authorized, executed and
delivered by First Security, in its individual capacity or as Owner Trustee, as
the case may be, and constitute the legal, valid and binding obligations of
First Security, in its individual capacity and as Owner Trustee, and, assuming
the due authorization, execution and delivery thereof by the other party or
parties thereto, are enforceable against First Security, in its individual
<PAGE>
capacity and as Owner Trustee, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.3.6 CITIZENSHIP
On the Closing Date, First Security is a Citizen of the United States.
6.3.7 CHIEF EXECUTIVE OFFICE
The chief executive office (as such term is defined in Article 9 of
the UCC) of Owner Trustee is located at 79 South Main Street, Salt Lake City,
Utah 84111.
6.3.8 TITLE
On the Closing Date, Owner Trustee shall have received whatever title
to the Aircraft as was conveyed to it by Existing Lessor.
6.3.9 NO LIENS; FINANCING STATEMENTS
On the Closing Date, there are no Lessor Liens attributable to First
Security or Owner Trustee in respect of all or any part of the Aircraft, Trust
Estate or the Trust Indenture Estate. Except for the Financing Statements, it
has not, either in its individual capacity or as Owner Trustee, executed any UCC
financing statements relating to the Aircraft or the Lease.
6.3.10 LITIGATION
There are no pending or, to the Actual Knowledge of First Security,
threatened actions or proceedings against First Security or Owner Trustee before
any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to First Security, would materially
adversely affect the ability of First Security or Owner Trustee to perform its
obligations under the Owner Trustee Agreements.
6.3.11 SECURITIES LAWS
Neither First Security, nor any person authorized to act on its
behalf, has directly or indirectly offered any beneficial interest or Security
<PAGE>
relating to the ownership of the Aircraft or any interest in the Trust Estate or
any of the Equipment Notes or any other interest in or security under the Trust
Indenture for sale to, or solicited any offer to acquire any such interest or
security from, or has sold any such interest or security to, any person other
than the Participants, except for the offering and sale of the Pass Through
Certificates.
6.3.12 EXPENSES AND TAXES
There are no Expenses or Taxes that may be imposed on or asserted
against the Trust, the Trust Estate or any part thereof or any interest therein,
the Trust Indenture Estate, Lessee, Owner Participant, any Pass Through Trustee,
Subordination Agent, Owner Trustee or Mortgagee (except as to Owner Trustee,
Taxes imposed on the fees payable to Owner Trustee) under the laws of Utah in
connection with the execution, delivery or performance of any Operative
Agreement by Owner Trustee or in connection with the issuance of the Equipment
Notes, which Expenses or Taxes would not have been imposed if Owner Trustee had
not (x) had its principal place of business in, (y) performed (in its individual
capacity or as Owner Trustee) any or all of its duties under the Operative
Agreements in or (z) engaged in any activities unrelated to the transactions
contemplated by the Operative Agreements in, the State of Utah.
6.4 WTC'S REPRESENTATIONS AND WARRANTIES
WTC represents and warrants (with respect to Section 6.4.10, solely
in its capacity as Subordination Agent) to Lessee, Owner Participant, Equity
Guarantor, Existing Mortgagee, Existing Lessor, Airframe Manufacturer, and Owner
Trustee that:
6.4.1 ORGANIZATION, ETC.
WTC is a Delaware banking corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware, holding a
valid certificate to do business as a Delaware banking corporation with banking
authority to execute and deliver, and perform its obligations under, the
Mortgagee Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements.
6.4.2 CORPORATE AUTHORIZATION
WTC has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Certificate of Incorporation or By-Laws)
to authorize the execution and delivery by WTC, in its individual capacity or as
<PAGE>
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements and the performance of its obligations
thereunder.
6.4.3 NO VIOLATION
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
Date of the transactions contemplated thereby, do not and will not (a) violate
any provision of the Certificate of Incorporation or By-Laws of WTC, (b) violate
any Law applicable to or binding on WTC, in its individual capacity or (except
in the case of any Law relating to any Plan) as Mortgagee, a Pass Through
Trustee or Subordination Agent, or (c) violate or constitute any default under
(other than any violation or default that would not result in a Material Adverse
Change to WTC, in its individual capacity or Mortgagee, a Pass Through Trustee
or Subordination Agent), or result in the creation of any Lien (other than the
lien of the Trust Indenture) upon any property of WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, or any
of WTC's subsidiaries under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other agreement, instrument or
document to which WTC, in its individual capacity or as Mortgagee, a Pass
Through Trustee or Subordination Agent, is a party or by which WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, or any of their respective properties is bound.
6.4.4 APPROVALS
The execution and delivery by WTC, in its individual capacity or as
Mortgagee, a Pass Through Trustee or Subordination Agent, as the case may be, of
the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, of its obligations thereunder and the consummation on the Closing
Date by WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee
or Subordination Agent, as the case may be, of the transactions contemplated
<PAGE>
thereby do not and will not require the consent, approval or authorization of,
or the giving of notice to, or the registration with, or the recording or filing
of any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of WTC or (b) any Government Entity, other
than the filing of the FAA Filed Documents and the Financing Statements.
6.4.5 VALID AND BINDING AGREEMENTS
The Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements have been duly authorized, executed and delivered
by WTC and, assuming the due authorization, execution and delivery by the other
party or parties thereto, constitute the legal, valid and binding obligations of
WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, and are enforceable against WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.4.6 CITIZENSHIP
WTC is a Citizen of the United States.
6.4.7 NO LIENS
On the Closing Date, there are no Lessor Liens attributable to WTC in
respect of all or any part of the Trust Estate or the Trust Indenture Estate.
6.4.8 LITIGATION
There are no pending or, to the Actual Knowledge of WTC, threatened
actions or proceedings against WTC, in its individual capacity or as Mortgagee,
a Pass Through Trustee or Subordination Agent, before any court, administrative
agency or tribunal which, if determined adversely to WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, would materially adversely affect the ability of WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, to perform its obligations under any of the Mortgagee
Agreements, the Pass Through Trustee Agreements or the Subordination Agent
Agreements.
<PAGE>
6.4.9 SECURITIES LAWS
Neither WTC nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Indenture Estate or
any of the Equipment Notes or any other interest in or security under the Trust
Indenture for sale to, or solicited any offer to acquire any such interest or
security from, or has sold any such interest or security to, any Person other
than the Participants, except for the offering and sale of the Pass Through
Certificates.
6.4.10 INVESTMENT
The Equipment Notes to be acquired by the Subordination Agent are
being acquired by it for the account of the Pass Through Trustees, for
investment and not with a view to any resale or distribution thereof, except
that, subject to the restrictions on transfer set forth in Section 10.1.3, the
disposition by it of its Equipment Notes shall at all times be within its
control.
6.4.11 TAXES
There are no Taxes payable by any Pass Through Trustee or WTC, as the
case may be, imposed by the State of Delaware or any political subdivision or
taxing authority thereof in connection with the execution, delivery and
performance by such Pass Through Trustee or WTC, as the case may be, of this
Agreement or any of the Pass Through Trustee Agreements (other than franchise or
other taxes based on or measured by any fees or compensation received by any
such Pass Through Trustee or WTC, as the case may be, for services rendered in
connection with the transactions contemplated by any of the Pass Through Trust
Agreements), and there are no Taxes payable by any Pass Through Trustee or WTC,
as the case may be, imposed by the State of Delaware or any political
subdivision thereof in connection with the acquisition, possession or ownership
by any such 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 any such Pass Through Trustee or WTC, as the case may be, for
services rendered in connection with the transactions contemplated by any of the
Pass Through Trust Agreements), and, assuming that the trusts created by the
Pass Through Trust Agreements will not be taxable as corporations, but, rather,
each will be characterized as a grantor trust under subpart E, Part I of
Subchapter J of the Code or as a partnership under Subchapter K of the Code,
such trusts will not be subject to any Taxes imposed by the State of Delaware or
any political subdivision thereof.
<PAGE>
6.4.12 CONTROL
WTC is not an Affiliate of the Owner Participant or the Owner
Trustee.
6.4.13 BROKER'S FEES
No Person acting on behalf of WTC, in its individual capacity or as
Mortgagee, any Pass Through Trustee or Subordination Agent, is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions.
6.5 EXISTING LESSOR'S REPRESENTATIONS AND WARRANTIES
Existing Lessor represents and warrants to Lessee, each Participant,
Equity Guarantor, Existing Mortgagee, Subordination Agent, Owner Trustee and
Mortgagee that:
6.5.1 ORGANIZATION, ETC.
Existing Lessor is a corporation duly incorporated, validly existing
and in good standing under the Laws of the State of Delaware, and has the
corporate power and authority to conduct the business in which it is currently
engaged and to own or hold under lease its properties and to enter into, and
perform its obligations under the Existing Lessor Agreements.
6.5.2 CORPORATE AUTHORIZATION
Existing Lessor has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its Certificate of Incorporation or
By-Laws) to authorize the execution and delivery of each of the Existing Lessor
Agreements, and the performance of its obligations thereunder.
6.5.3 NO VIOLATION
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby, do not and will not (a) violate any provision of the
Certificate of Incorporation or By-Laws of Existing Lessor, (b) violate any Law
applicable to or binding on Existing Lessor or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Lessor), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
<PAGE>
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Lessor is a party
or by which Existing Lessor or any of its properties is bound.
6.5.4 APPROVALS
The execution and delivery by Existing Lessor of the Existing Lessor
Agreements, the performance by Existing Lessor of its obligations thereunder and
the consummation by Existing Lessor on the Closing Date of the transactions
contemplated thereby do not and will not require the consent or approval of, or
the giving of notice to, or the registration with, or the recording or filing of
any documents with, or the taking of any other action in respect of, (a) any
trustee or other holder of any Debt of Existing Lessor and (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.
6.5.5 VALID AND BINDING AGREEMENTS
The Existing Lessor Agreements have been duly authorized, executed
and delivered by Existing Lessor and, assuming the due authorization, execution
and delivery by the other party or parties thereto, constitute the legal, valid
and binding obligations of Existing Lessor and are enforceable against Existing
Lessor in accordance with the respective terms thereof, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar Laws affecting the rights of
creditors generally and general principles of equity, whether considered in a
proceeding at law or in equity.
6.5.6 TITLE
On the Closing Date, Existing Lessor shall have, and the Bills of
Sale shall convey to Owner Trustee good marketable title to the Aircraft, free
and clear of all claims, Liens and encumbrances of any nature, except Permitted
Liens.
6.5.7 LITIGATION
There are no pending or, to the Actual Knowledge of Existing Lessor,
threatened actions or proceedings against Existing Lessor before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Existing Lessor, would materially adversely affect
the ability of Existing Lessor to perform its obligations under the Existing
Lessor Agreements.
<PAGE>
6.5.8 SECURITIES LAWS
Neither Existing Lessor nor any person Existing Lessor has authorized
to act on its behalf has directly or indirectly offered any beneficial interest
in or Security relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the Trust Indenture for sale to, or solicited any offer to acquire any of
the same from, any Person in violation of the Securities Act or applicable state
securities Laws.
6.5.9 BROKER'S FEES
No Person acting on behalf of Existing Lessor is or will be entitled
to any broker's fee, commission or finder's fee in connection with the
Transactions.
6.6 EXISTING MORTGAGEE'S REPRESENTATIONS AND WARRANTIES
Existing Mortgagee represents and warrants to Lessee, each
Participant, Subordination Agent, Owner Trustee, Existing Lessor, Airframe
Manufacturer and Mortgagee that:
6.6.1 ORGANIZATION, ETC.
Existing Mortgagee is a corporation duly incorporated, validly
existing under the Laws of England and has the corporate power and authority to
conduct the business in which it is currently engaged and to own or hold under
lease its properties and to enter into, and perform its obligations under the
Existing Mortgagee Agreements.
6.6.2 CORPORATE AUTHORIZATION
Existing Mortgagee has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Existing Mortgagee Agreements, and the
performance of its obligations thereunder.
6.6.3 NO VIOLATION
The execution and delivery by Existing Mortgagee of the Existing
Mortgagee Agreements, the performance by Existing Mortgagee of its obligations
thereunder and the consummation by Existing Mortgagee on the Closing Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the constitutional documents of Existing Mortgagee, (b) violate any Law
<PAGE>
applicable to or binding on Existing Mortgagee or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to Existing Mortgagee), or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, lease, loan or other
material agreement, instrument or document to which Existing Mortgagee is a
party or by which Existing Mortgagee or any of its properties is bound.
6.6.4 APPROVALS
The execution and delivery by Existing Mortgagee of the Existing
Mortgagee Agreements, the performance by Existing Mortgagee of its obligations
thereunder and the consummation by Existing Mortgagee on the Closing Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Existing Mortgagee
and (b) any Government Entity, other than the filing of the FAA Filed Documents
and the Financing Statements.
6.6.5 VALID AND BINDING AGREEMENTS
The Existing Mortgagee Agreements have been duly authorized, executed
and delivered by Existing Mortgagee and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Existing Mortgagee and are enforceable
against Existing Mortgagee in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
6.6.6 LITIGATION
There are no pending or, to the Actual Knowledge of Existing
Mortgagee, threatened actions or proceedings against Existing Mortgagee before
any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to Existing Mortgagee, would materially
adversely affect the ability of Existing Mortgagee to perform its obligations
under the Existing Mortgagee Agreements.
<PAGE>
6.6.7 SECURITIES LAWS
Neither Existing Mortgagee nor any person Existing Mortgagee has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the Securities
Act or applicable state securities Laws.
6.6.8 BROKER'S FEES
No Person acting on behalf of Existing Mortgagee is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
6.7 AIRFRAME MANUFACTURER'S REPRESENTATIONS AND WARRANTIES
Airframe Manufacturer represents and warrants to Lessee, each
Participant, Equity Guarantor, Existing Mortgagee, Subordination Agent, Owner
Trustee and Mortgagee that:
6.7.1 ORGANIZATION, ETC.
Airframe Manufacturer is a corporation duly incorporated, validly
existing and in good standing under the Laws of Brazil, and has the corporate
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into, and perform its
obligations under the Airframe Manufacturer Agreements.
6.7.2 CORPORATE AUTHORIZATION
Airframe Manufacturer has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its constitutional documents) to authorize
the execution and delivery of each of the Airframe Manufacturer Agreements, and
the performance of its obligations thereunder.
6.7.3 NO VIOLATION
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
obligations thereunder and the consummation by Airframe Manufacturer on the
Closing Date of the transactions contemplated thereby, do not and will not (a)
<PAGE>
violate any provision of the constitutional documents of Airframe Manufacturer,
(b) violate any Law applicable to or binding on Airframe Manufacturer or (c)
violate or constitute any default under (other than any violation or default
that would not result in a Material Adverse Change to Airframe Manufacturer), or
result in the creation of any Lien (other than as provided for or otherwise
permitted in the Operative Agreements) upon the Trust Estate under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document to
which Airframe Manufacturer is a party or by which Airframe Manufacturer or any
of its properties is bound.
6.7.4 APPROVALS
The execution and delivery by Airframe Manufacturer of the Airframe
Manufacturer Agreements, the performance by Airframe Manufacturer of its
obligations thereunder and the consummation by Airframe Manufacturer on the
Closing Date of the transactions contemplated thereby do not and will not
require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
Debt of Airframe Manufacturer and (b) any Government Entity, other than the
filing of the FAA Filed Documents and the Financing Statements.
6.7.5 VALID AND BINDING AGREEMENTS
The Airframe Manufacturer Agreements have been duly authorized,
executed and delivered by Airframe Manufacturer and, assuming the due
authorization, execution and delivery by the other party or parties thereto,
constitute the legal, valid and binding obligations of Airframe Manufacturer and
are enforceable against Airframe Manufacturer in accordance with the respective
terms thereof, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar Laws
affecting the rights of creditors generally and general principles of equity,
whether considered in a proceeding at law or in equity.
6.7.6 TITLE
On the Closing Date, Existing Lessor shall have, and the Bills of
Sale shall convey to the Owner Trustee, good and marketable title to, the
Aircraft, free and clear of all claims, Liens and encumbrances of any nature,
except Permitted Liens.
<PAGE>
6.7.7 TAXES
The Existing Lessor has filed or will cause to be filed all Federal
and all material state, local and foreign tax returns which are required to be
filed by it and have paid or will cause to be paid all Taxes which are due and
payable in connection with the Aircraft.
6.7.8 LITIGATION
There are no pending or, to the Actual Knowledge of Airframe
Manufacturer, threatened actions or proceedings against Airframe Manufacturer
before any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to Airframe Manufacturer, would
materially adversely affect the ability of Airframe Manufacturer to perform its
obligations under the Airframe Manufacturer Agreements.
6.7.9 SECURITIES LAWS
Neither Airframe Manufacturer nor any person Airframe Manufacturer
has authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the Securities
Act or applicable state securities Laws.
6.7.10 BROKER'S FEES
No Person acting on behalf of Airframe Manufacturer is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions, except for the underwriters' fees and commissions payable with
respect to the public offering of the Pass Through Certificates and the fees and
expenses of Equity Advisor.
SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS
7.1 COVENANTS OF LESSEE
Lessee covenants and agrees with Owner Participant, Loan Participant,
Owner Trustee, Equity Guarantor and Mortgagee as follows:
<PAGE>
7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Lessee shall at all times maintain its corporate existence, except as
permitted by Section 13.2 of the Lease, and shall at all times remain a U.S. Air
Carrier.
7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Lessee will give Owner Participant, Owner Trustee and Mortgagee
timely written notice (but in any event within 30 days prior to the expiration
of the period of time specified under applicable Law to prevent lapse of
perfection) of any relocation of its chief executive office (as such term is
defined in Article 9 of the UCC) from its then present location and will
promptly take any action required by Section 7.1.3(c) as a result of such
relocation.
7.1.3 CERTAIN ASSURANCES
(a) Lessee shall duly execute, acknowledge and deliver, or shall
cause to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as Owner Participant, Owner Trustee,
Equity Guarantor or Mortgagee shall reasonably request for accomplishing the
purposes of this Agreement and the other Operative Agreements, 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 Agreement.
(b) Lessee shall promptly take such action with respect to the
recording, filing, re-recording and re-filing of the Lease, the Trust Agreement
and the Trust Indenture and the respective supplements thereto, including,
without limitation, Lease Supplement No. 1 and the initial Trust Indenture
Supplement, as shall be necessary to establish, perfect and protect the
interests and rights of Owner Trustee in and to the Aircraft and under the Lease
and the perfection and priority of the Lien created by the Trust Indenture, and
Lessee shall pay all out-of-pocket costs and expenses thereof to the extent not
paid by another party as Transaction Expenses. Lessee shall furnish to Owner
Participant or Owner Trustee such information (other than with respect to the
citizenship of Owner Participant and Owner Trustee) in Lessee's possession or
otherwise reasonably available to Lessee as may be required to enable Owner
Participant or Owner Trustee to make application for registration of the
Aircraft under the Act (subject to Lessee's rights under Section 7.1.2 of the
Lease).
<PAGE>
(c) Lessee will cause the FAA Filed Documents, the Financing
Statements and all continuation statements (and any amendments necessitated by
any combination, consolidation or merger pursuant to Section 13.2 of the Lease,
or any relocation of its chief executive office) in respect of the Financing
Statements to be prepared and, subject only to the execution and delivery
thereof by Owner Trustee and Mortgagee, as applicable, duly and timely filed and
recorded, or filed for recordation, to the extent permitted under the Act (with
respect to the FAA Filed Documents) or the UCC or similar law of any other
applicable jurisdiction (with respect to such other documents).
(d) If the Aircraft has been registered in a country other than the
United States pursuant to Section 7.1.2 of the Lease, Lessee will furnish to
Owner Trustee, Equity Guarantor, Mortgagee and each Participant annually after
such registration, commencing with the calendar year after such registration is
effected, an opinion of special counsel reasonably satisfactory to Owner Trustee
and Mortgagee stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, re-recording and
re-filing of the Operative Agreements and any supplements and amendments thereto
as is necessary to establish, perfect and protect Owner Trustee's and
Mortgagee's respective right, title and interest in and to the Aircraft and the
Operative Agreements, reciting the details of such actions, or (ii) no such
action is necessary to maintain the perfection of such right, title and
interest.
7.1.4 SECURITIES LAWS
Neither Lessee nor any person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any person in violation of the Securities Act or applicable state or foreign
securities Laws.
7.2 COVENANTS OF OWNER PARTICIPANT
Owner Participant covenants and agrees with Lessee, and except with
respect to Section 7.2.4, Loan Participant, Equity Guarantor, Owner Trustee and
Mortgagee as follows:
7.2.1 LIENS
Owner Participant (a) will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable to it on or with respect
<PAGE>
to all or any part of the Trust Estate, the Trust Indenture Estate or the
Aircraft, (b) will, at its own cost and expense, take such action as may be
necessary to discharge any Lessor Lien attributable to Owner Participant on all
or any part of the Trust Estate, the Trust Indenture Estate or the Aircraft,
PROVIDED that Owner Participant shall not be in breach of its obligations under
this sentence so long as (i) Owner Participant shall, at its own cost and
expense, be diligently contesting such Lessor Lien in good faith by appropriate
proceedings and (ii) such Lessor Lien and such proceedings do not involve (x)
any material danger of the sale, forfeiture, or loss of the Aircraft, the
Airframe, any Engine or any Part thereof or (y) any restriction on the use or
operation of the Aircraft or title thereto. Owner Participant will hold harmless
and indemnify Lessee, Owner Trustee, each Note Holder, Mortgagee, Equity
Guarantor, each of their respective Affiliates, successors and permitted
assigns, the Trust Estate and the Trust Indenture Estate from and against (i)
any and all Expenses, (ii) any reduction in the amount payable out of the Trust
Estate or the Trust Indenture Estate and (iii) any interference with the
possession, operation or other use of all or any part of the Aircraft, in each
case imposed on, incurred by or asserted against any of the foregoing as a
consequence of any such Lessor Lien.
7.2.2 REVOCATION OF TRUST AGREEMENT
(a) Owner Participant will comply with the provisions of the Trust
Agreement applicable to it, and will not terminate or revoke the Trust Agreement
or the trusts created thereunder without the prior written consent of Lessee and
Mortgagee and will not amend, modify or supplement the Trust Agreement, or waive
any of the provisions thereof, if such amendment, modification, supplement or
waiver would have a material adverse effect on Lessee, without the consent of
Lessee, or on Mortgagee or any Note Holder, without the consent of Mortgagee.
(b) Notwithstanding Section 7.2.2(a), Owner Participant may at any
time remove Owner Trustee pursuant to Section 9.1 of the Trust Agreement or
terminate the Trust Agreement pursuant to Section 11.2 of the Trust Agreement.
7.2.3 CHANGE OF SITUS OF OWNER TRUST
If, at any time, any Tax Indemnitee or the Trust Estate becomes
subject to any Taxes for which it is indemnified pursuant to Section 9.3 of this
Agreement 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
<PAGE>
which it is then located, the situs of the Trust may be moved with the written
consent of Owner Participant (which consent shall not be unreasonably withheld)
and Owner Participant will take whatever action may be reasonably necessary to
accomplish such removal; PROVIDED, that, in any event, (a) Lessee shall provide
such additional tax indemnification as Owner Participant and the Note Holders or
the Pass Through Trustees may reasonably request to cover any additional
unindemnified Taxes or loss of Tax benefits described in the assumptions in the
Tax Indemnity Agreement resulting from such change in the situs of the Trust (it
being agreed that if a Lease Event of Default shall have occurred and is then
continuing, it shall not be unreasonable for Owner Participant to withhold its
consent to moving the situs of the Trust, notwithstanding the provision by
Lessee of such additional tax indemnification, unless a Section 1110 Event shall
have occurred and is then continuing), (b) the rights and obligations under the
Operative Agreements of Owner Participant, Equity Guarantor, the Note Holders,
Pass Through Trustees and Mortgagee shall not be adversely affected 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 Lessee and
Owner Trustee shall execute and deliver such documents as may be necessary or as
may reasonably be requested by Mortgagee to protect and maintain the perfection
and priority of such Lien, (d) Owner Participant, Equity Guarantor, Pass Through
Trustees and Mortgagee shall have received an opinion or opinions of counsel
(which counsel is reasonably satisfactory to Owner Participant, Equity
Guarantor, Pass Through Trustees and Mortgagee) in scope, form and substance
reasonably satisfactory to Owner Participant, Equity Guarantor, Pass Through
Trustees and Mortgagee 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)
covering such other matters as Owner Participant, Equity Guarantor, Pass Through
Trustees or Mortgagee may reasonably request, (e) if such removal involves the
replacement of Owner Trustee, then Owner Participant, Equity Guarantor, Pass
Through Trustees and Mortgagee shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to Owner
Participant, Equity Guarantor, Pass Through Trustees and Mortgagee covering the
matters described in the opinion delivered pursuant to Section 5.1.2(xxv)(D) and
(f) Lessee shall indemnify and hold harmless Owner Participant, Equity
Guarantor, Note Holders, Pass Through Trustees and First Security, in its
individual capacity and as Owner Trustee, on a net after-tax basis against any
and all reasonable out-of-pocket costs and expenses including attorneys' fees
<PAGE>
and disbursements, fees and expenses of any new owner trustee, registration,
recording or filing fees and taxes incurred by Owner Participant, Equity
Guarantor, Note Holders, Pass Through Trustees or Owner Trustee in connection
with such change of situs. 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, except that if a Lease Event of Default shall have
occurred and is then continuing, except during a Section 1110 Period, such
consent shall not be required.
7.2.4 COMPLIANCE WITH LEASE PROVISIONS
Owner Participant will, solely for the benefit of Lessee, comply with
the express provisions applicable to it contained in the Lease.
7.2.5 SECURITIES ACT
Owner Participant will not directly or indirectly offer any
beneficial interest or security relating to the ownership of the Aircraft or any
interest in the Trust Estate or any of the Equipment Notes or any other interest
in or security under the Trust Indenture for sale to, or solicit any offer to
acquire any such interest or security from, or sell any such interest or
security to, any Person in violation of the registration provisions of the
Securities Act or applicable state or foreign securities Laws, provided that the
foregoing shall not be deemed to impose on Owner Participant any responsibility
with respect to any such offer, sale or solicitation by any other party hereto.
7.2.6 REGARDING THE OWNER TRUSTEE
Owner Participant will instruct Owner Trustee to perform its
obligations under each Owner Trustee Agreement.
7.3 COVENANTS OF FIRST SECURITY AND OWNER TRUSTEE
First Security, in its individual capacity and/or as Owner Trustee,
as provided below, covenants and agrees with Lessee, Owner Participant, Equity
Guarantor, each Note Holder and Mortgagee as follows:
7.3.1 LIENS
First Security (a) will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable to it or Owner Trustee
with respect to all or any part of the Trust Estate, the Trust Indenture Estate
or the Aircraft, (b) will, at its own cost and expense, take such action as may
be necessary to discharge any Lessor Lien attributable to First Security or
Owner Trustee on all or any part of the Trust Estate, the Trust Indenture Estate
<PAGE>
or the Aircraft, PROVIDED that First Security shall not be in breach of its
obligations under this sentence so long as (i) First Security shall, at its own
cost and expense, be diligently contesting such Lessor Lien in good faith by
appropriate proceedings and (ii) such Lessor Lien and such proceedings do not
involve (x) any material danger of the sale, forfeiture, or loss of the
Aircraft, the Airframe, any Engine or any Part thereof or (y) any restriction on
the use or operation of the Aircraft or title thereto First Security will in its
individual capacity hold harmless and indemnify Lessee, Owner Participant,
Equity Guarantor, each Note Holder, Mortgagee, each of their respective
Affiliates, successors and permitted assigns, the Trust Estate and the Trust
Indenture Estate from and against (i) any and all Expenses, (ii) any reduction
in the amount payable out of the Trust Estate or the Trust Indenture Estate and
(iii) any interference with the possession, operation or other use of all or any
part of the Aircraft, in each case imposed on, incurred by or asserted against
any of the foregoing as a consequence of any such Lessor Lien.
7.3.2 OTHER BUSINESS
Owner Trustee will not enter into any business or other activity
except as contemplated by the Operative Agreements.
7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
First Security, in its individual capacity and as Owner Trustee, will
give Lessee, each Participant, Equity Guarantor and Mortgagee 30 days' prior
written notice of any relocation of its chief executive office (as such term is
defined in Article 9 of the UCC) from its then present location and will
promptly take any action required by Section 7.3.8 as a result of such
relocation.
7.3.4 SECURITIES ACT
First Security, in its individual capacity and as Owner Trustee, will
not directly or indirectly offer any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicit any offer to acquire any such interest or security from,
or sell any such interest or security to, any Person in violation of the
registration provisions of the Securities Act or applicable state or foreign
securities Laws, provided that the foregoing shall not be deemed to impose on
First Security in its individual capacity or as Owner Trustee, any
<PAGE>
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.
7.3.5 PERFORMANCE OF AGREEMENTS
Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.
7.3.6 RELEASE OF LIEN OF TRUST INDENTURE
Owner Trustee, in each instance referred to in the Lease in which a
transfer of any property is required to be made by Owner Trustee to Lessee or
any other Person (other than Mortgagee or Owner Participant), shall, at Lessee's
request and expense, use its reasonable efforts to procure from Mortgagee the
prompt release of the Lien of the Trust Indenture with respect to such property.
7.3.7 NOTICES; DOCUMENTS
In the event any claim with respect to any liabilities is filed
against the Owner Trustee in its capacity as such and Owner Trustee shall have
Actual Knowledge thereof, the Owner Trustee shall promptly notify Lessee and
Mortgagee in writing thereof. Owner Trustee further agrees to provide to Lessee
promptly any documents (including the certificate of aircraft registration) that
it receives from the FAA with respect to the Aircraft.
7.3.8 FILINGS
After the Closing Date, Owner Trustee shall duly execute and deliver
to Lessee all filings and recordings (including, without limitation, all filings
and UCC financing statements under the Act and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office), prepared and delivered to it by Lessee required to perfect Owner
Trustee's title to the Aircraft and the liens of and security interests granted
by the Trust Indenture (or to maintain such perfection) and to make such title,
liens and security interests valid and enforceable.
7.3.9 TRUST AGREEMENT
Each of First Security and Owner Trustee hereby agrees with Lessee,
Loan Participant and Mortgagee not to revoke the trust created by the Trust
Agreement so long as the Trust Indenture remains undischarged or if such
revocation would have an adverse effect on the Lessee. Nothing contained in this
Agreement shall impair any right under the Trust Agreement of First Security to
<PAGE>
resign as Owner Trustee in accordance with the provisions of the Trust
Agreement.
7.4 COVENANTS OF WTC
WTC in its individual capacity or as Mortgagee, each Applicable Pass
Through Trustee or Subordination Agent, as the case may be, covenants and agrees
with Lessee, Owner Participant, Equity Guarantor and Owner Trustee as follows:
7.4.1 LIENS
WTC (a) will not directly or indirectly create, incur, assume or
suffer to exist any Lessor Lien attributable to it on or with respect to all or
any part of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b)
will, at its own cost and expense, promptly take such action as may be necessary
to discharge any Lessor Lien attributable to WTC on all or any part of the Trust
Estate, the Trust Indenture Estate or the Aircraft and (c) will in its
individual capacity hold harmless and indemnify Lessee, Owner Participant,
Equity Guarantor, each Note Holder, Owner Trustee, each of their respective
Affiliates, successors and permitted assigns, the Trust Estate and the Trust
Indenture Estate from and against (i) any and all Expenses, (ii) any reduction
in the amount payable out of the Trust Estate or the Trust Indenture Estate and
(iii) any interference with the possession, operation or other use of all or any
part of the Aircraft, in each case imposed on, incurred by or asserted against
any of the foregoing as a consequence of any such Lessor Lien.
7.4.2 SECURITIES ACT
WTC in its individual capacity or as Mortgagee, a Pass Through
Trustee or Subordination Agent, will not offer any beneficial interest or
Security relating to the ownership of the Aircraft or any interest in the Trust
Indenture Estate, or any of the Equipment Notes or any other interest in or
security under the Trust Indenture for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any Person in violation of the Securities Act or applicable state or foreign
securities Laws, provided that the foregoing shall not be deemed to impose on
WTC any responsibility with respect to any such offer, sale or solicitation by
any other party hereto.
7.4.3 PERFORMANCE OF AGREEMENTS
WTC, in its individual capacity and as Mortgagee, a Pass Through
Trustee or Subordination Agent, as the case may be, shall perform its
<PAGE>
obligations under the Indenture Agreements, the Pass Through Trustee Agreements
and the Subordination Agent Agreements in accordance with the terms thereof.
7.4.4 WITHHOLDING TAXES
WTC shall indemnify (on an after-tax basis) and hold harmless Lessee,
Lessor and Owner Participant against any United States withholding taxes (and
related interest, penalties and additions to tax) as a result of the failure by
WTC to withhold on payments to any Note Holder if such Note Holder failed to
provide to Mortgagee necessary certificates or forms to substantiate the right
to exemption from such withholding tax.
7.5 COVENANTS OF NOTE HOLDERS
Each Note Holder (including Subordination Agent) as to itself only
covenants and agrees with Lessee, Owner Participant, Owner Trustee, Equity
Guarantor and Mortgagee as follows:
7.5.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on
an after-tax basis) and hold harmless Lessee, Lessor, Owner Participant and
Mortgagee against any United States withholding taxes (and related interest,
penalties and additions to tax) as a result of the inaccuracy or invalidity of
any certificate or form provided by such Note Holder to Mortgagee in connection
with such withholding taxes. Any amount payable hereunder shall be paid within
30 days after receipt by a Note Holder of a written demand therefor.
7.5.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (i) not transfer any Equipment Note or
interest therein in violation of the Securities Act or applicable state or
foreign securities Law; PROVIDED, that the foregoing provisions of this section
shall not be deemed to impose on such Note Holder any responsibility with
respect to any such offer, sale or solicitation by any other party hereto, and
(ii) perform and comply with the obligations specified to be imposed on it (as a
Note Holder) under each of the Trust Indenture and the form of Equipment Note
set forth in the Trust Indenture.
(b) Except as otherwise required by the terms of Section 2.13 of the
Trust Indenture, each Note Holder will not sell, assign, convey, exchange or
otherwise transfer any Equipment Note or any interest in, or represented by, any
<PAGE>
Equipment Note (it being understood that this provision is not applicable to the
Pass Through Certificates) unless the proposed transferee thereof first provides
Lessee, Owner Participant and Equity Guarantor with both of the following:
(i) a written representation and covenant that either (a) no
portion of the funds it uses to purchase, acquire and hold such Equipment
Note or interest directly or indirectly constitutes, or may be deemed under
the Code or ERISA or any rulings, regulations or court decisions thereunder
to constitute, the assets of any Plan or (b) the transfer, and subsequent
holding, of such Equipment Note or interest shall not involve or give rise
to a transaction that constitutes a prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code involving
Lessee, Owner Participant, a Pass Through Trustee, the Subordination Agent
or the proposed transferee (other than a transaction that is exempted from
the prohibitions of such sections by applicable provisions of ERISA or the
Code or administrative exemptions or regulations issued thereunder); and
(ii) a written covenant that it will not transfer any Equipment
Note or any interest in, or represented by, any Equipment Note unless the
subsequent transferee also makes the representation described in clause (i)
above and agrees to comply with this clause (ii) and the other covenants of
the Note Holders contained in the Operative Agreements.
7.6 AGREEMENTS
7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES
Lessee, the Owner Participant, Equity Guarantor and Owner Trustee
agree that for all purposes, after the Closing, Owner Trustee will be the owner
of the Aircraft (except that Owner Participant will be the owner for income tax
purposes) and Lessee will be the lessee thereof. No transfer, by operation of
Law or otherwise, of the beneficial interest of Owner Participant in and to the
Trust Estate shall operate to transfer legal title to any part of the Trust
Estate to any transferee thereof.
7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS
Lessee, each Participant, Equity Guarantor, each Note Holder, First
Security, Owner Trustee, WTC and Mortgagee agree for the benefit of each of the
others that it will not commence or join in any proceeding under the Bankruptcy
Code to commence a case under Section 303 of the Bankruptcy Code against the
Trust Estate. Nothing contained herein shall be deemed to preclude any
<PAGE>
Participant, Equity Guarantor, any Note Holder, First Security, Owner Trustee,
WTC or Mortgagee from filing any claim against the Trust Estate in any case
commenced against the Trust Estate.
7.6.3 CERTAIN BANKRUPTCY MATTERS
If (a) all or any part of the Trust Estate becomes the property of,
or Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy Code,
First Security or Owner Participant is required, by reason of First Security or
Owner Participant being held to have recourse liability to any Note Holder or
Mortgagee directly or indirectly (other than the recourse liability of First
Security or Owner Participant under this Agreement, the Trust Indenture or by
separate agreement), to make payment on account of any amount payable as
principal, Make-Whole Amount, if any, interest or other amounts on the Equipment
Notes, and (c) any Note Holder or Mortgagee actually receives any Excess Amount,
as defined below, which reflects any payment by First Security or Owner
Participant on account of (b) above, then such Note Holder or Mortgagee, as the
case may be, shall promptly refund to First Security or Owner Participant
(whichever shall have made such payment) such Excess Amount.
For purposes of this Section 7.6.3, "Excess Amount" means the amount
by which such payment exceeds the amount that would have been received by a Note
Holder or Mortgagee if First Security or Owner Participant had not become
subject to the recourse liability referred to in clause (b) above, and such Note
Holder or Mortgagee receives written notice that such amount is an Excess Amount
prior to its distribution thereof. Nothing contained in this Section 7.6.3 shall
prevent a Note Holder or Mortgagee from enforcing any personal recourse
obligation (and retaining the proceeds thereof) of First Security or Owner
Participant under this Agreement (other than as referred to in clause (b) above)
or the Trust Indenture (and any exhibits or annexes thereto) or from retaining
any amount paid by Owner Participant under Sections 2.13 or 4.03 of the Trust
Indenture.
7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING
(a) Owner Participant, Equity Guarantor, each Pass Through Trustee,
Subordination Agent, each Note Holder, Owner Trustee and Mortgagee agrees as to
itself with Lessee that, so long as no Lease Event of Default shall have
occurred and be continuing, such Person shall not (and shall not permit any
Affiliate or other Person claiming by, through or under it to) interfere with
<PAGE>
Lessee's rights in accordance with the Lease to the quiet enjoyment, possession
and use of the Aircraft during the Term.
(b) Any assignment, sale, transfer or other conveyance of the
Aircraft by Owner Trustee made pursuant to the terms of this Agreement or the
Lease shall bind Owner Participant and Equity Guarantor and shall be effective
to transfer or convey all right, title and interest of Owner Trustee, Owner
Participant and Equity Guarantor 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 Owner
Trustee, as regards Owner Participant and Equity Guarantor.
7.6.5 RELEASE OF LIEN TRUST INDENTURE
Each of Lessee, Lessor and Mortgagee agrees that in each instance
referred to in the Lease in which a transfer of any property is required to be
made by Lessor to Lessee or any other Person (other than Mortgagee), Mortgagee
shall, upon request of Lessor and compliance with the applicable provisions of
the Lease and Trust Indenture, promptly execute (at Lessee's cost and expense)
such instruments as Lessor or Lessee may reasonably request to evidence the
release of the Lien of the Trust Indenture with respect to such property.
7.6.6 NON-RECOURSE
Loan Participant and Mortgagee agree that (a) obligations of Owner
Trustee under the Trust Indenture or any other Operative Agreement and with
respect to the Equipment Notes shall be non-recourse to Owner Participant and to
First Security and (b) they will look solely to the income and proceeds from the
Trust Estate and the Trust Indenture Estate to the extent available for
distribution to Note Holder or Mortgagee as provided in the Trust Indenture and
that neither Owner Participant nor First Security will be personally liable to
Loan Participant or Mortgagee for any amounts payable by Owner Trustee under the
Trust Indenture or any other Operative Agreement; PROVIDED, HOWEVER, that the
foregoing is not intended nor shall it be construed to limit any recourse
liability of Owner Participant or First Security to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any representation or warranty
or covenant given by such Person (in the case of First Security, in its
individual capacity).
<PAGE>
7.6.7 OTHER DOCUMENTS; AMENDMENT
(a) Each of the Owner Participant, Equity Guarantor and the Owner
Trustee hereby agrees with Lessee, the Loan Participant, and the Mortgagee not
to amend, supplement or otherwise modify any provision of the Trust Agreement in
a manner that could materially adversely affect such party without the prior
written consent of such party. Notwithstanding the foregoing, so long as the
Lease has not been terminated or expired, each Participant, Equity Guarantor,
the Mortgagee and the Owner Trustee hereby agree for the benefit of Lessee that
without the consent of Lessee they will not amend, supplement or otherwise
modify (i) Article III, Article IX or Sections 2.05 or 2.15 of the Trust
Indenture, (ii) any provision of any Operative Agreement that will affect the
stated principal amount of or premium or interest on the Equipment Notes or
(iii) any other provision of the Trust Indenture or Equipment Notes in a manner
that could materially adversely affect Lessee. Mortgagee and Owner Trustee agree
promptly to furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Agreements to which Lessee is not a party.
Loan Participant agrees that it will not take any action in respect of the Trust
Indenture Estate except through the Mortgagee pursuant to the Trust Indenture or
as otherwise permitted by Trust Indenture.
(b) Owner Trustee agrees to join with Lessee to the extent that
action on its part is necessary or appropriate (i) to cause the following to be
duly accomplished in accordance with applicable United States federal Law by the
time the Aircraft is delivered under this Agreement and the Lease: (A) the
application for registration of the Aircraft in the name of Owner Trustee and
(B) all related action necessary in order for Lessee to have temporary or
permanent authority to operate the Aircraft as contemplated by the Lease and
(ii) forthwith upon delivery of the Aircraft under this Agreement and the Lease,
to cause all necessary documents to be duly filed for recording in accordance
with applicable United States federal Law.
7.6.8 CONSENTS
Owner Participant, Equity Guarantor, and Owner Trustee each covenants
and agrees, for the benefit of Lessee, that it shall not unreasonably withhold
its consent to any consent or approval requested of it or of Owner Trustee or
Mortgagee under the terms of any of the Operative Agreements which by its terms
is not to be unreasonably withheld; provided, however, that the consent of the
Owner Participant shall not be deemed to be unreasonably withheld if such
consent is withheld because of the failure of the Equity Guarantor to consent
thereto.
<PAGE>
7.6.9 INSURANCE
Each of Owner Participant, Equity Guarantor, the Pass Through
Trustees, the Subordination Agent and the Owner Trustee agrees not to obtain or
maintain insurance for its own account as permitted by Section 11.2 of the Lease
if such insurance would limit or otherwise materially adversely affect the
coverage of any insurance required to be obtained or maintained by Lessee
pursuant to Section 11 and Annex D of the Lease.
7.6.10 EXTENT OF INTEREST OF NOTE HOLDERS
A Note Holder shall not, as such, have any further interest in, or
other right with respect to, the Trust Estate or the Trust Indenture Estate when
and if the principal and Make-Whole Amount, if any, of and interest on the
Equipment Note held by such Holder, and all other sums, then due and payable to
such Holder hereunder and under any other Operative Agreement, shall have been
paid in full.
7.6.11 FOREIGN REGISTRATION
Each Participant, Equity Guarantor, Owner Trustee and Mortgagee
hereby agree, for the benefit of Lessee but subject to the provisions of Section
7.1.2 of the Lease:
(a) that Lessee shall be entitled to register the Aircraft or cause
the Aircraft to be registered in a country other than the United States subject
to compliance with the following:
(i) each of the following requirements is satisfied:
(A) such registration shall be made only after the Tax Attribute
Period, unless Lessee prepays on a lump sum basis calculated
pursuant to Section 5(f) of the Tax Indemnity Agreement any
liability due under the Tax Indemnity Agreement as a result
of such registration based upon the assumption that such
registration would continue for the remainder of the term of
the Permitted Sublease described in clause (C) below,
PROVIDED, that notwithstanding the foregoing, such
registration may be made during -------- the taxable year in
which the seventh anniversary of the Closing Date occurs so
long as the Aircraft is not "used predominantly outside the
United States" within the meaning of Section 168(g) of the
Code during such taxable years;
<PAGE>
(B) no Lease Event of Default shall have occurred and be
continuing at the time of such registration;
(C) such proposed change of registration is made in connection
with a Permitted Sublease to a Permitted Air Carrier;
(D) such country is a Permitted Country with which the United
States then maintains normal diplomatic relations.
(ii) the Owner Trustee, Owner Participant and Mortgagee shall
have received an opinion, in form and substance reasonably
satisfactory to the Owner Participant (subject to customary
exceptions) of counsel reasonably satisfactory to the Owner
Participant addressed to each such party to the effect that:
(A) such country would recognize the Owner Trustee's title to,
ownership interest in and right to possession of, the
Aircraft;
(B) the obligations of Lessee, and the rights and remedies of
Owner Trustee, under the Lease are valid, binding and
enforceable under the laws of such country (or the laws of
the country to which the laws of such country would refer as
the applicable governing law);
(C) after giving effect to such change in registration, the Lien
of the Trust Indenture on the Owner Trustee's right, title
and interest in and to the Aircraft and the Lease shall
continue as a valid and duly perfected first priority
security interest and all filing, recording or other action
necessary to protect the same shall have been accomplished
(or, if such opinion cannot be given at the time of such
proposed change in registration because such change in
registration is not yet effective, (1) the opinion shall
detail what filing, recording or other action is necessary
and (2) Owner Trustee and the Mortgagee shall have received
a certificate from Lessee 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 Owner Trustee and the Mortgagee
on or prior to the effective date of such change in
registration;
<PAGE>
(D) it is not necessary, solely as a consequence of such change
in registration and without giving effect to any other
activity of Owner Trustee, the Owner Participant or the
Mortgagee (or any Affiliate thereof), as the case may be,
for Owner Trustee, the Owner Participant or the Mortgagee to
qualify to do business in such country as a result of such
reregistration;
(E) there is no tort liability of the owner or lessor of an
aircraft not in possession thereof under the laws of such
country (it being agreed 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 is provided
to cover such risk); and
(F) unless Lessee shall have agreed to provide insurance
reasonably satisfactory to Owner Participant covering the
risk of requisition of use of the Aircraft by the government
of such country (so long as the Aircraft is registered under
the laws of such country), the laws of such country require
fair compensation by the government of such country payable
in currency freely convertible into Dollars and freely
removable from such country (without license or permit,
unless Lessee prior to such proposed reregistration has
obtained such license or permit) for the taking or
requisition by such government of such use.
(b) In addition, as a condition precedent to any change in
registration Lessee shall have given to Lessor and Mortgagee assurances
reasonably satisfactory to each of them:
(i) to the effect that the provisions of Section 11 of the Lease
have been complied with after giving effect to such change
of registration; and
(ii) of the payment by Lessee of all reasonable out-of-pocket
expenses at no after-tax cost to any Participant of Lessor,
each Participant and Mortgagee in connection with such
change of registry, including, without limitation (1) the
reasonable fees and disbursements of counsel to Lessee,
Lessor and Mortgagee, (2) any filing or recording fees,
Taxes or similar payments incurred in connection with the
change of registration of the Aircraft and the creation and
perfection of the security interest therein in favor of
<PAGE>
Mortgagee for the benefit of Note Holders, (3) all costs and
expenses incurred in connection with any filings necessary
to continue in the United States the perfection of the
security interest in the Aircraft and the Lease in favor of
Mortgagee for the benefit of Note Holders and (4) costs in
connection with the calculation of the lump sum payment
described in clause (i)(A) of this Section 7.6.11.
7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED
Notwithstanding anything to the contrary set forth in any Operative
Agreement:
(a) Except as set forth in the Purchase Agreement Assignment, nothing
contained in the Operative Agreements shall constitute or be deemed to be a
waiver by Lessee of any rights, remedies or claims it may have against Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either;
and the Operative Agreements do not and shall not be construed or deemed to
create any rights, waivers, immunities or indemnities in favor of Airframe
Manufacturer, Engine Manufacturer or any subcontractor or supplier of either
with respect to any such rights, remedies or claims of Lessee; and
(b) The Airframe Manufacturer, by its execution and delivery of the
Consent and Agreement, shall not be deemed to have waived any rights, remedies
or claims which Airframe Manufacturer (or any subcontractor or supplier of
Airframe Manufacturer) may have against Lessee; and the Operative Agreements do
not and shall not be construed or deemed to create any rights, waivers,
immunities or indemnities in favor of Lessee with respect to any such rights,
remedies or claims of Airframe Manufacturer (or any subcontractor or supplier of
Airframe Manufacturer).
7.6.13 INTEREST IN CERTAIN ENGINES
Each Participant, Equity Guarantor, Owner Trustee, and Mortgagee
agree, for the benefit of each of the lessor, conditional seller, mortgagee or
secured party of any airframe or engine leased to, or purchased by, Lessee or
any Permitted Sublessee subject to a lease, conditional sale, trust indenture or
other security agreement that it will not acquire or claim, as against such
lessor, conditional seller, mortgagee or secured party, any right, title or
interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
<PAGE>
conditional seller or subject to a trust indenture or security interest in favor
of such mortgagee or secured party.
7.6.14 GUARANTY FEE
Each Participant, Owner Trustee and Mortgagee (i) acknowledges that
in consideration of the issuance of the Equity Guaranty, the Equity Guarantor
shall be paid a fee and such fee shall be paid in installments during the Base
Lease Term on each Payment Date and (ii) agrees that on each Payment Date, to
the extent that Basic Rent paid on such Payment Date shall be in an amount in
excess of Lessor Rent as set forth in Schedule 4 with respect to such Payment
Date, upon the receipt of Basic Rent, Mortgagee shall distribute such Basic Rent
in accordance with the terms of Section 3.01 of the Trust Indenture to the Owner
Trustee and Owner Trustee shall, after distribution of Lessor Rent due to Owner
Participant on such Payment Date, if any, distribute the remainder to Equity
Guarantor in payment of guaranty fees for the Equity Guaranty.
7.6.15 CERTAIN RIGHTS OF EQUITY GUARANTOR
(a) Lessee, each Participant, Note Holders, Owner Trustee and
Mortgagee agree for the benefit of Equity Guarantor that Equity Guarantor may,
but shall not be obligated to, exercise any right to cure a Lease Default, Lease
Event of Default, Default or Event of Default which may be cured by Owner
Trustee or Owner Participant, in lieu of Owner Trustee or Owner Participant,
pursuant to the terms of Section 15.3 of the Lease or Section 4.03 of the Trust
Indenture, as the case may be. If the Lease Event of Default shall be due to a
failure by Lessee to pay Basic Rent due under the Lease, whether in whole or in
part, unless Equity Guarantor, Owner Trustee or Owner Participant have, in the
aggregate, cured Lease Events of Default in respect of payments of Basic Rent on
each of the six immediately preceding Payment Dates or Equity Guarantor, Owner
Trustee or Owner Participant have cured, in the aggregate, twelve previous Lease
Events of Default in respect of payments of Basic Rent, such payment by Equity
Guarantor shall be deemed to cure any Lease Event of Default which would
otherwise have arisen on account of the nonpayment by Lessee of such installment
of Basic Rent.
(b) The Loan Participant, Note Holders and Mortgagee agree for the
benefit of Equity Guarantor that Equity Guarantor may, but shall not be
obligated to exercise Owner Trustee's and Owner Participant's option to
purchase, or cause an Affiliate to purchase, the Equipment Notes pursuant to
Section 2.13 of the Trust Indenture.
<PAGE>
(c) In each case in which Equity Guarantor shall have cured a Lease
Default, Lease Event of Default, Default or Event of Default, Equity Guarantor
shall be entitled to the rights of subrogation afforded to Owner Trustee or
Owner Participant pursuant to the terms of the Lease or the Trust Indenture, as
the case may be.
SECTION 8. CONFIDENTIALITY
Lessee, Owner Participant, Note Holders, Owner Trustee, Mortgagee,
Existing Lessor, Existing Mortgagee and Airframe Manufacturer shall keep Annexes
B, C and D and Schedules 1, 2, 3 and 4 to the Lease, the Purchase Agreement
Assignment, the Equity Guaranty and the Tax Indemnity Agreement confidential and
shall not disclose, or cause to be disclosed, the same to any Person, except (A)
to prospective and permitted transferees of Lessee's, Owner Participant's,
Equity Guarantor's, a Note Holder's, a Liquidity Provider's, Owner Trustee's,
Mortgagee's or other Indenture Indemnitee's interest or their respective counsel
or special counsel, independent insurance brokers, auditors, or other agents who
agree to hold such information confidential, (B) to Lessee's, Owner
Participant's, Equity Guarantor's, a Note Holder's, a Liquidity Provider's, a
Pass Through Trustee's, Owner Trustee's, Mortgagee's or other Indenture
Indemnitee's counsel or special counsel, independent insurance brokers,
auditors, or other agents, Affiliates or investors who agree to hold such
information confidential, (C) as may be required by any statute, court or
administrative order or decree, legal process or governmental ruling or
regulation, including those of any applicable insurance regulatory bodies
(including, without limitation, the National Association of Insurance
Commissioners), federal or state banking examiners, Internal Revenue Service
auditors or any stock exchange, (D) with respect to Lessee and Owner
Participant, by mutual agreement of such parties, (E) with respect to a Note
Holder or any Pass Through Trustee, to a nationally recognized rating agency for
the purpose of obtaining a rating on the Equipment Notes or the Pass Through
Certificates or to support an NAIC rating for the Equipment Notes or (F) such
other Persons as are reasonably deemed necessary by the disclosing party in
order to protect the interests of such party or for the purposes of enforcing
such documents by such party; PROVIDED, that any and all disclosures permitted
by clauses (C), (D), (E) or (F) above shall be made only to the extent necessary
to meet the specific requirements or needs of the Persons making such
disclosures.
<PAGE>
SECTION 9. INDEMNIFICATION AND EXPENSES
9.1 GENERAL INDEMNITY
9.1.1 INDEMNITY
If the Closing occurs, Lessee shall indemnify, protect, defend and
hold harmless each Indemnitee from, against and in respect of, and shall pay on
a net after-tax basis, any and all Expenses of any kind or nature whatsoever
that may be imposed on, incurred by or asserted against any Indemnitee, relating
to, resulting from, or arising out of or in connection with, any one or more of
the following:
(a) The Operative Agreements, the Pass Through Agreements, or the
enforcement of any of the terms of any of the Operative Agreements or the Pass
Through Agreements;
(b) The Aircraft, the Airframe, any Engine or any Part, including,
without limitation, with respect thereto, (i) the manufacture, design, purchase,
acceptance, nonacceptance or rejection, ownership, registration, reregistration,
deregistration, delivery, nondelivery, lease, sublease, assignment, possession,
use or non-use, operation, maintenance, testing, repair, overhaul, condition,
alteration, modification, addition, improvement, storage, airworthiness,
replacement, repair, sale, substitution, return, abandonment, redelivery or
other disposition of the Aircraft, any Engine or any Part, (ii) any claim or
penalty arising out of violations of applicable Laws by Lessee (or any Permitted
Sublessee), (iii) tort liability, whether or not arising out of the negligence
of any Indemnitee (whether active, passive or imputed), (iv) death or property
damage of passengers, shippers or others, (v) environmental control, noise or
pollution and (vi) any Liens in respect of the Aircraft, any Engine or any Part;
(c) The offer, sale, or delivery of any Equipment Notes, Pass Through
Certificates or any interest therein or represented thereby; and
(d) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by Lessee under any Lessee Operative Agreement or any Pass Through
Agreement or the falsity of any representation or warranty of Lessee in any
Lessee Operative Agreement or any Pass Through Agreement other than in the Tax
Indemnity Agreement.
<PAGE>
9.1.2 EXCEPTIONS
Notwithstanding anything contained in Section 9.1.1, Lessee shall not
be required to indemnify, protect, defend and hold harmless any Indemnitee
pursuant to Section 9.1.1 in respect of any Expense of such Indemnitee:
(a) For any Taxes or a loss of Tax benefit, whether or not Lessee is
required to indemnify therefor pursuant to Section 9.3 or the Tax Indemnity
Agreement;
(b) Except to the extent attributable to acts or events occurring
prior thereto, acts or events (other than acts or events related to the
performance or failure to perform by Lessee of its obligations pursuant to the
terms of the Lessee Operative Agreements) that occur after the earliest of: (i)
with respect to the Airframe, any Engine or any Part, the return of possession
(it being understood that the date of the placement of the Aircraft in storage
as provided in Section 5 of the Lease constitutes the date of return of the
Aircraft under the Lease) of such Airframe, Engine or Part pursuant to the terms
of and in compliance with the Lease (other than pursuant to Section 15 thereof,
in which case Lessee's liability under this Section 9.1 shall survive for so
long as Lessor or Mortgagee shall be entitled to exercise remedies under such
Section 15) or (ii) the termination of the Term in accordance with the Lease;
(c) To the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of such Indemnitee of any Equipment Note or
interest therein, except (i) for out-of-pocket costs and expenses incurred as a
result of any such Transfer pursuant to the exercise of remedies under any
Operative Agreement resulting from a Lease Event of Default and (ii) as
otherwise required by the terms of Section 2.13 of the Trust Indenture;
(d) To the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of Owner Participant of any interest in the
Aircraft, or the Trust Estate except for costs and expenses incurred as a result
of such Transfer, if such Transfer arises directly from a Lease Event of Default
that shall have occurred and be continuing;
(e) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
(other than gross negligence or willful misconduct imputed to such person by
reason of its interest in the Aircraft or any Operative Agreement);
<PAGE>
(f) In the case of First Security, to the extent attributable to
matters enumerated in the proviso to Section 14;
(g) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Agreement or any Pass Through
Agreement;
(h) To the extent attributable to the failure by such Indemnitee or
any related Indemnitee to perform or observe any agreement, covenant or
condition on its part to be performed or observed in any Operative Agreement or
any Pass Through Agreement;
(i) To the extent attributable to the offer or sale by such
Indemnitee or any related Indemnitee of any interest in the Aircraft, the
Equipment Notes, the Pass Through Certificates, the Trust Estate or the Trust
Agreement or any similar interest, in violation of the Securities Act or other
applicable federal, state or foreign securities Laws (other than any offer or
sale thereof caused by the acts or omissions of Lessee);
(j) (i) With respect to any Indemnitee (other than Mortgagee), to the
extent attributable to the failure of the Mortgagee to distribute funds received
and distributable by it in accordance with the Trust Indenture, (ii) with
respect to any Indemnitee (other than the Owner Trustee), to the extent
attributable to the failure of the Owner Trustee to distribute funds received
and distributable by it in accordance with the Trust Agreement, (iii) with
respect to any Indemnitee (other than the Subordination Agent), to the extent
attributable to the failure of the Subordination Agent to distribute funds
received and distributable by it in accordance with the Intercreditor Agreement,
(iv) with respect to any Indemnitee (other than the Pass Through Trustees), to
the extent attributable to the failure of a Pass Through Trustee to distribute
funds received and distributable by it in accordance with the Pass Through Trust
Agreements, (v) with respect to Mortgagee, to the extent attributable to the
negligence or willful misconduct of Mortgagee in the distribution of funds
received and distributable by it in accordance with the Trust Indenture, (vi)
with respect to Owner Trustee, to the extent attributable to the negligence or
willful misconduct of Owner Trustee in the distribution of funds received and
distributable by it in accordance with the Trust Agreement, (vii) with respect
to the Subordination Agent, to the extent attributable to the negligence or
willful misconduct of the Subordination Agent in the distribution of funds
received and distributable by it in accordance with the Intercreditor Agreement,
and (viii) with respect to the Pass Through Trustees, to the extent attributable
<PAGE>
to the negligence or willful misconduct of a Pass Through Trustee in the
distribution of funds received and distributable by it in accordance with the
Pass Through Trust Agreements.
(k) Other than during the continuation of a Lease Event of Default,
to the extent attributable to the authorization or giving or withholding of any
future amendments, supplements, waivers or consents with respect to any
Operative Agreement or Pass Through Agreement other than such as have been
requested by Lessee or as are required by or made pursuant to the terms of the
Operative Agreements or Pass Through Agreements (unless such requirement results
from the actions of an Indemnitee not required by or made pursuant to the
Operative Agreements or the Pass Through Agreements);
(l) To the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees shall not be paid by
or be reimbursed by Lessee;
(m) To the extent that it is an ordinary and usual operating or
overhead expense;
(n) With respect to the Owner Participant or the Owner Trustee, or
any related Indemnitee, to the extent attributable to the deregistration of the
Aircraft under the Act as a result of Owner Participant's or Owner Trustee's (or
any related Indemnitee of either) not being a Citizen of the United States as a
result of any act (other than reregistration of the Aircraft pursuant to Section
7.1.2 of the Lease) of Owner Participant or Owner Trustee, or any related
Indemnitee of either of the foregoing (not taken at the request of the Lessee);
(o) For any Lessor Lien attributable to such Indemnitee or any
related Indemnitee;
(p) If another provision of an Operative Agreement or a Pass Through
Agreement specifies the extent of Lessee's responsibility or obligation with
respect to such Expense, to the extent arising from other than failure of Lessee
to comply with such specified responsibility or obligation;
(q) To the extent relating to, resulting from, or arising out of or
in connection with the Equity Guaranty, the obligation to pay the guaranty fees
for the Equity Guaranty;
(r) To the extent it is a Transaction Expense;
(s) To the extent constituting principal, Make-Whole Amount or
interest on the Equipment Notes attributable solely to an Event of Default not
constituting a Lease Event of Default; or
<PAGE>
(t) To the extent incurred by or asserted against an Indemnitee as a
result of any "prohibited transaction", within the meaning of Section 406 of
ERISA or Section 4975(c)(1) of the Code.
For purposes of this Section 9.1, a Person shall be considered a
"related" Indemnitee with respect to an Indemnitee if such Person is an
Affiliate or employer of such Indemnitee, a director, officer, employee, agent,
or servant of such Indemnitee or any such Affiliate or a successor or permitted
assignee of any of the foregoing.
9.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
9.1.4 NOTICE
If a claim for any Expense that an Indemnitee shall be indemnified
against under this Section 9.1 is made, such Indemnitee shall give prompt
written notice thereof to Lessee. Notwithstanding the foregoing, the failure of
any Indemnitee to notify Lessee as provided in this Section 9.1.4, or in Section
9.1.5, shall not release Lessee from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to Lessee (in which event Lessee shall not be responsible for
such additional Expense) or materially impairs Lessee's ability to contest such
claim.
9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS
(a) In case any action, suit or proceeding shall be brought against
any Indemnitee for which Lessee is responsible under this Section 9.1, such
Indemnitee shall notify Lessee of the commencement thereof and Lessee may, at
its expense, participate in and to the extent that it shall wish (subject to the
provisions of the following paragraph), assume and control the defense thereof
and, subject to Section 9.1.5(c), settle or compromise the same.
(b) Lessee or its insurer(s) shall have the right, at its or their
expense, to investigate or, if Lessee or its insurer(s) shall agree in writing
not to dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 9.1.5 for indemnification hereunder or under any
<PAGE>
insurance policies pursuant to which coverage is sought, control the defense of,
any action, suit or proceeding, relating to any Expense for which
indemnification is sought pursuant to this Section 9.1, and each Indemnitee
shall cooperate with Lessee or its insurer(s) with respect thereto; PROVIDED,
that Lessee shall not be entitled to control the defense of any such action,
suit, proceeding or compromise any such Expense (i) during the continuance of
any Lease Event of Default arising under Section 14.1 of the Lease, (ii) if such
proceedings would entail a material risk of the sale, forfeiture or loss of the
Aircraft or (iii) if such proceedings would entail a risk of criminal liability
or greater than de minimis risk of material civil penalties being imposed on
such Indemnitee. In connection with any such action, suit or proceeding being
controlled by Lessee, such Indemnitee shall have the right to participate
therein, at its sole cost and expense, with counsel reasonably satisfactory to
Lessee; PROVIDED, that such Indemnitee's participation does not, in the
reasonable opinion of the independent counsel appointed by the Lessee or its
insurers to conduct such proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of
Lessee, 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 9.1.
(d) In the case of any Expense indemnified by the Lessee hereunder
which is covered by a policy of insurance maintained by Lessee pursuant to
Section 11 of the Lease, at Lessee's expense, each Indemnitee agrees to
cooperate with the insurers in the exercise of their rights to investigate,
defend or compromise such Expense as may be required to retain the benefits of
such insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this Agreement, Lessee may
require such Indemnitee to agree in writing to the terms of this Section 9 and
Section 15.8 prior to making any payment to such Indemnitee under this Section
9.
(f) Nothing herein shall be deemed to be an assumption by Lessee of
obligations of Owner Trustee with respect to, or a guarantee by Lessee of, any
amounts payable by Owner Trustee upon Equipment Notes or a guarantee of any
residual value of the Aircraft.
(g) Nothing contained in this Section 9.1.5 shall be deemed to
require an Indemnitee to contest any Expense or to assume responsibility for or
control of any judicial proceeding with respect thereto.
<PAGE>
9.1.6 INFORMATION
Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Lessee's control or is
reasonably available to Lessee, which such Indemnitee may reasonably request and
will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under Section 9.1.5. The Indemnitee shall supply Lessee
with such information not within the control of Lessee, as is in such
Indemnitee's control or is reasonably available to such Indemnitee, which Lessee
may reasonably request to control or participate in any proceeding to the extent
permitted by Section 9.1.5.
9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER
ASSURANCES
Upon the payment in full by Lessee of any indemnity provided for
under this Agreement, Lessee, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies or in connection with any indemnity claim such Indemnitee may have
under Section 5.03 or 7.01 of the Trust Indenture or Section 5.3 or 7 of the
Trust Agreement) in respect of the matter as to which such indemnity was paid.
Each Indemnitee will give such further assurances or agreements and cooperate
with Lessee to permit Lessee to pursue such claims, if any, to the extent
reasonably requested by Lessee and at Lessee's expense.
9.1.8 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with
respect to any Expense paid by Lessee hereunder, it will promptly pay the amount
refunded (but not an amount in excess of the amount Lessee or any of its
insurers has paid in respect of such Expense) over to Lessee unless a Lease
Event of Default shall have occurred and be continuing, in which case such
amounts shall be paid over to Owner Trustee (or, so long as the Trust Indenture
shall not have been discharged, to Mortgagee) to hold as security for Lessee's
obligations under the Lessee Operative Agreements or, if requested by Lessee,
applied to satisfy such obligations.
9.2 EXPENSES
9.2.1 TRANSACTION EXPENSES
Owner Participant shall pay all Transaction Expenses (other than the
ongoing fees, disbursements and expenses of Mortgagee and the Owner Trustee), up
<PAGE>
to an aggregate amount equal to the Expense Limit. Airframe Manufacturer shall
pay all Transaction Expenses in excess of the Expense Limit and the ongoing
fees, disbursements and expenses of Mortgagee and the Owner Trustee. Lessee
shall have no liability or obligation with respect to Transaction Expenses.
9.2.2 PAYMENT OF OTHER EXPENSES
Lessee will be responsible for the fees and charges of its counsel
incurred in connection with the preparation, execution and delivery of the
Operating Agreements. All out-of-pocket costs and expenses of Lessee (including,
without limitation, reasonable attorney's fees and charges) incurred in
performance of Sections 7.1.3(a), (b) and (c) (other than with respect to the
first parenthetical of Section 7.1.3(c)) to the extent constituting Transaction
Expenses, shall be paid pursuant to Section 9.2.1 and, otherwise, shall be paid
by Airframe Manufacturer. Existing Lessor and Airframe Manufacturer shall each
pay all costs and expenses incurred by it in connection with the Operative
Agreements.
9.3 GENERAL TAX INDEMNITY
9.3.1 GENERAL
Except as provided in Section 9.3.2, Lessee agrees that each payment
of Rent paid by Lessee pursuant to the Lease, and any other payment or indemnity
paid by Lessee to a Tax Indemnitee under any Operative Agreement, shall be free
of all withholdings or deductions with respect to Taxes of any nature (other
than U.S. federal withholding taxes on, based on or measured by gross or net
income), and in the event that Lessee shall be required by applicable law to
make any such withholding or deduction for any such payment (x) Lessee shall
make all such withholdings or deductions, (y) the amount payable by Lessee shall
be increased so that after making all required withholdings or deductions such
Tax Indemnitee receives (at no after-Tax cost to the Tax Indemnitee) the same
amount that it would have received had no such withholdings or deductions been
made, and (z) Lessee shall pay the full amount withheld or deducted to the
relevant Taxing Authority in accordance with applicable law. Lessee further
agrees that, in the event it is required to withhold from any payment of Basic
Rent, Termination Value, Stipulated Loss Value (and amounts determined by
reference thereto), and amounts payable upon exercise of Lessee's purchase
option pursuant to Section 17.3 of the Lease, any Tax imposed upon Owner
Participant or Owner Trustee (including any withholding Tax based on income or
receipts of Owner Participant or Owner Trustee) and such Tax is excluded from
indemnification pursuant to Section 9.3.2, Lessee shall pay such additional
<PAGE>
amount, if any, required so that the total amount paid by Lessee (after making
all required withholdings) is equal to (assuming timely payment of the Equipment
Notes prior to the relevant Payment Date) the aggregate principal amount of
scheduled installments due on the Equipment Notes outstanding on the relevant
Payment Date, together with accrued and unpaid interest, due on the Equipment
Notes; Owner Participant or Owner Trustee, as the case may be, shall reimburse
Lessee for any such additional amounts within two Business Days after demand
therefor. Except as provided in Section 9.3.2 and whether or not any of the
transactions contemplated hereby are consummated, Lessee shall pay, indemnify,
protect, defend and hold each Tax Indemnitee harmless from all Taxes imposed by
any Taxing Authority that may from time to time be imposed on or asserted
against any Tax Indemnitee or the Aircraft, the Airframe, any Engine or any Part
or any interest in any of the foregoing (whether or not indemnified against by
any other Person), upon or with respect to the Operative Agreements or the
transactions or payments contemplated thereby, including but not limited to any
Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine,
any Part, any Operative Agreement (including without limitation any Equipment
Notes) or any data or any other thing delivered or to be delivered under an
Operative Agreement, (y) the purchase, manufacture, acceptance, rejection, sale,
transfer of title, return, ownership, mortgaging, delivery, transport, charter,
rental, lease, re-lease, sublease, assignment, possession, repossession,
presence, use, condition, storage, preparation, maintenance, modification,
alteration, improvement, operation, registration, transfer or change of
registration, reregistration, repair, replacement, overhaul, location, control,
the imposition of any Lien (other than a Lessor Lien), financing, refinancing
requested by the Lessee, abandonment or other disposition of the Aircraft, the
Airframe, any Engine, any Part, any data or any other thing delivered or to be
delivered under an Operative Agreement, or (z) rent, interest, fees or any other
income, proceeds, receipts or earnings, whether actual or deemed, arising upon,
in connection with, or in respect of, any of the Operative Agreements (including
the property or income or other proceeds with respect to property held as part
of the Trust Estate) or the transactions contemplated thereby.
9.3.2 CERTAIN EXCEPTIONS
The provisions of Section 9.3.1 shall not apply to, and Lessee shall
have no liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the
United States or any Taxing Authority of any jurisdiction within the United
States in which such Tax Indemnitee is incorporated or maintains its principal
<PAGE>
place of business or is otherwise subject to Taxes of such type as a result of
transactions or activities other than those contemplated by the Operative
Agreements (i) on, based on, or measured by, gross or net income or gross or net
receipts, including capital gains taxes, excess profits taxes, minimum taxes
from tax preferences, alternative minimum taxes, branch profits taxes,
accumulated earnings taxes, personal holding company taxes, succession taxes and
estate taxes, and any withholding taxes on, based on or measured by gross or net
income or receipts or (ii) on, or with respect to, or measured by, capital or
net worth or in the nature of a franchise tax or a tax for the privilege of
doing business (other than, in the case of clause (i) or (ii), sales, use,
license or property Taxes, value added taxes imposed in lieu of any of the
foregoing, airport excise taxes or any excise taxes imposed in the nature of or
in lieu of any of the foregoing or any Hawaii general excise tax and related
county surcharges imposed as a result of the use or location of the Aircraft in
Hawaii by a Lessee Person; and other than, in the case of clause (ii), any doing
business taxes imposed by a taxing authority in any jurisdiction (other than a
jurisdiction within which such Tax Indemnitee is incorporated or maintains its
principal place of business) if such doing business taxes attributable to the
transactions contemplated by the Operative Agreements were subject to indemnity
pursuant to the provisions of this clause 9.3.2(a) (without regard to this
parenthetical) solely as a result of the usage or location of the Aircraft in
such jurisdiction by a Lessee Person when such Tax Indemnitee was not
incorporated or doing business or otherwise subject to Taxes of such type in
such jurisdiction, if in a subsequent taxable period such Tax Indemnitee becomes
subject to Taxes of such type as a result of activities or transactions other
than those contemplated by the Operative Agreements, to the extent that such
Taxes (and in an amount no more than the amount of such Taxes that) would have
continued to be imposed solely as a result of the usage or location of the
Aircraft by a Lessee Person in such jurisdiction in the absence of any
additional nexus between such Tax Indemnitee and such jurisdiction);
(b) any Taxes imposed in connection with the sale or transfer of the
Aircraft from the Existing Lessor to the Owner Trustee or the purchase by Owner
Trustee for the benefit of the Owner Participant of the Aircraft from the
Existing Lessor;
(c) on, or with respect to, or measured by, any trustee fees,
commissions or compensation received by Owner Trustee, Pass Through Trustee,
Subordination Agent or Mortgagee;
<PAGE>
(d) on the Trust or the Trust Estate that result from treatment of
the Trust or the Trust Estate as an entity, such as a corporation, separate and
apart from the Owner Participant;
(e) that are being contested as provided in Section 9.3.4 hereof, for
so long as such contest is continuing;
(f) imposed on any Tax Indemnitee to the extent that such Taxes
result from the gross negligence or willful misconduct of such Tax Indemnitee, a
related Tax Indemnitee or any Affiliate thereof;
(g) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is imposed on, or is
collected from, the transferee) as a result of a transfer or other disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of the Owner Participant, by Owner Trustee
(unless requested by the Lessee), or, in the case of Taxes imposed on a
transferee, by the transferor) of any interest in the Aircraft, the Airframe,
any Engine or any Part, the Rent (other than the assignment of Rent to the Loan
Trustee pursuant to the Trust Indenture), the Trust, the Trust Estate, the Trust
Indenture Estate, the Lease or any interest arising under the Operative
Agreements or any Equipment Note or a transfer or disposition (including a
deemed transfer or disposition) of any interest in a Tax Indemnitee (other than
(A) a substitution or replacement of the Aircraft, the Airframe, any Engine or
any Part by a Lessee Person that is treated for Tax purposes as a transfer or
disposition, (B) a transfer pursuant to an exercise of remedies upon a Lease
Event of Default that shall have occurred and have been continuing, or (C) a
transfer to Lessee pursuant to Section 17.3 of the Lease);
(h) except with respect to gross-ups, imposed subsequent to (and not
in respect of) a transfer or other disposition described in paragraph (g) above
and in excess of those that would have been imposed had there not been a
transfer or other disposition by or to such Tax Indemnitee or a related Tax
Indemnitee described in paragraph (g) above;
(i) imposed on the Owner Participant and indemnified by Lessee
pursuant to the Tax Indemnity Agreement;
(j) imposed with respect to any period after the expiration or
earlier termination of the Term and, if required pursuant to the terms of the
Lease, the return of possession of the Aircraft to Lessor or placement in
storage at the request of Lessor in accordance with the Lease (provided that
<PAGE>
this exclusion (j) shall not apply to Taxes imposed after such period arising as
a result of events occurring prior to such expiration or earlier termination);
(k) consisting of any interest, penalties or additions to tax imposed
on a Tax Indemnitee resulting from a failure of such Tax Indemnitee or a related
Tax Indemnitee to file any return properly and timely, unless such failure shall
be caused by the failure of Lessee to fulfill its obligations, if any, under
Section 9.3.6 with respect to such return, PROVIDED that if any such return is
required to be filed in a jurisdiction outside the United States, which return
would not have been required to be filed in the absence of the transactions
contemplated under the Operative Agreements or Lessee's transactions or
activities in such jurisdiction, this exclusion shall not apply if (A) Lessee
has not informed the Tax Indemnitee in writing of the need to file such return
at least 30 days prior to the due date thereof (or such shorter period as would
reasonably allow the Tax Indemnitee to file such return if, under the
circumstances, the Lessee could not have reasonably informed the Tax Indemnitee
of the need to file at least 30 days prior to the due date thereof), or (B) the
Tax Indemnitee had determined in good faith that such filing would subject it or
any Affiliate to adverse consequences in such jurisdiction for which it had not
been (and would not have been) indemnified;
(l) resulting from, or that would not have been imposed but for, any
Lessor Liens arising as a result of claims against, or acts or omissions of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee;
(m) imposed on any Tax Indemnitee as a result of the breach by such
Tax Indemnitee or a related Tax Indemnitee of any covenant of such Tax
Indemnitee or any Affiliate thereof contained in any Operative Agreement or the
inaccuracy of any representation or warranty by such Tax Indemnitee or any
Affiliate thereof in any Operative Agreement;
(n) in the nature of an intangible or similar Tax (i) upon or with
respect to the value or principal amount of the interest of Loan Participant or
any Note Holder in any Equipment Note or the loan evidenced thereby or (ii) upon
or with respect to the value of the interest of the Owner Participant in the
Trust Estate or the Trust, in each case only if such Taxes are in the nature of
franchise Taxes or result from the Tax Indemnitee doing business in the taxing
jurisdiction and are imposed because of the place of incorporation or the
activities unrelated to the transactions contemplated by the Operative
Agreements in the taxing jurisdiction of such Tax Indemnitee;
<PAGE>
(o) that are included in Lessor's Cost and paid to the appropriate
Taxing Authority;
(p) imposed on a Tax Indemnitee by a Taxing Authority of a
jurisdiction outside the United States within which such Tax Indemnitee is
incorporated or maintains its principal place of business or to the extent that
such Taxes would not have been imposed but for a connection between the Tax
Indemnitee or a related Tax Indemnitee and such jurisdiction imposing such Tax
unrelated to the transactions contemplated by the Operative Agreements; or
(q) Taxes relating to ERISA or Section 4975 of the Code.
For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees
that are successors, assigns, agents, servants or Affiliates of such Tax
Indemnitee shall be related Tax Indemnitees.
9.3.3 PAYMENT
(a) Lessee's indemnity obligation to a Tax Indemnitee under this
Section 9.3 shall equal the amount which, after taking into account any Tax
imposed upon the receipt or accrual of the amounts payable under this Section
9.3 and any tax benefits actually recognized by such Tax Indemnitee as a result
of the indemnifiable Tax (including, without limitation, any benefits recognized
as a result of an indemnifiable Tax being utilized by such Tax Indemnitee as a
credit against Taxes not indemnifiable under this Section 9.3), shall equal the
amount of the Tax indemnifiable under this Section 9.3.
(b) At Lessee's request, the computation of the amount of any
indemnity payment owed by Lessee or any amount owed by a Tax Indemnitee to
Lessee pursuant to this Section 9.3 shall be verified and certified by an
independent public accounting firm selected by such Tax Indemnitee and
reasonably satisfactory to Lessee. Such verification shall be binding. The costs
of such verification (including the fee of such public accounting firm) shall be
borne by Lessee unless such verification shall result in an adjustment in
Lessee's favor of 5% or more of the net present value (computed using a discount
rate equal to the Debt Rate, compounded semiannually) of the payment as computed
by such Tax Indemnitee, in which case the costs shall be paid by such Tax
Indemnitee.
(c) Each Tax Indemnitee shall provide Lessee with such
certifications, information and documentation as shall be in such Tax
Indemnitee's possession and as shall be reasonably requested by Lessee to
<PAGE>
minimize any indemnity payment pursuant to this Section 9.3; provided, that
notwithstanding anything to the contrary contained herein, no Tax Indemnitee
shall be required to provide Lessee with any Tax returns.
(d) Each Tax Indemnitee shall promptly forward to Lessee any written
notice, bill or advice received by it from any Taxing Authority concerning any
Tax for which it seeks indemnification under this Section 9.3. Lessee shall pay
any amount for which it is liable pursuant to this Section 9.3 directly to the
appropriate Taxing Authority if legally permissible or upon demand of a Tax
Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a
contest occurs in accordance with Section 9.3.4, within 30 days after a Final
Determination (as defined below)), but in no event more than two Business Days
prior to the date the Tax to which such amount payable hereunder relates is due.
If requested by a Tax Indemnitee in writing, Lessee shall furnish to the
appropriate Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of any Tax paid by Lessee or such other evidence of payment of
such Tax as is acceptable to such Tax Indemnitee. Lessee shall also furnish
promptly upon written request such data as any Tax Indemnitee may reasonably
require to enable such Tax Indemnitee to comply with the requirements of any
taxing jurisdiction unless such data is not reasonably available to Lessee or,
unless such data is specifically requested by a Taxing Authority, is not
customarily furnished by domestic air carriers under similar circumstances. For
purposes of this Section 9.3, a "Final Determination" shall mean (i) a decision,
judgment, decree or other order by any court of competent jurisdiction that
occurs pursuant to the provisions of Section 9.3.4, which decision, judgment,
decree or other order has become final and unappealable (by law or by Lessee
hereunder), (ii) a closing agreement or settlement agreement entered into in
accordance with Section 9.3.4 that has become binding and is not subject to
further review or appeal (absent fraud, misrepresentation, etc.), or (iii) the
termination of administrative proceedings and the expiration of the time for
instituting a claim in a court proceeding.
(e) If any Tax Indemnitee shall actually realize a tax savings by
reason of any Tax paid or indemnified by Lessee pursuant to this Section 9.3
(whether such tax savings shall be by means of a foreign tax credit,
depreciation or cost recovery deduction or otherwise) and such savings is not
otherwise taken into account in computing such payment or indemnity, such Tax
Indemnitee shall pay to Lessee (within 30 days after the realization of such tax
savings) an amount equal to the lesser of (i) the amount of such tax savings,
plus any additional tax savings recognized as the result of any payment made
pursuant to this sentence, when, as, if, and to the extent, realized or (ii) the
<PAGE>
amount of all payments (other than in respect of contest costs) pursuant to this
Section 9.3 by Lessee to such Tax Indemnitee (less any payments previously made
by such Tax Indemnitee to Lessee pursuant to this Section 9.3.3 (e)) (and the
excess, if any, of the amount described in clause (i) over the amount described
in clause (ii) shall be carried forward and applied to reduce pro tanto any
subsequent obligations of Lessee to make payments to such Tax Indemnitee
pursuant to this Section 9.3); provided, that such Tax Indemnitee shall not be
required to make any payment pursuant to this sentence so long as a Lease Event
of Default of a monetary nature has occurred and is continuing. If a tax benefit
is later disallowed or denied, the disallowance or denial shall be treated as a
Tax indemnifiable under Section 9.3.1 without regard to the provisions of
Section 9.3.2 (other than Section 9.3.2 (f)). Each such Tax Indemnitee shall in
good faith use reasonable efforts in filing its tax returns and in dealing with
Taxing Authorities to seek and claim any such tax benefit.
(f) For purposes of this Section 9.3, items of foreign Tax of any Tax
Indemnitee shall be deemed to be utilized by such Tax Indemnitee as credits or
deductions for any taxable year in accordance with the following priorities:
(x) First, all utilizable foreign Taxes (taking into account the
limitations of Section 904(d) of the Code) other than those described in clause
(y) below;
(y) Second, all utilizable foreign Taxes (taking into account
the limitations of Section 904(d) of the Code) arising out of the transactions
contemplated by the Operative Agreements and other equipment leasing
transactions to the extent such Tax Indemnitee is indemnified or held harmless
for such Taxes by the Lessee or a lessee on a pari passu basis.
9.3.4 CONTEST
(a) If a written claim is made against a Tax Indemnitee for Taxes
with respect to which Lessee could be liable for payment or indemnity hereunder,
or if a Tax Indemnitee makes a determination that a Tax is due for which Lessee
could have an indemnity obligation hereunder, such Tax Indemnitee shall promptly
give Lessee notice in writing of such claim (provided, that failure to so notify
Lessee shall not relieve Lessee of its indemnity obligations hereunder unless
such failure to notify forecloses Lessee's rights to require a contest of such
claim) and shall take no action with respect to such claim without the prior
written consent of Lessee for 30 days following the receipt of such notice by
Lessee; provided, that, in the case of a claim made against a Tax Indemnitee, if
<PAGE>
such Tax Indemnitee shall be required by law to take action prior to the end of
such 30-day period, such Tax Indemnitee shall, in such notice to Lessee, so
inform Lessee, and such Tax Indemnitee shall take no action for as long as it is
legally able to do so (it being understood that a Tax Indemnitee shall be
entitled to pay the Tax claimed and sue for a refund prior to the end of such
30-day period if (i)(A) the failure to so pay the Tax would result in
substantial penalties (unless immediately reimbursed by Lessee) and the act of
paying the Tax would not materially prejudice the right to contest or (B) the
failure to so pay would result in criminal penalties and (ii) such Tax
Indemnitee shall take any action so required in connection with so paying the
Tax in a manner that, in its good faith opinion, is the least prejudicial to the
pursuit of the contest). In addition, such Tax Indemnitee shall (provided, that
Lessee shall have agreed to keep such information confidential other than to the
extent necessary in order to contest the claim) furnish Lessee with copies of
any requests for information from any Taxing Authority relating to such Taxes
with respect to which Lessee may be required to indemnify hereunder. If
requested by Lessee in writing within 30 days after its receipt of such notice,
such Tax Indemnitee shall, at the expense of Lessee (including, without
limitation, all reasonable costs, expenses and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law to be contested by the Lessee in its own name, allow Lessee to
contest) through appropriate administrative and judicial proceedings the
validity, applicability or amount of such Taxes by (I) resisting payment
thereof, (II) not paying the same except under protest if protest is necessary
and proper or (III) if the payment is made, using reasonable efforts to obtain a
refund thereof in an appropriate administrative and/or judicial proceeding. If
requested to do so by Lessee, the Tax Indemnitee shall appeal any adverse
administrative or judicial decision, except that the Tax Indemnitee shall not be
required to pursue any appeals to the United States Supreme Court. If and to the
extent the Tax Indemnitee is able to separate the contested issue or issues from
other issues arising in the same administrative or judicial proceeding that are
unrelated to the transactions contemplated by the Operative Agreements without,
in the good faith judgment of such Tax Indemnitee, adversely affecting such Tax
Indemnitee, such Tax Indemnitee shall permit Lessee to contest such matter in
its own name, if permitted by applicable law, and shall provide to Lessee (at
Lessee's cost and expense) such information or data that is in such Tax
Indemnitee's control or possession that is reasonably necessary to conduct such
contest (other than such Tax Indemnitee's federal income tax returns). In the
case of a contest controlled by a Tax Indemnitee, such Tax Indemnitee shall
consult with Lessee in good faith regarding the manner of contesting such claim
and shall keep Lessee reasonably informed regarding the progress of such
<PAGE>
contest. A Tax Indemnitee shall not fail to take any action expressly required
by this Section 9.3.4 (including, without limitation, any action regarding any
appeal of an adverse determination with respect to any claim) or settle or
compromise any claim without the prior written consent of the Lessee (except as
contemplated by Section 9.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee
be required to pursue any contest (or to permit Lessee to pursue any contest)
unless (i) Lessee shall have agreed to pay such Tax Indemnitee on demand all
reasonable costs and expenses incurred by such Tax Indemnitee in connection with
contesting such Taxes, including, without limitation, all reasonable out of
pocket costs and expenses and reasonable attorneys' and accountants' fees and
disbursements, (ii) if such contest shall involve the payment of the claim,
Lessee shall advance the amount thereof (to the extent indemnified hereunder)
plus interest, penalties and additions to tax with respect thereto that are
required to be paid prior to the commencement of such contest on an
interest-free and after-Tax basis to such Tax Indemnitee (and such Tax
Indemnitee shall promptly pay to the Lessee any net realized tax benefits
resulting from such advance including any tax benefits resulting from making
such payment), (iii) such Tax Indemnitee shall have reasonably determined that
the action to be taken will not result in any material risk of forfeiture, sale
or loss of the Aircraft (unless Lessee shall have made provisions to protect the
interests of any such Tax Indemnitee and the Owner Participant in a manner
reasonably satisfactory to such Tax Indemnitee and the Owner Participant)
(provided, that such Tax Indemnitee agrees to notify Lessee in writing promptly
after it becomes aware of any such risk), (iv) no Lease Event of Default shall
have occurred and be continuing unless Lessee has provided adequate security for
its obligations hereunder by advancing to such Tax Indemnitee before proceeding
or continuing with such contest, the amount of the Tax being contested, plus any
interest and penalties and an amount estimated in good faith by such Tax
Indemnitee for expenses, and (v) prior to commencing any judicial action
controlled by Lessee, Lessee shall have acknowledged its liability for such
claim hereunder, provided that Lessee shall not be bound by its acknowledgment
if the Final Determination articulates conclusions of law and fact that
demonstrate that Lessee has no liability for the contested amounts hereunder.
Notwithstanding the foregoing, if any Tax Indemnitee shall release, waive,
compromise or settle any claim which may be indemnifiable by Lessee pursuant to
this Section 9.3 without the written permission of Lessee, Lessee's obligation
to indemnify such Tax Indemnitee with respect to such claim (and all directly
related claims and claims based on the outcome of such claim) shall terminate,
subject to Section 9.3.4(c), and subject to Section 9.3.4(c), such Tax
<PAGE>
Indemnitee shall repay to Lessee any amount previously paid or advanced to such
Tax Indemnitee with respect to such claim (other then contest costs), plus
interest at the rate that would have been payable by the relevant Taxing
Authority with respect to a refund of such Tax.
(c) Notwithstanding anything contained in this Section 9.3, a Tax
Indemnitee will not be required to contest the imposition of any Tax and shall
be permitted to settle or compromise any claim without Lessee's consent if such
Tax Indemnitee (i) shall waive its right to indemnity under this Section 9.3
with respect to such Tax (and any directly related claim and any claim the
outcome of which is determined based upon the outcome of such claim), (ii) shall
pay to Lessee any amount previously paid or advanced by Lessee pursuant to this
Section 9.3 (other than contest costs) with respect to such Tax, plus interest
at the rate that would have been payable by the relevant Taxing Authority with
respect to a refund of such Tax, and (iii) shall agree to discuss with Lessee
the views or positions of any relevant Taxing Authority with respect to the
imposition of such Tax.
9.3.5 REFUND
If any Tax Indemnitee shall receive a refund of, or be entitled to a
credit against other liability for, all or any part of any Taxes paid,
reimbursed or advanced by Lessee, such Tax Indemnitee shall pay to Lessee within
30 days of such receipt an amount equal to the lesser of (a) the amount of such
refund or credit plus any net tax benefit (taking into account any Taxes
incurred by such Tax Indemnitee by reason of the receipt of such refund or
realization of such credit) actually realized by such Tax Indemnitee as a result
of any payment by such Tax Indemnitee made pursuant to this sentence (including
this clause (a)) and (b) such tax payment, reimbursement or advance by Lessee to
such Tax Indemnitee theretofore made pursuant to this Section 9.3 (and the
excess, if any, of the amount described in clause (a) over the amount described
in clause (b) shall be carried forward and applied to reduce pro tanto any
subsequent obligation of Lessee to make payments to such Tax Indemnitee pursuant
to this Section 9.3). If, in addition to such refund or credit, such Tax
Indemnitee shall receive (or be credited with) an amount representing interest
on the amount of such refund or credit, such Tax Indemnitee shall pay to Lessee
within 30 days of such receipt or realization of such credit that proportion of
such interest that shall be fairly attributable to Taxes paid, reimbursed or
advanced by Lessee prior to the receipt of such refund or realization of such
credit.
<PAGE>
9.3.6 TAX FILING
If any report, return or statement is required to be filed with
respect to any Tax which is subject to indemnification under this Section 9.3,
Lessee shall timely file the same (except for any such report, return or
statement which a Tax Indemnitee has timely notified the Lessee in writing that
such Tax Indemnitee intends to file or which a Tax Indemnitee is required by law
to file in its own name); provided, that the relevant Tax Indemnitee shall
furnish Lessee with any information in such Tax Indemnitee's possession or
control that is reasonably necessary to file any such return, report or
statement and is reasonably requested in writing by Lessee (it being understood
that the Tax Indemnitee shall not be required to furnish copies of its actual
tax returns, although it may be required to furnish relevant information
contained therein). Lessee shall either file such report, return or statement
and send a copy of such report, return or statement to such Tax Indemnitee, and
Owner Trustee if the Tax Indemnitee is not Owner Trustee, or, where Lessee is
not permitted to file such report, return or statement, or if the same is
required by law to be filed in the Tax Indemnitee's own name, it shall notify
such Tax Indemnitee in writing of such requirement and prepare and deliver such
report, return or statement to such Tax Indemnitee in a manner satisfactory to
such Tax Indemnitee within a reasonable time prior to the time such report,
return or statement is to be filed.
9.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Lessee or
Loan Trustee or to such other person as Lessee or Loan Trustee may designate, at
Lessee's or Loan Trustee's request, such duly executed and properly completed
forms as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(x) such reduction or exemption is available to such Tax Indemnitee, (y) Lessee
has provided such Tax Indemnitee with any information necessary to complete such
form not otherwise reasonably available to such Tax Indemnitee, and (z) if such
return is required to be filed in a jurisdiction outside the United States, the
Tax Indemnitee has not made a good faith determination that such filing would
subject it or any Affiliate to any adverse consequences in such jurisdiction for
which it has not been (and would not have been) indemnified.
9.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Lessee may
require the Tax Indemnitee to agree in writing, in a form reasonably acceptable
<PAGE>
to Lessee, to the terms of this Section 9.3 and Section 15.8 prior to making any
payment to such Tax Indemnitee under this Section 9.3.
9.3.9 SUBROGATION
Upon payment of any Tax by Lessee pursuant to this Section 9.3 to or
on behalf of a Tax Indemnitee, Lessee, without any further action, shall be
subrogated to any claims that such Tax Indemnitee may have relating thereto.
Such Tax Indemnitee shall cooperate with Lessee (to the extent such cooperation
does not result in any unreimbursed cost, expense or liability to such Tax
Indemnitee) to permit Lessee to pursue such claims.
9.3.10 FOREIGN TAX ON LOAN PAYMENTS
If an Owner Participant is incorporated or organized, or maintains a
place of business or conducts activities (other than any activities of the Owner
Participant resulting from its participation in the transactions contemplated by
the Operative Agreements or resulting from any activities of Lessee in such
jurisdiction) in a country other than the United States or in a territory,
possession or commonwealth of the United States (within the meaning of the tax
law of that foreign jurisdiction) and if as a result thereof any foreign Taxes
(including withholding Taxes) are imposed on the Pass Through Trustees, Pass
Through Trusts, or Note Holders, then Owner Participant shall reimburse Lessee
for any payments Lessee is required to make to or on behalf of any Pass Through
Trustee, Pass Through Trust, or Note Holder under this Section 9.3 as a result
of the imposition of such Taxes. The amount payable by Owner Participant to
Lessee shall be an amount which, after taking into account any such Taxes, any
Tax imposed upon the receipt or accrual by Lessee of such payment by Owner
Participant and any tax benefits or tax savings realized by Lessee with respect
to the payment of such withholding Tax or the payment hereunder, shall equal the
amount of Lessee's payment to or on behalf of such Pass Through Trustee, or Note
Holder.
9.4 PAYMENTS
Any payments made pursuant to Section 9.1 and Section 9.3 shall be
due on the 60th day after demand is made to the indemnifying party therefor
(other than any payments for which a different time is provided under Section
9.3.3 hereof) and shall be made directly to the relevant Indemnitee or Tax
Indemnitee or to Lessee, in immediately available funds at such bank or to such
account as specified by such Indemnitee or Tax Indemnitee or Lessee, as the case
may be, in written directives to the payor, or, if no such direction shall have
been given, by check of the payor payable to the order of, and mailed to, such
<PAGE>
Indemnitee or Tax Indemnitee or Lessee, as the case may be, by certified mail,
postage prepaid, at its address as set forth in this Agreement.
9.5 INTEREST
If any amount, payable by Lessee, any Indemnitee or any Tax
Indemnitee under Section 9.1 or 9.3 is not paid when due, the person obligated
to make such payment shall pay on demand, to the extent permitted by Law, to the
person entitled thereto, interest on any such amount for the period from and
including the due date for such amount to but excluding the date the same is
paid, at the Payment Due Rate. Such interest shall be paid in the same manner as
the unpaid amount in respect of which such interest is due.
9.6 BENEFIT OF INDEMNITIES
The obligations of Lessee in respect of all indemnities, obligations,
adjustments and payments in Section 9.1 or 9.3 are expressly made for the
benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee
entitled thereto, without declaring the Lease to be in default or taking other
action thereunder, and notwithstanding any provision of the Trust Indenture.
SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS
10.1 PARTICIPANTS, OWNER TRUSTEE AND NOTE HOLDERS
10.1.1 OWNER PARTICIPANT
(a) Owner Participant shall not Transfer any or all of its right,
title or interest in the Trust Estate or the Trust Agreement and to this
Agreement unless:
(i) The Transferee shall have full power, authority and legal
right to execute and deliver and to perform the obligations of Owner
Participant under this Agreement and the other Owner Participant
Agreements and shall provide reasonably satisfactory evidence of such
power and authority to Lessee, Equity Guarantor, Owner Trustee and
Mortgagee;
(ii) The Transferee shall enter into one or more legal, valid,
binding and enforceable agreements effective to confirm that such
Transferee agrees to be bound by all the terms of, and to undertake
all of the obligations arising after such transfer of, the
transferring Owner Participant contained in the Owner Participant
Agreements and in which it makes representations and warranties
<PAGE>
substantially the same as those contained in Section 6.2 of this
Participation Agreement;
(iii) Lessee shall not be obligated to pay any greater amount or
incur any greater obligation than that which it would have been
obliged to pay or incur under the Lease or other Lessee Operative
Agreement if no transfer or assignment had taken place, and the terms
and conditions of the Lease and the other Lessee Operative Agreements
insofar as they relate to the rights and obligations of Lessee or the
Loan Participants shall not be altered;
(iv) Owner Participant shall deliver to Lessee, Equity Guarantor,
Owner Trustee and Mortgagee an opinion of counsel reasonably
satisfactory to each of them (which, if the Transferee is an Affiliate
of the Owner Participant, may be in-house counsel to such Owner
Participant) to the effect that such agreement or agreements referred
to in Section 10.1.1(a)(ii) and, if applicable, 10.1.1(a)(vi) are
legal, binding and enforceable in accordance with its or their terms
and that such transfer will not violate applicable securities laws,
the Act or any other applicable law and is in accordance with this
Section 10.1.1;
(v) The Transferee is a Citizen of the United States (it being
understood that the existence of any such requirement is to be
determined without giving consideration to Section 47.9 of the FAA
Regulations or any other provision that would restrict Lessee's use or
operation of the Aircraft), or shall use a voting powers trust or
similar arrangement in order to hold an interest in the Trust Estate
such that the Aircraft can be registered in the United States (without
giving consideration to Section 47.9 of the FAA Regulations or any
other provision that would restrict Lessee's use or operation of the
Aircraft);
(vi) The Transferee shall be one person and shall be either (A) a
Permitted Institution or (B) any other person (other than, without
Lessee's consent, a commercial air carrier, a commercial aircraft
operator, a freight forwarder or an Affiliate of any of the foregoing)
the obligations of which under the Owner Participant Agreements are
guaranteed by a Permitted Institution in any case, pursuant to a
written guaranty, in form and substance reasonably satisfactory to
Lessee, Owner Trustee and Mortgagee;
(vii) Equity Guarantor shall not be obligated to pay any greater
amount or incur any greater obligation than that which it would have
been obliged to pay or incur under the Equity Guaranty if no Transfer
<PAGE>
had taken place, and the terms and conditions of the Equity Guaranty
insofar as they relate to the rights and obligations of Equity
Guarantor shall not be altered; and
(viii) The Transferee shall be a "U.S. Person" as defined in
Section 7701(a)(30) of the Code (or any successor provision thereto).
(b) Owner Participant shall give written notice to Lessee, Mortgagee
and Owner Trustee at least 10 days prior to any such Transfer, specifying the
name and address of the proposed Transferee, and providing financial statements
of the proposed Transferee evidencing satisfaction of the requirements described
in Section 10.1.1(a)(vi)(A) or (B) above.
(c) Any fees, charges and expenses, including the reasonable legal
fees, charges and expenses incurred by Lessee, Owner Participant, Mortgagee, any
Note Holder or Owner Trustee in connection with any Transfer by Owner
Participant permitted by this Section 10.1.1, or by the Transferee in any such
case, will be paid for by Owner Participant.
10.1.2 OWNER TRUSTEE
Owner Trustee may transfer its interests in the Trust Agreement
pursuant to Section 9 thereof.
10.1.3 NOTE HOLDERS
Subject to Section 7.5.2 hereof and Section 2.07 of the Trust
Indenture, any Note Holder may, at any time and from time to time, Transfer or
grant participations in all or any portion of the Equipment Notes and/or all or
any portion of its beneficial interest in its Equipment Notes and the Trust
Indenture Estate to any person (it being understood that the sale or issuance of
Pass Through Certificates by a Pass Through Trustee shall not be considered a
Transfer or participation); provided, that any participant in any such
participations shall not have any direct rights under the Operative Agreements
or any Lien on all or any part of the Aircraft or Trust Indenture Estate and
neither Lessee, Lessor, nor Owner Participant shall have any increased liability
or obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be deemed to be bound by all of the covenants of Note
Holders contained in the Operative Agreements.
<PAGE>
10.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with Section 10.1.1, 10.1.2 or 10.1.3
(other than any Transfer by any Note Holder, to the extent it only grants
participations in Equipment Notes or in its beneficial interest therein),
Transferee shall be deemed an "Owner Participant," "Owner Trustee" or a "Note
Holder," respectively, for all purposes of this Agreement and the other
Operative Agreements and, in the case of a Transferee of any Participant or Note
Holder, shall be deemed to have paid its ratable portion of Lessor's Cost
previously made by Owner Participant or Loan Participant, respectively, making
such conveyance and represented by the interest being conveyed, and each
reference herein to Owner Participant, Owner Trustee or Note Holder,
respectively, shall thereafter be deemed a reference to such Transferee for all
purposes, and the transferring Owner Participant, Owner Trustee, Loan
Participant or Note Holder shall be released (except, in the case of Owner
Participant, to the extent of any guaranty provided by it under Section
10.1.1(a)(vi)) from all of its liabilities and obligations under this Agreement
and any other Operative Agreements to the extent such liabilities and
obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the transferee; PROVIDED, that such
transferring Owner Participant, Owner Trustee or Note Holder (and its respective
Affiliates, successors, assigns, agents, servants, representatives, directors
and officers) will continue to have the benefit of any rights or indemnities
under any Operative Agreement vested or relating to circumstances, conditions,
acts or events prior to such Transfer.
SECTION 11. [RESERVED]
SECTION 12. SECTION 1110
It is the intention of each of Lessee, Owner Participant, Loan
Participant, the Note Holders (such intention being evidenced by each of their
acceptance of an Equipment Note), Owner Trustee and Mortgagee that Owner
Trustee, as lessor under the Lease (and Mortgagee as assignee of Owner Trustee
under the Trust Indenture), shall be entitled to the benefits of Section 1110 in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a
debtor. Lessee shall at all times be certificated and registered to the extent
necessary to entitle Owner Trustee to the rights afforded to lessors of aircraft
equipment under Section 1110 of the United States Bankruptcy Code.
<PAGE>
SECTION 13. CHANGE OF CITIZENSHIP
13.1 GENERALLY
Without prejudice to the representations, warranties or covenants
regarding the status of any party hereto as a Citizen of the United States:
(a) Each of Lessee, First Security and WTC agrees that it will,
immediately upon obtaining knowledge of any facts that would cast doubt upon its
continuing status as a Citizen of the United States and promptly upon public
disclosure of negotiations in respect of any transaction which would or might
adversely affect such status, notify in writing all parties hereto of all
relevant matters in connection therewith; and
(b) Owner Participant agrees that, in the event its citizenship
status is to change or has changed in any way that would restrict the U.S.
registration of the Aircraft pursuant to the Act, or it makes public disclosure
of circumstances as a result of which it believes that such status is likely to
change in such manner, it will notify all the other parties to this
Participation Agreement of (i) such change in status promptly after obtaining
Actual Knowledge thereof or (ii) such belief as soon as practicable after such
public disclosure but in any event within ten Business Days after such public
disclosure.
13.2 OWNER PARTICIPANT
Owner Participant agrees, solely for the benefit of Lessee and the
Note Holders that if, during such time as the Aircraft is registered in the
United States, (a) it shall experience any change in citizenship status and (b)
the Aircraft shall be, or would therefore become, ineligible for registration in
the name of Owner Trustee under the Act and regulations then applicable
thereunder (without giving consideration to Section 47.9 of the FAA Regulations
or any other provision that may restrict Lessee's use or operation of the
Aircraft), then Owner Participant shall as soon as is reasonably practicable,
but in any event within 30 days after obtaining Actual Knowledge of such
ineligibility and of such change in status, (y) effect voting trust or other
similar arrangements (in which case any provisions contained in the Operative
Agreements restricting Owner Participant's or Owner Trustee's ability to amend
the Trust Agreement shall not apply to the extent necessary to permit the use of
such a voting trust or other similar arrangement) or take any other action as
may be necessary to prevent any deregistration or maintain the United States
registration of the Aircraft or (z) transfer in accordance with the terms of
<PAGE>
this Agreement all its right, title and interest in and to this Agreement, the
Trust Estate and the Trust Agreement in accordance with Section 10.1.
13.3 OWNER TRUSTEE
Upon First Security giving any notice in accordance with Section
13.1(a), Owner Trustee shall, subject to Section 9.1.1 of the Trust Agreement,
resign as Owner Trustee. Upon its receipt of such notice, Owner Participant
shall as promptly as practicable appoint a Citizen of the United States as
successor Owner Trustee pursuant to Section 9.1 of the Trust Agreement.
13.4 MORTGAGEE
Upon WTC giving any notice in accordance with Section 13.1(a),
Mortgagee shall (if and so long as such citizenship is necessary under the Act
as in effect at such time or, if it is not necessary, if and so long as
Mortgagee's citizenship could have any adverse effect on Lessee, any Participant
or any Note Holder), subject to Section 8.02 of the Trust Indenture, resign as
Mortgagee promptly upon its ceasing to be such a citizen.
SECTION 14. CONCERNING OWNER TRUSTEE
It is understood and agreed that, except as otherwise expressly
provided herein or in the Trust Agreement or the Trust Indenture, Owner Trustee
is entering into this Agreement solely in its capacity as trustee as provided in
the Trust Agreement and not in its individual capacity and in no case whatsoever
will it be liable or accountable in its individual capacity for any of the
statements, representations, warranties, agreements or obligations of Owner
Trustee hereunder, or for any loss in respect thereof, as to all of which the
parties agree to look solely to the Trust Estate; PROVIDED, that nothing in this
Section 14 shall be deemed to limit in scope or substance the personal liability
of First Security (a) to Owner Participant as expressly set forth in the Trust
Agreement, (b) in respect of the representations, warranties and agreements of
First Security expressly made as such herein or in any other Operative Agreement
to which it is a party, and (c) for the consequences of its own gross
negligence, willful misconduct, and, in receiving, handling or remitting of
funds only, its willful misconduct or simple negligence as a trustee.
<PAGE>
SECTION 15. MISCELLANEOUS
15.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
communication, course of dealing or performance or other manner not set forth in
an agreement, document or instrument in writing and signed by the party against
which enforcement of the same is sought.
15.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
15.3 SURVIVAL
The indemnities set forth herein shall survive the delivery or return
of the Aircraft, the Transfer of any interest of Owner Participant in this
Agreement, the Trust Estate and the Trust Agreement, the Transfer of any
interest by any Note Holder of its Equipment Note and the expiration or other
termination of this Agreement or any other Operative Agreement.
15.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
<PAGE>
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction likewise is
admissible in evidence.
15.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
15.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay
by any party hereto in exercising, any of its respective rights, powers,
remedies or privileges under this Agreement or provided at Law, in equity or
otherwise shall impair, prejudice or constitute a waiver of any such right,
power, remedy or privilege or be construed as a waiver of any breach hereof or
default hereunder or as an acquiescence therein nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof by it or the exercise of any other right, power, remedy
or privilege by it. No notice to or demand on any party hereto in any case
shall, unless otherwise required under this Agreement, entitle such party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of any party hereto to any other or further
action in any circumstances without notice or demand.
15.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers and
other communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
<PAGE>
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile or telecommunication transmission (which in either
case provides written confirmation to the sender of its delivery), sent by
registered mail or certified mail, return receipt requested, postage prepaid, or
sent by overnight courier service, in each case to the respective address, or
facsimile number set forth for such party in Schedule 1, or to such other
address, facsimile or other number as each party hereto may hereafter specify by
notice to the other parties hereto. Each such notice, request, demand,
authorization, direction, consent, waiver or other communication shall be
effective when received or, if made, given, furnished or filed (a) by facsimile
or telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 15.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 15.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
<PAGE>
(D) TO THE EXTENT THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY OF THE ABOVE-NAMED COURTS OR FROM ANY
LEGAL PROCESS THEREIN, SUCH PARTY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY, AND EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR
PROCEEDING BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, (I) THE DEFENSE
OF SOVEREIGN IMMUNITY, (II) THAT IT OR ANY OF ITS PROPERTY IS IMMUNE FROM THE
ABOVE DESCRIBED LEGAL PROCESS AND (III) THAT SUCH ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS
IMPROPER OR THAT THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE
ENFORCED IN OR BY SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
15.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than the Liquidity Provider, which is an intended
third party beneficiary with respect to the provisions of Section 9.1, and the
other persons referred to in Section 7.6.13, who are intended third party
beneficiaries of such Section) with any rights of any nature whatsoever against
any of the parties hereto and no person not a party hereto (other than the
Liquidity Provider, with respect to the provisions of Section 9.1, and the other
persons referred to in Section 7.6.13, with respect to such Section) shall have
any right, power or privilege in respect of any party hereto, or have any
benefit or interest, arising out of this Agreement.
15.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and
as of the date hereof, constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, among any of the parties
hereto with respect to such subject matter are hereby superseded in their
entireties (except that the letter agreement, dated May 14, 1997, among Lessee,
Existing Mortgagee and Airframe Manufacturer shall not be superseded).
<PAGE>
15.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge and deliver or shall
cause to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further acts and things, in any case, as any other party hereto shall reasonably
request in connection with the administration of, or to carry out more
effectively the purposes of, or to better assure and confirm into such other
party the rights and benefits to be provided under this Agreement and the other
Operative Agreements.
[This space intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Participation
Agreement to be duly executed and delivered as of the day and year first above
written.
CONTINENTAL AIRLINES, INC., Lessee
By _________________________________________
Name:
Title:
METLIFE CAPITAL CREDIT L.P.,
Owner Participant
By: CLJFINCO, INC.,
General Partner
By _________________________________________,
Name:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, except
as expressly provided herein, but solely
as Owner Trustee
By __________________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but solely
as Mortgagee
By _________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but solely
as Pass Through Trustee under the Pass
Through Trust Agreement for the
Continental Airlines Pass Through Trust,
1997-3A
By _________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but solely
as Pass Through Trustee under the Pass
Through Trust Agreement for the
Continental Airlines Pass Through Trust,
1997-3B
By _________________________________________
Name:
Title:
<PAGE>
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but solely
as Pass Through Trustee under the Pass
Through Trust Agreement for the
Continental Airlines Pass Through Trust,
1997-3C
By _________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
not in its individual capacity, except
as expressly provided herein, but solely
as Subordination Agent
By _________________________________________
Name:
Title:
CORCIM, INC.,
Existing Lessor
By _________________________________________
Name:
Title:
<PAGE>
ROLLS-ROYCE PLC,
Existing Mortgagee and Equity Guarantor
By _________________________________________
Name:
Title:
EMBRAER-EMPRESA BRASILEIRA DE
AERONAUTICA S.A.,
Airframe Manufacturer
By _________________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided,
a reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner
Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted
transferee, permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and
words importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex,
schedule or exhibit thereto, or any other part thereof, includes,
without prejudice to the provisions of any Operative Agreement, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the Operative
Agreements, and any agreement, instrument or document entered into in
substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or reenacted
prior to the Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby,"
"herein," "hereto," "hereof" and "hereunder" and words of similar
import when used in any Operative Agreement refer to such Operative
Agreement as a whole and not to any particular provision of such
Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar
import when used in any Operative Agreement, with respect to any
<PAGE>
matter or thing, mean including, without limitation, such matter or
thing; and
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule"
in any Operative Agreement, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex or a schedule to, such Operative
Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or
Mortgagee, as the case may be, actual knowledge of a responsible officer in the
Corporate Trust Department or the Corporate Trust Office, respectively, and (b)
as it applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee
and Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering
the Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books,
and all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (PROVIDED, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from
time to time installed thereon) manufactured by Airframe Manufacturer and
identified by Airframe Manufacturer's model number, United States registration
number and Airframe Manufacturer's serial number set forth in Lease Supplement
No. 1 and (b) any and all Parts incorporated or installed in or attached or
appurtenant to such airframe, and any and all Parts removed from such airframe,
unless title to such Parts shall not be vested in Lessor in accordance with
Section 8.1 and Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de
Aeronautica S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the
Participation Agreement, the Purchase Agreement and the Consent and Agreement.
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as
of any Payment Date, the amount determined by multiplying the percentage set
forth opposite such Date on the Amortization Schedule by the Original Amount of
such Equipment Note.
<PAGE>
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note,
the amortization schedule for such Equipment Note delivered pursuant to Section
2.02 of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation
Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which
follows the time of determination by a period equal to the Remaining Weighted
Average Life of such Equipment Note. "Remaining Weighted Average Life" on a
given date with respect to any Equipment Note shall be the number of days equal
to the quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining scheduled payment
of principal of such Equipment Note by (ii) the number of days from and
including such determination date to but excluding the date on which such
payment of principal is scheduled to be made, by (b) the then outstanding
principal amount of such Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted
to be, and is, registered with any other Government Entity under and in
accordance with Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
ss. 101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section
14.5 of the Lease.
"BASE LEASE TERM" means the period beginning on and including the
Closing Date and ending on the Scheduled Expiration Date, or such earlier date
on which the Term terminates in accordance with the provisions of the Lease.
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
"BASIC RENT" means the rent payable for the Aircraft pursuant to
Section 3.2.1 of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
<PAGE>
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of
Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required by law to close in New
York, New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of
the Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code
or the regulations promulgated thereunder or any change in the interpretation of
the Code or such regulations in a decision by the United States Supreme Court,
the United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events:
(i) sale of the Aircraft to the Owner Trustee and the filing of the FAA Bill of
Sale with the FAA in connection therewith; (ii) payment of Lessor's Cost by
Owner Trustee to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee
<PAGE>
to Lessee pursuant to the Lease; and (iv) completion of the other events
contemplated by the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement
No. 1 as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; PROVIDED,
that when used in relation to a Plan, "Code" shall mean the Internal Revenue
Code of 1986 and any regulations and rulings issued thereunder, all as amended
and in effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its
participation in the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the
Participation Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement
____, dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee
located at Mortgagee's address for notices under the Participation Agreement or
such other office at which Mortgagee's corporate trust business shall be
administered which Mortgagee shall have specified by notice in writing to
Lessee, Owner Trustee and each Note Holder.
"CRAF" means the Civil Reserve Air Fleet Program established pursuant
to 10 U.S.C. ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for
the payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
<PAGE>
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice
or the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.3 of the Participation Agreement, which
delayed Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to
Lessee by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency
of the United States.
"DOT" means the Department of Transportation of the United States or
any Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine
Manufacturer and identified by Engine Manufacturer's model number and Engine
Manufacturer's serial number set forth in Lease Supplement No. 1 and originally
installed on the Airframe on delivery thereof pursuant to the Lease, and any
Replacement Engine, in any case whether or not from time to time installed on
such Airframe or installed on any other airframe or aircraft, and (b) any and
all Parts incorporated or installed in or attached or appurtenant to such
engine, and any and all Parts removed from such engine, unless title to such
Parts shall not be vested in Lessor in accordance with Section 8.1 and Annex C
of the Lease. Upon substitution of a Replacement Engine under and in accordance
with the Lease, such Replacement Engine shall become subject to the Lease and
shall be an "Engine" for all purposes of the Lease and the other Operative
Agreements and thereupon the Engine for which the substitution is made shall no
longer be subject to the Lease, and such replaced Engine shall cease to be an
"Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
<PAGE>
"EQUIPMENT NOTES" means and includes any equipment notes issued under
the Trust Indenture in the form specified in Section 2.01 thereof (as such form
may be varied pursuant to the terms of the Trust Indenture) and any Equipment
Note issued under the Trust Indenture in exchange for or replacement of any
Equipment Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EQUITY GUARANTOR" means Rolls-Royce plc, a corporation organized
under the laws of England.
"EQUITY GUARANTY" means the Equity Guaranty ____ issued by the Equity
Guarantor dated of even date with the Participation Agreement, including the
side letter dated of even date with the Participation Agreement between the
Equity Guarantor and the Owner Participant.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
any regulations and rulings issued thereunder all as amended and in effect from
time to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit
for normal use by Lessee;
(b) the actual or constructive total loss of such property or any
damage to such property, or requisition of title or use of such
property, which results in an insurance settlement with respect
to such property on the basis of a total loss or constructive or
compromised total loss;
(c) any theft, hijacking or disappearance of such property for a
period of 180 consecutive days or more or, if earlier, the end of
the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government or
purported Government Entity (other than a requisition of use by
the U.S. Government) for a period exceeding 180 consecutive days
or, if earlier, at the end of the Term;
<PAGE>
(e) any seizure, condemnation, confiscation, taking or requisition of
use of such property by the U.S. Government that continues until
the last day of the Term, PROVIDED that no such Event of Loss
shall exist if Lessor shall have elected not to treat such event
as an Event of Loss pursuant to Section 10.6 of the Lease; and
(f) as a result of any law, rule, regulation, order or other action
by the Aviation Authority or by any Government Entity of the
government of registry of the Aircraft or by any Government
Entity otherwise having jurisdiction over the operation or use of
the Aircraft, the use of such property in the normal course of
Lessee's business of passenger air transportation is prohibited
for a period of 180 consecutive days, unless Lessee, prior to the
expiration of such 180 day period, shall have undertaken and
shall be diligently carrying forward such steps as may be
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 720 days, provided that no Event of
Loss shall be deemed to have occurred if such prohibition has
been applicable to Lessee's (or a Permitted Sublessee's) entire
U.S. fleet of such property and Lessee (or a Permitted
Sublessee), prior to the expiration of such 720-day period, shall
have conformed at least one unit of such property 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 and shall be diligently carrying forward, in a
manner which does not discriminate against such property in so
conforming such property, 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
three years or such use shall be prohibited at the expiration of
the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by
Lessee to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
<PAGE>
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) all
payments of guaranty fees pursuant to Section 7.6.14 of the Participation
Agreement, (vi) any amount payable to the Owner Participant by any transferee as
the purchase price of the Owner Participant's interest in the Trust Estate,
(vii) all rights of the Owner Participant or the Owner Trustee in and to the
Equity Guaranty and any amounts payable thereunder, (viii) any interest that
pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (vii) above, (ix) proceeds
of any right to enforce the payment of any amount described in clauses (i)
through (viii) above (PROVIDED, that the rights referred to in this clause (ix)
shall not be deemed to include the exercise of any remedies provided for in the
Lease other than the right to sue for specific performance of any covenant to
make such payment or to sue for damages in respect of the breach of any such
covenant) and (x) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized
under the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement,
the Equity Guaranty and the Termination Agreement with respect to the Existing
Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in
Schedule 3 to the Participation Agreement.
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the
date of the Existing Participation Agreement, between Lessee and Express
relating to the Aircraft.
<PAGE>
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary
of Lessee.
"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date
of the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States
or any Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner
Trustee on the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the
Express Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing buyer under no compulsion to buy, and an informed and
willing seller under no compulsion to sell, the Aircraft, in a transaction that
would close on or about the relevant time of determination, assuming (except as
<PAGE>
otherwise provided in Section 15.4 of the Lease) that (a) the Aircraft has been
maintained in accordance with, and is in the condition required by, the Lease
and (b) the Aircraft would be delivered to such informed and willing buyer in
the return condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing
statements (i) covering the Trust Indenture Estate, by Owner Trustee, as debtor,
showing Mortgagee as secured party, for filing in Utah and each other
jurisdiction that, in the opinion of Mortgagee, is necessary to perfect its Lien
on the Trust Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in
the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be varied
by any applicable financial accounting rules or regulations issued by the SEC
and, with respect to any person, shall mean such principles applied on a basis
consistent with prior periods except as may be disclosed in such person's
financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or
similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" MEANS (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) Owner
<PAGE>
Participant Parent, (vi) the Trust Estate and the Trust Indenture Estate, (vii)
the Subordination Agent, (viii) the Liquidity Providers, (ix) the Pass Through
Trustees, (x) each Affiliate of the persons described in clauses (i) through
(v), inclusive, (xi) each Affiliate of the persons described in clauses (vi),
(vii), (viii) and (ix), (xii) the respective directors, officers, employees,
agents and servants of each of the persons described in clauses (i) through (v)
inclusive and in clause (x), (xiii) the respective directors, officers,
employees, agents and servants of each of the persons described in clauses
(vii), (viii), (ix) and (xi), (xiv) the successors and permitted assigns of the
persons described in clauses (i) through (v), inclusive, and in clauses (x) and
(xii), and (xv) the successors and permitted assigns of the persons described in
clauses (vii), (viii), (ix), (xi) and (xiii); PROVIDED THAT the persons
described in clauses (vii), (viii), (ix), (xi), (xiii) and (xv) are indemnitees
only for purposes of Section 9.1 of the Participation Agreement. if any
Indemnitee is Airframe Manufacturer or Engine Manufacturer or any subcontractor
or supplier of either thereof, such Person shall be an Indemnitee only in its
capacity as Owner Participant, Loan Participant or Note Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease,
the Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each
separate or additional trustee appointed pursuant to the Trust Indenture, (iii)
the Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through
Trustee and (vi) each of the respective directors, officers, employees, agents
and servants of each of the persons described in clauses (i) through (v)
inclusive above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement
among the Pass Through Trustees, the Liquidity Providers and the Subordination
Agent, dated as of the Issuance Date, PROVIDED that, for purposes of any
obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, such Intercreditor Agreement shall be effective
unless consented to by Lessee.
<PAGE>
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Government Entity, and (b) any
judicial or administrative interpretation or application of, or decision under,
any of the foregoing.
"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ____, dated as
of even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute a Lease
Event of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of
Exhibit A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated
the Closing Date. "LESSEE" means Continental Airlines, Inc., a Delaware
corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the
Lease, Lease Supplement No. 1, the Express Sublease, the Termination Agreement
with respect to the Existing Sublease and the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or
other user or person in possession of the Aircraft, Airframe or an Engine with
or without color of right, or any Affiliate of any of the foregoing (excluding
any Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any
person using or claiming any rights with respect to the Aircraft, Airframe or an
Engine directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the
Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
<PAGE>
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
"LESSOR RENT" means, with respect to any Payment Date, the amount set
forth in Schedule 4 to the Participation Agreement with respect to such Payment
Date. "LESSOR'S COST" means the amount paid by Owner Trustee to Existing Lessor
to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a
Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity
Provider (as such terms are defined in the Intercreditor Agreement) under the
respective Liquidity Facilities, or any successor thereto.
<PAGE>
"LOAN PARTICIPANTS" mean, until the Closing shall have been
consummated, the Pass Through Trustees, and after the Closing shall have been
consummated, each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant
to Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date
of determination, the holders of a majority in aggregate unpaid Original Amount
of all Equipment Notes outstanding as of such date (excluding any Equipment
Notes held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of
any such party or any interests of Owner Trustee or Owner Participant therein by
reason of subrogation pursuant to Section 4.03 of the Trust Indenture (unless
all Equipment Notes then outstanding shall be held by Owner Trustee, Lessee,
Owner Participant or any Affiliate of any thereof)); PROVIDED that for the
purposes of directing any action or casting any vote or giving any consent,
waiver or instruction hereunder any Note Holder of an Equipment Note or
Equipment Notes may allocate, in such Note Holder's sole discretion, any
fractional portion of the principal amount of such Equipment Note or Equipment
Notes in favor of or in opposition to any such action, vote, consent, waiver or
instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an
amount (as determined by an independent investment banker of national standing)
equal to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
<PAGE>
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any
event, condition or circumstance that materially and adversely affects such
person's business or consolidated financial condition, or its ability to observe
or perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust
Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as loan trustee under the
Trust Indenture.
"MORTGAGEE AGREEMENTS" means, collectively, the Participation
Agreement and the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization
proceeding involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the
trustee in such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax
yield utilizing the multiple investment sinking fund method of analysis and
aggregate net after-tax cash flow, computed on the basis of the same methodology
and assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
<PAGE>
"NET WORTH" means, for any person, the excess of its total assets
over its total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person,
as defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" MEANS AT ANY TIME EACH REGISTERED HOLDER OF ONE OR MORE
EQUIPMENT NOTES.
"OFFICER'S CERTIFICATE" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, the President,
any Vice President (including those with varying ranks such as Executive,
Senior, Assistant or Staff Vice President), the Treasurer or the Secretary of
such party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Agreement, the Purchase Agreement Assignment, the Consent
and Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the
initial Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity
Agreement, the Owner Participant Guaranty, the Equipment Notes, the Letter
Agreement and the Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes
have been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation
Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the
stated original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation
Agreement as "Owner Participant" or, if a second person becomes an "Owner
Participant" pursuant to Section 10.1.1 of the Participation Agreement, both of
such persons; PROVIDED that if an Owner Participant Transfers 100% of its
interest to a successor Owner Participant, such transferring Owner Participant
shall thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT GUARANTY" means the Guaranty by Corporate
Affiliate of Owner Participant dated the Delivery Date from Owner Participant
Parent to the beneficiaries named therein.
<PAGE>
"OWNER PARTICIPANT PARENT" means the person executing the Owner
Participant Guaranty.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's
Cost allocated to the Owner Participant in Schedule 2 to the Participation
Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a
national banking association, not in its individual capacity, except as
expressly provided in any Operative Agreement, but solely as Owner Trustee under
the Trust Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ____
dated as of September 25, 1997 among Lessee, Owner Participant, Owner Trustee,
the Pass Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor,
the Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing
gear, instruments, appurtenances, accessories, furnishings, seats and other
equipment of whatever nature (other than (a) Engines or engines, and (b) any
items leased by Lessee from a third party other than Lessor)), that may from
time to time be installed or incorporated in or attached or appurtenant to the
Airframe or any Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements,
the Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as
defined in the Intercreditor Agreement), provided, that no amendment,
modification or supplement to, or substitution or replacement of, any such Fee
Letter shall be effective for purposes of any obligation of Lessee, unless
consented to by Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates
issued by the Pass Through Trusts (and any other pass through certificates for
which such pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through
trusts created under the Pass Through Trust Agreements.
<PAGE>
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, in its capacity as trustee under each Pass Through Trust
Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement,
the Pass Through Trust Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means the Closing Date and each March 24, June 24,
September 24 and December 24 during the Term, commencing with the first such
date to occur after the Closing Date.
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of
Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive quarterly periods
during the Term ending on a Payment Date, the first such period commencing on
and including the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier,
(ii) any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the
Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii)
any Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance
company, financial institution or corporation (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a freight
forwarder or Affiliate of any of the foregoing), in each case with a combined
capital and surplus or net worth of at least $25,000,000.
<PAGE>
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7
of the Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section
3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the
Series A Equipment Notes, April 30, 2004 in the case of the Series B Equipment
Notes and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee,
the percentage of Lessor's Cost allocated to such Pass Through Trustee in
Schedule 2 to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement
Assignment ____, dated as of even date with the Participation Agreement, between
Existing Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or
any Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
<PAGE>
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
"RENEWAL RENT" for the Aircraft means the rent payable therefor in
respect of a Renewal Lease Term determined pursuant to Section 17.2.2 of the
Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental
Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine
pursuant to the Lease.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement,
dated as of the date the Aircraft is returned to Lessor pursuant to Section 5 of
the Lease, by Lessor and Lessee substantially in the form of Exhibit B to the
Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the
first Renewal Lease Term, the second anniversary of the Scheduled Expiration
Date, and in the case of the second Renewal Lease Term, the fourth anniversary
of the Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United
States, or any Government Entity succeeding to the functions of such Securities
and Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization
proceedings with respect to Lessee under Chapter 11 of the Bankruptcy Code and
the trustee or debtor-in-possession in such proceedings (i) having agreed to
perform its obligations under the Lease with the approval of the applicable
court and thereafter having continued to perform such obligations in accordance
with Section 1110 or (ii) having assumed the Lease with the approval of the
<PAGE>
relevant court and thereafter having continued to perform its obligations under
the Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such
other period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy
Code, plus an additional period, if any, resulting from the trustee or
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the
Securities Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series A" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series B" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series C" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a)
during the Base Lease Term, the amount determined by multiplying (i) the
percentage set forth in Schedule 3 to the Lease (as adjusted from time to time
in accordance with Section 3.2.3 of the Lease) opposite the Stipulated Loss
Value Date by (ii) Lessor's Cost and (b) during any Renewal Term, the amount
determined pursuant to Section 17.2.3 of the Lease. Notwithstanding anything to
<PAGE>
the contrary in any Operative Agreement, Stipulated Loss Value shall always be
sufficient to pay in full, as of the date of payment thereof (assuming timely
payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such
month specified in Schedule 3 to the Lease or, if such day is not a Business
Day, the immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as
subordination agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement,
the Liquidity Facilities and the Intercreditor Agreement.
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), PROVIDED that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and PROVIDED, FURTHER, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
<PAGE>
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax
Indemnity Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC
and Mortgagee, (c) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as
of even date with the Participation Agreement, between Lessee and Owner
Participant. "TAXES" means all license, recording, documentary, registration and
other similar fees and all taxes, levies, imposts, duties, charges, assessments
or withholdings of any nature whatsoever imposed by any Taxing Authority,
together with any penalties, additions to tax, fines or interest thereon or
additions thereto.
"TAXING AUTHORITY" means any federal, state or local government or
other taxing authority in the United States, any foreign government or any
political subdivision or taxing authority thereof, any international taxing
authority or any territory or possession of the United States or any taxing
authority thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION AGREEMENTS" means, collectively, the termination
agreement with respect to the Existing Lease, the termination agreement with
respect to the Existing Sublease and the release from the Lien of the Existing
Mortgage, in each case delivered pursuant to Section 5.1.2(xiii) of the
Participation Agreement.
<PAGE>
"TERMINATION DATE" means any Payment Date occurring after the end of
the Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the
Participation Agreement and the other Operative Agreements to occur on the
Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements and, in the case
of the Owner Participant and the Equity Guaranty (including, without limitation,
the reasonable fees and expenses of counsel for such parties), (b) all costs and
expenses for the recording or filing of any documents, certificates or
instruments in accordance with any Operative Agreement, including, without
limitation, the FAA Filed Documents and the Financing Statements, (c) one ninth
of (i) the underwriting fees and expenses attributable to the offering and sale
of the Pass Through Certificates and (ii) all costs and expenses incurred by
Existing Mortgagee, the Pass Through Trustees, the Subordination Agent, Owner
Trustee and Mortgagee in connection with the preparation, execution and delivery
of the Pass Through Agreements and the Equity Guaranty (including, without
limitation, the reasonable fees and expenses of counsel for such parties), (d)
the equity placement fee and expenses of Equity Advisor attributable to the
Aircraft, (e) the reasonable fees and disbursements of special counsel in
Oklahoma City, Oklahoma, in connection with the Closing, (f) all initial and
ongoing fees, disbursements and expenses of Owner Trustee and Mortgagee, and (g)
the fees and expenses of the Appraiser contemplated by Section 5.1.2(xv) of the
Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance
of all or any interest in any property, right or interest.
<PAGE>
"TRANSFEREE" means a person to which any Owner Participant, Owner
Trustee or any Loan Participant or Note Holder purports or intends to Transfer
any or all of its right, title or interest in the Trust Estate or in its
Equipment Note and the Trust Indenture Estate, respectively, as described in
Section 10.1.1(a), 10.1.2 or 10.1.3 (but excluding participants in any
participation referred to in Section 10.1.3), respectively, of the Participation
Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ____, dated as of even
date with the Participation Agreement, between Owner Participant and Owner
Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ____, dated
as of even date with the Participation Agreement, between Owner Trustee and
Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the
Trust Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage
____ Supplement, substantially in the form of Exhibit A to the Trust Indenture,
with appropriate modifications to reflect the purpose for which it is being
used.
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
<PAGE>
"UNITED STATES" or "U.S." means the United States of America;
PROVIDED, that for geographic purposes, "United States" means, in aggregate, the
50 states and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is 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 10 or more individuals or
6000 pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of
the Code.
"U.S. GOVERNMENT" means the federal government of the United States,
or any instrumentality or agency thereof the obligations of which are guaranteed
by the full faith and credit of the federal government of the United States.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any
specified Debt, at the time of the determination thereof the number of years
obtained by dividing the then Remaining Dollar-years of such Debt by the then
outstanding principal amount of such Debt. The term "Remaining Dollar-years"
shall mean the amount obtained by (1) multiplying the amount of each
then-remaining principal payment on such Debt by the number of years (calculated
at the nearest one-twelfth) that will elapse between the date of determination
of the Weighted Average Life to Maturity of such Debt and the date of that
required payment and (2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted
Sublessee agrees to furnish the Aircraft, Airframe or any Engine to a third
party pursuant to which the Aircraft, Airframe or Engine shall at all times be
in the operational control of Lessee or a Permitted Sublessee, provided that
Lessee's obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking corporation,
not in its capacity as Mortgagee under the Trust Indenture, but in its
individual capacity.
<PAGE>
------------------------------
| SCHEDULE 1 |
| TO |
| PARTICIPATION AGREEMENT ___|
------------------------------
ACCOUNTS; ADDRESSES
<TABLE>
<CAPTION>
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
<S> <C> <C>
CONTINENTAL AIRLINES, INC. The Chase Manhattan Bank Continental Airlines, Inc.
New York, New York 10081 2929 Allen Parkway
Account No.: 910-2-499291 Suite 2010
ABA#: 021-000021 Houston, Texas 77019
Attention: Paul Trupia Attention: Executive Vice
Voice: 212-552-2829 President and Chief
Facsimile: 212-552-0107 Financial Officer
Reference: Continental Facsimile: (713) 520-6329
Lease ____
OWNER PARTICIPANT MetLife Capital Credit L.P.
c/o MetLife Capital Corporation
10900 Northeast 4th Street
Suite 500
Bellevue, Washington 98005
Attn: Large Ticket Operations
Fax: (425)450-3517
with a copy to Rolls-Royce plc
FIRST SECURITY BANK, NATIONAL First Security Bank, First Security Bank,
ASSOCIATION National Association National Association
79 South Main Street 79 South Main Street
Salt Lake City, Utah 84111 Salt Lake City, Utah 84111
Account No.: 051-0922115 Attention: Corporate Trust Department
Corporate Trust Department Facsimile: (801) 246-5053
ABA#: 124-0000-12
Reference: Continental
Lease ____
WILMINGTON TRUST COMPANY, AS The Chase Manhattan Bank Wilmington Trust Company
MORTGAGEE New York, New York 10081 One Rodney Square
Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Attention: Corporate Trust Administration
Administration Facsimile: (302) 651-8882
Reference: Continental
Lease ____
<PAGE>
WILMINGTON TRUST COMPANY, AS The Chase Manhattan Bank Wilmington Trust Company
SUBORDINATION AGENT New York, New York 10081 One Rodney Square
Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Continental Facsimile: (302) 651-8882
Lease ____
WILMINGTON TRUST COMPANY, AS The Chase Manhattan Bank Wilmington Trust Company
PASS THROUGH TRUSTEE FOR THE New York, New York 10081 One Rodney Square
1997-3A PASS THROUGH TRUST Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Continental Facsimile: (302) 651-8882
Lease ____
WILMINGTON TRUST COMPANY, AS The Chase Manhattan Bank Wilmington Trust Company
PASS THROUGH TRUSTEE FOR THE New York, New York 10081 One Rodney Square
1997-3B PASS THROUGH TRUST Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Continental Facsimile: (302) 651-8882
Lease ____
WILMINGTON TRUST COMPANY, AS The Chase Manhattan Bank Wilmington Trust Company
PASS THROUGH TRUSTEE FOR THE New York, New York 10081 One Rodney Square
1997-3C PASS THROUGH TRUST Account No.: 920-1-014363 1100 North Market Street
ABA#: 021-000021 Wilmington, Delaware 19890
Attention: Corporate Trust Attention: Corporate Trust
Administration Administration
Reference: Continental Facsimile: (302) 651-8882
Lease ____
CORCIM, INC. None CT Corporation System
1209 Orange Street
Wilmington, Delaware 19801
Attention: Mark Ferrucci
Facsimile: (302) 658-5459
With copy to:
EMBRAER-Empresa Brasileira de Aeronautica S.A.
<PAGE>
EMBRAER-EMPRESA BRASILEIRA DE Banco do Brasil S.A. EMBRAER-Empresa Brasileira de Aeronautica S.A.
AERONAUTICA S.A. Av. Nelson D'Avila, 149 Av. Brigadeiro Faria Lima, 2170
12245-030, Sao Jose dos 12227-901 Sao Jose dos Campos -SP Brazil
Campos-SP Brazil Attention: General Counsel
Swift Code: BRASBRRJSJC Facsimile: (55-123) 41-1679
Account No.: 9405-6
Reference: COEX Lease
ROLLS-ROYCE PLC Citibank, NA Rolls-Royce plc
New York, New York 10005 65 Buckingham Gate
Account No. 36855852 London SW1E 6AT, England
For further credit: 794-508 Attn: Company Secretary
ABA#: 021-000089 Facsimile: 011-44-171-233-1733
Reference: Paying Agent
</TABLE>
<PAGE>
------------------------------
| SCHEDULE 2 |
| TO |
| PARTICIPATION AGREEMENT ___|
------------------------------
COMMITMENTS
PARTICIPANT PERCENTAGE OF LESSOR'S DOLLAR AMOUNT
----------- ---------------------- -------------
COST
----
OWNER PARTICIPANT OWNER PARTICIPANT'S
PERCENTAGE
PASS THROUGH TRUSTEE LOAN PARTICIPANT'S
PTT PERCENTAGE
TOTAL 100%
<PAGE>
-----------------------------
| SCHEDULE 3 |
| TO |
|PARTICIPATION AGREEMENT ___|
-----------------------------
CERTAIN TERMS
DEFINED TERM DEFINITION
Commitment Termination Date October 15, 1997
Existing Lease
Lease Agreement ____, dated as
of January 8, 1997, between
Existing Lessor and Lessee
Existing Mortgage Aircraft Mortgage and Security
Agreement ____, dated as of
January 8, 1997, between Existing
Lessor, as Debtor, and Existing
Mortgagee, as Secured Party
Existing Participation Agreement Participation Agreement ____,
dated as of January 8, among
Lessee, Existing Lessor, Express,
Airframe Manufacturer and
Existing Mortgagee
Equity Advisor Babcock & Brown, Inc.
Expense Limit
Lessor's Cost $12,600,000
Local Counsel to the Owner
Participant and Owner Participant
Parent Paul J. Graf
OP Jurisdiction Delaware
Special Counsel to the Owner
Participant and Owner Participant
Parent Chadbourne & Parke LLP
Special Tax Counsel to the Owner
Participant Chadbourne & Parke LLP
-------------------------------------------------------------------
| CONFIDENTIAL: ANNEXES B, C AND D AND SCHEDULES 1, 2, 3 AND 4 |
| OF THIS LEASE AGREEMENT ARE SUBJECT TO RESTRICTIONS ON |
| DISSEMINATION SET FORTH IN SECTION 8 OF THE PARTICIPATION |
| AGREEMENT (AS DEFINED HEREIN) |
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE AGREEMENT ____
Dated as of September 25, 1997
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
CONTINENTAL AIRLINES, INC.,
Lessee
- --------------------------------------------------------------------------------
One Embraer Model EMB-145 Aircraft
Bearing United States Registration No. N_____ and
Bearing Manufacturer's Serial No. 145.___ with two
Allison AE3007A Engines
Bearing Engine Manufacturer's Serial Nos. _________ and _________
================================================================================
The right, title and interest of Lessor in and to, among other things, this
Lease Agreement has been assigned to and is subject to a security interest in
favor of Wilmington Trust Company, a Delaware banking corporation, as Mortgagee,
under the Trust Indenture and Mortgage ____, dated as of September 25, 1997, for
the benefit of the holders of the Equipment Notes referred to in such Trust
Indenture, all to the extent provided in such Trust Indenture. This Lease
Agreement has been executed in multiple counterparts; to the extent, if any,
that this Lease Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in Lessor's right, title and interest in and to this Lease Agreement
may be perfected through the delivery or possession of any counterpart of this
Lease Agreement other than the counterpart of this Lease Agreement that contains
the original receipt executed by Wilmington Trust Company, as Mortgagee.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION............................ 1
SECTION 2. DELIVERY AND ACCEPTANCE................................. 1
2.1 Delivery and Lease of Aircraft.......................... 1
2.2 Acceptance by Lessee.................................... 2
SECTION 3. TERM AND RENT........................................... 2
3.1 Term.................................................... 2
3.2 Rent.................................................... 2
3.3 Payments................................................ 4
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR;
SECTION 1110 MATTERS.................................... 5
4.1 Disclaimer.............................................. 5
4.2 Certain Agreements of Lessor............................ 6
4.3 Quiet Enjoyment......................................... 6
4.4 Investment of Funds Held as Security.................... 6
4.5 Title Transfers by Lessor............................... 7
4.6 Lessor's Interest in Certain Engines.................... 8
4.7 Section 1110 of Bankruptcy Code......................... 8
SECTION 5. RETURN OF AIRCRAFT...................................... 8
5.1 Compliance with Annex B................................. 8
5.2 Storage and Related Matters............................. 9
5.3 Return of Other Engines................................. 9
SECTION 6. LIENS................................................... 9
SECTION 7. REGISTRATION, OPERATION, POSSESSION,
SUBLEASING AND RECORDS.................................. 10
7.1 Registration and Operation.............................. 10
7.2 Possession.............................................. 12
7.3 Certain Limitations on Subleasing or
Other Relinquishment of Possession...................... 16
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF
PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS; OTHER LESSEE COVENANTS....................... 17
8.1 Maintenance; Replacement and Pooling of
Parts; Alterations, Modifications and
Additions............................................... 17
8.2 Information, Certificates, Notices and
Reports................................................. 17
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE................. 19
9.1 Right of Termination.................................... 19
<PAGE>
9.2 Election by Lessor to Sell.............................. 20
9.3 Retention of Aircraft by Lessor......................... 22
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC..................... 23
10.1 Event of Loss With Respect to Aircraft.................. 23
10.2 Event of Loss With Respect to an Engine................. 25
10.3 Conditions to any Replacement of Engine................. 25
10.4 Conveyance to Lessee.................................... 27
10.5 Application of Payments................................. 27
10.6 Requisition of Aircraft for Use......................... 28
10.7 Requisition of an Engine for Use........................ 28
10.8 Application of Payments................................. 29
10.9 Application of Payments During Existence
of a Lease Event of Default............................. 29
SECTION 11. INSURANCE............................................... 30
11.1 Lessee's Obligation to Insure........................... 30
11.2 Insurance for Own Account............................... 30
11.3 Indemnification by Government in Lieu of Insurance...... 30
11.4 Application of Insurance Proceeds....................... 30
11.5 Application of Payments During Existence
of Default.............................................. 31
SECTION 12. INSPECTION.............................................. 31
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER
TRUSTEE................................................. 32
13.1 In General.............................................. 32
13.2 Merger of Lessee........................................ 33
13.3 Assignment Security for Lessor's Obligations............ 34
13.4 Successor Owner Trustee................................. 34
SECTION 14. LEASE EVENTS OF DEFAULT................................. 34
14.1 Payments................................................ 35
14.2 Insurance............................................... 35
14.3 Other Covenants......................................... 35
14.4 Representations and Warranties.......................... 36
14.5 Bankruptcy and Insolvency............................... 36
SECTION 15. REMEDIES AND WAIVERS.................................... 37
15.1 Remedies................................................ 37
15.2 Limitations Under CRAF.................................. 40
15.3 Right to Perform for Lessee............................. 40
15.4 Determination of Fair Market Sales Value................ 41
15.5 Remedies Cumulative..................................... 41
<PAGE>
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF,
COUNTERCLAIM, ETC....................................... 41
SECTION 17. RENEWAL AND PURCHASE OPTIONS............................ 42
17.1 Notices Generally....................................... 42
17.2 Renewal Options......................................... 43
17.3 Purchase Option......................................... 44
17.4 Appraisals.............................................. 45
SECTION 18. MISCELLANEOUS........................................... 46
18.1 Amendments.............................................. 46
18.2 Severability............................................ 47
18.3 Third-Party Beneficiary................................. 47
18.4 Reproduction of Documents............................... 47
18.5 Counterparts............................................ 48
18.6 Notices................................................. 48
18.7 GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE..................................... 48
18.8 No Waiver............................................... 49
18.9 Entire Agreement........................................ 50
</TABLE>
<TABLE>
<CAPTION>
ANNEXES, EXHIBITS AND SCHEDULES
- -------------------------------
<S> <C>
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Form of Lease Supplement
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent
SCHEDULE 3 Stipulated Loss Value Schedule
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
</TABLE>
<PAGE>
LEASE AGREEMENT ____
LEASE AGREEMENT ____, dated as of September 25, 1997 (this "Agreement"
or "Lease"), between (a) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) CONTINENTAL
AIRLINES, INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to the Participation Agreement,
pursuant to which, among other things, Lessor and Lessee have agreed to enter
into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant has authorized
Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby agrees (subject to the satisfaction or waiver of the
conditions set forth in Section 5 of the Participation Agreement) to lease to
Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing immediately upon
acquisition of the Aircraft by Lessor pursuant to the Participation Agreement.
<PAGE>
2.2 ACCEPTANCE BY LESSEE
By executing and delivering Lease Supplement No. 1, Lessee confirms to
Lessor that Lessee has duly and irrevocably accepted delivery of the Aircraft
for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless this
Agreement or the leasing of the Aircraft is earlier terminated in accordance
with any provision of this Agreement. Lessee shall have the option to renew the
leasing of the Aircraft hereunder pursuant to, and subject to the terms and
conditions of, Section 17, for the Renewal Lease Term.
3.2 RENT
3.2.1 BASIC RENT
(a) During the Base Lease Term, Lessee shall pay to Lessor, on each
Payment Date, Basic Rent in the amount specified in Schedule 2 for such Payment
Date, which shall be allocated to the Payment Period commencing on such Payment
Date.
(b) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Date), the
aggregate principal amount of scheduled installments due on the Equipment Notes
outstanding on such Payment Date, together with the accrued and unpaid interest
thereon, due on such Payment Date in respect of the Equipment Notes; provided,
however, that no installment of Basic Rent shall be increased to the extent such
increase would be based upon (i) any attachment or diversion of Basic Rent on
account of Lessor Liens attributable to Lessor or Owner Participant, (ii) any
modification of the payment terms of the Equipment Notes, or (iii) the
acceleration of any Equipment Note or Equipment Notes due solely to the
occurrence of an Indenture Event of Default that does not constitute a Lease
Event of Default.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever shall be entitled thereto,
any and all Supplemental Rent when and as the same shall become due and owing.
Lessee will also pay to Lessor, or to whomever shall be entitled thereto as
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Supplemental Rent, to the extent permitted by applicable law, interest at the
Payment Due Rate on any part of any amount of Rent (including, without
limitation, Supplemental Rent) not paid by 12:30 p.m., New York time, on the
date when due (so long as, in the case of any person not a party to the
Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to, but excluding, the date of payment in
full.
3.2.3 ADJUSTMENTS TO STIPULATED LOSS VALUES
AND TERMINATION VALUES
(a) In the event that Lessee is required to indemnify the Owner
Participant under the Tax Indemnity Agreement, the Stipulated Loss Value
percentages set forth in Schedule 3 and the Termination Value percentages set
forth in Schedule 4 shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the extent such
assumptions shall be varied to take into account the Loss or Foreign Tax Credit
Loss (as each such term is defined in the Tax Indemnity Agreement) that is the
subject of such indemnification and any prior or contemporaneous Loss or Foreign
Tax Credit Loss) used to calculate the Stipulated Loss Value percentages and the
Termination Value percentages on the Closing Date, in order to maintain the
Owner Participant's Net Economic Return.
(b) All adjustments pursuant to Section 3.2.3(a) shall be made as
promptly as practicable after either Owner Participant or Lessee gives notice to
the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Stipulated Loss
Value and Termination Value shall be prepared by Owner Participant, subject to
verification at the request of Lessee in accordance with this Section 3.2.3(b),
on the basis of the same methodology and assumptions used by Owner Participant
in determining the percentages of Stipulated Loss Value and Termination Value as
of the Closing Date, except as such assumptions have been modified to reflect
the events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments required pursuant to Section 3.2.3(a) shall be set forth in a Lease
Supplement or in an amendment to this Lease, and, promptly after execution
thereof by Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee.
<PAGE>
(c) If Lessee believes that any calculations by Owner Participant
pursuant to Section 3.2.3(b) are in error, and if, after consultation, Lessee
and Owner Participant are unable to agree on an adjustment, then a nationally
recognized firm of accountants selected by Lessee and reasonably satisfactory to
Owner Participant shall verify such calculations. Owner Participant will make
available to such firm, but not, in any circumstances, to Lessee or any
representative of Lessee, the methodology and assumptions referred to in Section
3.2.3(b) and any modifications thereto made to reflect the events giving rise to
adjustments hereunder (subject to the execution by such firm of a
confidentiality agreement, reasonably acceptable to Owner Participant,
prohibiting disclosure of such methodology and assumptions to any third party).
The determination by such firm of accountants shall be final. Lessee will pay
the reasonable costs and expenses of such further verification by such
accountants, provided that if it results in a decrease in the present value
(discounted at the Debt Rate) of any Stipulated Loss Value or Termination Value
by ten or more basis points from such Stipulated Loss Value or Termination Value
as recalculated by the Owner Participant, then the Owner Participant will pay
such costs and expenses.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 12:30 p.m., New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior to the
date such payment of Rent is due or, in the case of any payment of Supplemental
Rent expressly payable to a person other than Lessor, to the person that shall
be entitled thereto to such account in the United States as such person may
specify from time to time to Lessee at least 10 Business Days prior to the date
such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any
payment of Rent shall be due on a day that is not a Business Day, such payment
shall be made on the next day that is a Business Day, and, if such payment is
made on such next Business Day, no interest shall accrue on the amount of such
payment during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Trust Indenture has been discharged, and notwithstanding
Section 3.3(a), Lessor hereby irrevocably directs, and Lessee agrees, that all
payments of Rent and all other amounts payable by Lessee hereunder, other than
Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor by
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wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.
(d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the person specified in the Participation
Agreement or, if not so specified, to such account in the United States as may
be specified by such person by written notice to Lessor and Lessee from time to
time at least 10 Business Days prior to the date such payment is required to be
made.
(e) All computations of interest under this Agreement shall be made on
the basis of a year of 360 days comprised of twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 DISCLAIMER
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE
ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR, MORTGAGEE AND
ANY PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF
AND (ii) NONE OF LESSOR, MORTGAGEE AND 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:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY PARTICULAR
PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY ENGINE
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT
OR THE LIKE; OR
<PAGE>
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless a Lease 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, or made available, by Airframe
Manufacturer or any of its subcontractors or suppliers, as the case may be,
pursuant to and in accordance with the terms of the Purchase Agreement
Assignment.
4.3 QUIET ENJOYMENT
So long as no Lease Event of Default shall have occurred and be
continuing, Lessor shall not interfere with Lessee's rights hereunder to
continued possession, use and operation of, and quiet enjoyment of, the Aircraft
during the Term. The foregoing, however, shall not be construed or deemed to
modify or condition in any respect the obligations of the Lessee pursuant to
Section 16, which obligations are absolute and unconditional.
4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any moneys required to be paid to or retained by Lessor that are
required to be paid to Lessee or applied as provided herein shall, until paid to
Lessee as provided herein or applied as provided herein, be invested by Lessor
from time to time as directed in writing by Lessee (or, if Lessee fails to so
direct, by or as directed by Lessor in its sole discretion) and at the expense
and risk of Lessee in Cash Equivalents so long as such Cash Equivalents
specified by Lessee or Lessor, as the case may be, can be acquired by Lessor
using its best efforts; provided, that so long as the Lien of the Trust
Indenture shall not have been discharged, such moneys shall be invested and held
by Mortgagee, as assignee of Lessor, in accordance with this Lease and upon
discharge of such Lien, Mortgagee shall pay any such money held by it to Lessor
to be held and invested in accordance with this Section.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the result of
investments pursuant to Section 4.4.1 (net of any fees, commissions and other
<PAGE>
reasonable expenses, if any, incurred in connection with such investment) shall
be held and applied in the same manner as the principal amount is to be held and
applied hereunder. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment), such amount so paid to be held and applied by Lessor as
contemplated in Section 4.4.1 above.
4.4.3 LIMITATION OF LIABILITY
All investments under this Section 4.4 shall be at the expense and
risk of Lessee, and Lessor and Mortgagee shall not be liable for any loss
resulting from any investment made under this Section 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor without instructions whenever such
sale is necessary to make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens
but otherwise on an "as-is", "where is" basis, (2) so long as the Lien of the
Trust Indenture has not been discharged, comply with the Trust Indenture
relating to the release of the Aircraft, Airframe or such Engine, (3) assign to
Lessee or such other person, as the case may be, if and to the extent permitted
under the Purchase Agreement, all warranties of Airframe Manufacturer with
respect to the Aircraft, Airframe or such Engine, and (4) assign to Lessee or
such other person, as the case may be, if and to the extent permitted, all
claims, if any, for damage to the Aircraft, Airframe or such Engine, in each
case free of Lessor Liens, and without recourse or warranty of any kind
whatsoever (except as to the transfer described in clause (1) above and as to
the absence of such Lessor Liens, as aforesaid), and (b) Lessor shall promptly
deliver to Lessee or such other person, as the case may be, a bill of sale and
agreements of assignment, evidencing such transfer and assignment, and such
other instruments of transfer, all in form and substance reasonably satisfactory
to Lessee (or such other person, as the case may be), as Lessee (or such other
person, as the case may be) may reasonably request.
<PAGE>
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any engine leased to, or purchased
by, Lessee or any Permitted Sublessee subject to a lease, conditional sale,
trust indenture or other security agreement that Lessor, its successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
indenture trustee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party.
4.7 SECTION 1110 OF BANKRUPTCY CODE
It is the intention of each of Lessee and Lessor that Lessor (and
Mortgagee as assignee of Lessor under the Trust Indenture) shall be entitled to
the benefits of Section 1110 with respect to the right to take possession of the
Aircraft, Airframe, Engines and Parts as provided in this Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B hereto,
which provisions are hereby incorporated by this reference as if set forth in
full herein.
5.2 STORAGE AND RELATED MATTERS
If Lessor gives written notice to Lessee not less than 60 days nor
more than 120 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft for a period up
to 30 days, commencing on the date of such return, and upon request of Lessor to
Lessee made at least 10 days prior to the end of such initial 30 day period, for
an additional 120 day period commencing upon expiration of such initial period,
at such storage facility in the 48 contiguous states of the United States on
Lessee's route system for Similar Aircraft as Lessor may select as the site for
such return of the Aircraft. Such storage shall be at Lessor's risk, and Lessor
shall pay all applicable storage fees, except that Lessee shall pay the parking
fees for the initial 30 day storage period; PROVIDED that Lessee's obligation to
<PAGE>
provide parking shall be subject to Lessor entering into an agreement prior to
the commencement of the storage period with the storage facility providing,
among other things, that Lessor shall bear all maintenance charges and other
costs (other than parking fees for the initial 30 day period) incurred.
5.3 RETURN OF OTHER ENGINES
In the event that any Engine owned by Lessor shall not be installed on
the Airframe at the time of return hereunder, Lessee shall be required to return
the Airframe hereunder with a Replacement Engine meeting the requirements of,
and in accordance with, Section 10 hereof and Annex B hereto. Thereupon, Lessor
will transfer to Lessee the Engine constituting part of such Aircraft but not
installed on such Airframe at the time of the return of the Airframe.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine or any Part, title to any of the foregoing or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens with respect to any Participant, Lessor or
Mortgagee; (c) the rights of others under agreements or arrangements to the
extent permitted by the terms of Sections 7.2 and 7.3; (d) Liens for Taxes of
Lessee (and its U.S. federal tax law consolidated group), or Liens for Taxes of
any Tax Indemnitee (and its U.S. federal tax law consolidated group) for which
Lessee is obligated to indemnify such Tax Indemnitee under any of the Lessee
Operative Agreements, in any such case either not yet due or being contested in
good faith by appropriate proceedings so long as such Liens and such proceedings
do not involve any material danger of the sale, forfeiture or loss of the
Aircraft, the Airframe, any Engine or any Part thereof; (e) materialmen's,
mechanics', workers', repairers', employees' or other like Liens arising in the
ordinary course of business for amounts the payment of which is either not yet
delinquent for more than 35 days or is being contested in good faith by
appropriate proceedings, so long as such Liens and such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or any Part thereof; and (f) Liens arising out of any
judgment or award against Lessee (or against any Permitted Sublessee), so long
as such judgment shall, within 30 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 30 days after the expiration of such
stay, and so long as during any such 30-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 Aircraft, the Airframe or any Engine. Lessee shall promptly (and in
any case, by the end of the Term), at its own expense, take (or cause to be
taken) such action as may be necessary to duly discharge (by bonding or
otherwise) any Lien not excepted above if the same shall at any time arise in
respect of the Aircraft, the Airframe, any Engine or any Part during the Term.
<PAGE>
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND
RECORDS
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to the compliance by Lessor and Owner Participant with their
respective obligations under Section 13 of the Participation Agreement, Lessee
shall cause the Aircraft to be, and at all times during the Term to remain, duly
registered with the FAA under the Act or with such other country of registry as
shall be permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot be
effected with the FAA because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Act). Lessor shall execute and all such documents as Lessee (or any
Permitted Sublessee) may reasonably request for the purpose of effecting and
continuing such registration. Unless Mortgagee has given Lessee notice that the
Trust Indenture has been discharged, Lessee shall also cause the Trust Indenture
to be duly recorded and at all times maintained of record as a first-priority
perfected mortgage (subject to Permitted Liens) on the Aircraft, the Airframe
and each of the Engines (except to the extent that such perfection or priority
cannot be maintained as a result of the failure by Lessor or Mortgagee to
execute and deliver any necessary documents).
7.1.2 REREGISTRATION
So long as no Lease Event of Default shall have occurred and be
continuing, Lessee may, by written notice to Lessor, request to change the
country of registration of the Aircraft. Any such change in registration shall
be effected only in compliance with, and subject to all of the conditions set
forth in, Section 7.6.11 of the Participation Agreement.
<PAGE>
7.1.3 MARKINGS
If permitted by Applicable Law, on or reasonably promptly after the
Closing, Lessee will cause to be affixed to, and maintained in, the cockpit of
the Airframe and on each Engine, in each case, in a clearly visible location (it
being understood that the location of such placards, as identified to the Owner
Participant prior to the Closing, shall be deemed to be in compliance with this
requirement), a placard of a reasonable size and shape bearing the legend, in
English, set forth in Schedule 6. Such placards may be removed temporarily, if
necessary, in the course of maintenance of the Airframe or Engines. If any such
placard is damaged or becomes illegible, Lessee shall promptly replace it with a
placard complying with the requirements of this Section 7.1.3.
7.1.4 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other person to, operate,
use, maintain, service, repair or overhaul the Aircraft (a) in violation of any
Law binding on or applicable to the Aircraft, the Airframe or any Engine, or (b)
in violation of any airworthiness certificate, license or registration of any
Government Entity relating to Lessee or the Aircraft, the Airframe or any
Engine, except (1) immaterial or non-recurring violations with respect to which
corrective measures are taken promptly by Lessee or a Permitted Sublessee, as
the case may be, upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license or registration in good
faith in any reasonable manner that does not involve a material danger of the
sale, forfeiture or loss of the Aircraft, the Airframe, or any Engine, any risk
of criminal liability or a greater than de minimis risk of material civil
penalties being imposed against Lessor, Mortgagee or any Participant or impair
the Lien of the Trust Indenture.
7.1.5 OPERATION
Lessee agrees not to operate, use or locate the Aircraft, the Airframe
or any Engine, or allow the Aircraft, the Airframe or any Engine to be operated,
used or located (a) in any area excluded from coverage by any insurance required
by the terms of Section 11, except in the case of a requisition by the U.S.
Government where Lessee obtains an indemnity in lieu of such insurance from the
U.S. Government, or insurance from the U.S. Government, covering such area, in
accordance with Section 11.3 or (b) in any recognized area of hostilities unless
fully covered in accordance with Annex D by war-risk insurance as required by
<PAGE>
the terms of Section 11 (including, without limitation, Section 11.3), unless in
any case referred to in this Section 7.1.5 the Aircraft is only temporarily
operated, used or located in such area as a result of an emergency, equipment
malfunction, navigational error, hijacking, weather condition or other similar
unforeseen circumstances, so long as Lessee diligently and in good faith
proceeds to remove the Aircraft from such area.
7.2 POSSESSION
Lessee will not, without the prior written consent of Lessor and Owner
Participant (which consent shall not be unreasonably withheld), sublease or
otherwise in any manner deliver, transfer or relinquish possession of the
Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine
to be installed, on any airframe other than the Airframe; PROVIDED, however,
subject to the provisions of Section 7.3, Lessee may, without such prior written
consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject any Engine to
normal interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial airline industry and entered into by Lessee or
such Permitted Sublessee, as the case may be, in the ordinary course of
business; PROVIDED, HOWEVER, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with, Section
10.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver possession of the
Aircraft, Airframe, any Engine or any Part (i) to the manufacturer thereof or to
any third-party maintenance provider, for testing, service, repair, maintenance
or overhaul work on the Aircraft, Airframe, any Engine or any Part, or, to the
extent required or permitted by the terms of Annex C, for alterations or
modifications in or additions to the Aircraft, Airframe or any Engine or (ii) to
any Person for the purpose of transport to a Person referred to in the preceding
clause (i).
7.2.3 TRANSFER TO U.S. GOVERNMENT
Transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, Airframe or any Engine to the U.S. Government, in which event
Lessee shall promptly notify Lessor and Mortgagee in writing of any such
transfer of possession and, in the case of any transfer pursuant to CRAF, in
<PAGE>
such notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under CRAF.
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, as the case may be, free
and clear of all Liens, except (a) Permitted Liens and those that do not apply
to the Engines and (b) the rights of third parties under normal interchange or
pooling agreements and arrangements of the type that would be permitted under
Section 7.2.1.
7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased by Lessee or
such Permitted Sublessee subject to a mortgage, security agreement, conditional
sale or other secured financing arrangement, but only if (a) such airframe is
free and clear of all Liens, except (i) the rights of the parties to such lease,
or any such secured financing arrangement, covering such airframe and (ii) Liens
of the type permitted by clauses (a) and (b) of Section 7.2.4 and (b) Lessee or
Permitted Sublessee, as the case may be, shall have received from the lessor,
mortgagee, secured party or conditional seller, in respect of such airframe, a
written agreement (which may be a copy of the lease, mortgage, security
agreement, conditional sale or other agreement covering such airframe), whereby
such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease or is owned
by Lessor.
7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT
So long as no Payment Default, Bankruptcy Default or Lease Event of
Default shall have occurred and be continuing, install or permit any Permitted
Sublessee to install an Engine on an airframe owned by Lessee or such Permitted
Sublessee, leased to Lessee or such Permitted Sublessee, or purchased by Lessee
or such Permitted Sublessee subject to a conditional sale or other security
agreement under circumstances where neither Section 7.2.4 or 7.2.5 is
applicable; PROVIDED, HOWEVER, that any such installation shall be deemed an
Event of Loss with respect to such Engine, and Lessee shall comply with Section
10.2 hereof in respect thereof.
<PAGE>
7.2.7 SUBLEASING
With respect to the Aircraft, Airframe or any Engine, so long as no
Payment Default, Bankruptcy Default or Lease Event of Default has occurred and
is continuing, enter into a sublease with any Permitted Air Carrier, but only
if:
(a) Lessee shall provide written notice to Lessor of Lessee's intent
to enter into a Permitted Sublease (except if the Permitted Sublessee is
Express), such notice in the event of a sublease to a U.S., Air Carrier to be
given promptly after entering into any such sublease or, in the case of a
sublease to any other Permitted Air Carrier, 20 days in advance of entering into
such sublease;
(b) At the time that Lessee enters into such Permitted Sublease, such
Permitted Sublessee shall not be subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding, shall not be
seeking any reorganization or any readjustment of its debts and shall not be,
shall not have substantially all of its property, in the possession of any
liquidator, trustee, receiver or similar person and, if such Permitted Sublessee
is a Permitted Foreign Air Carrier, the United States then maintains normal
diplomatic relations with the country in which such Permitted Sublessee has its
principal executive offices;
(c) Any such Permitted Sublease (i) shall include provisions for the
maintenance, operation, possession, inspection and insurance of the Aircraft
that are the same in all material respects as the applicable provisions of this
Lease, (ii) shall provide that, except if any subsidiary of Lessee is the
Permitted Sublessee, such Permitted Sublessee may not further sublease or
transfer its interests (except transfers of the type permitted in Sections 7.2.1
through 7.2.6, inclusive) in the Aircraft, Airframe or Engines, (iii) shall not
extend beyond the end of the Term and (iv) shall be expressly subject and
subordinate to all the terms of this Agreement and to the rights, powers and
remedies of Lessor hereunder;
(d) In connection with a sublease to a Permitted Foreign Air Carrier,
Lessee shall have furnished Lessor an opinion of counsel, reasonably
satisfactory to Lessor, in the country of domicile of such Permitted Foreign Air
Carrier, that (i) the terms of such sublease are the legal, valid and binding
obligations of the parties thereto enforceable under the laws of such
jurisdiction, (ii) it is not necessary for Owner Participant, Lessor or
Mortgagee to register or qualify to do business in such jurisdiction, if not
<PAGE>
already so registered or qualified, as a result, in whole or in part, of the
proposed sublease, (iii) Lessor's title to, and Mortgagee's Lien in respect of,
the Aircraft, Airframe and Engines will be recognized in such jurisdiction, (iv)
the Laws of such jurisdiction of domicile require fair compensation by the
government of such jurisdiction, payable in a currency freely convertible into
Dollars, for the loss of title to the Aircraft, Airframe or Engines in the event
of the requisition by such government of such title (unless Lessee shall provide
insurance in the amounts required with respect to hull insurance under Section
11 covering the requisition of title to the Aircraft, Airframe or Engines by the
government of such jurisdiction so long as the Aircraft, Airframe or Engines are
subject to such sublease), (v) the agreement of such Permitted Air Carrier that
its rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such Permitted Air Carrier under applicable
law, and (vi) there is no tort liability of the owner or Lessor of an aircraft
not in possession thereof under the laws of such country (it being agreed 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 is provided to cover such risk);
(e) No such sublease shall be made to a "tax exempt entity" as defined
in Section 168(h)(2) of the Code (including any Permitted Foreign Air Carrier)
prior to the close of the Tax Attribute Period, unless Lessee prepays on a
lump-sum basis any liability due under the Tax Indemnity Agreement as a result
of such sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease, PROVIDED, that notwithstanding
the foregoing, such sublease may be made without requiring such prepayment
during the taxable year in which the seventh anniversary of the Closing Date
occurs so long as the Aircraft is not "used predominantly outside the United
States" within the meaning of Section 168(g) of the Code during such taxable
year;
(f) Lessee shall furnish to Lessor and Mortgagee evidence reasonably
satisfactory to Lessor that the insurance required by Section 11 remains in
effect;
(g) All necessary documents shall have been duly filed, registered or
recorded in such public offices as may be required fully to preserve the title
of Lessor, and the first priority security interest (subject to Permitted Liens)
of Mortgagee, in the Aircraft, Airframe and Engines;
<PAGE>
(h) Except for the initial sublease to Express, Lessee shall reimburse
Lessor for all of its reasonable out-of-pocket fees and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred by
Lessor in connection with any such sublease; and
(i) For all purposes of this Section 7.2.7, the term "sublease" shall
be deemed to include interchange agreements with respect to the Aircraft or
Airframe.
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER
RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of the Aircraft
in accordance with Section 7.2 shall be subject and subordinate to all the terms
of this Lease, and to Lessor's rights, powers and remedies hereunder, including,
without limitation (i) Lessor's right to repossess the Aircraft pursuant to
Section 15, (ii) Lessor's right to terminate and avoid such sublease, delivery,
transfer or relinquishment of possession upon the occurrence of a Lease Event of
Default and (iii) the right to require such person to forthwith deliver the
Aircraft, the Airframe and Engines subject to such transfer upon the occurrence
of a Lease Event of Default;
(b) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer had not
occurred, and no transfer of possession of the Aircraft, the Airframe, any
Engine or any Part shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or under any Operative Agreement;
(c) Lessee shall ensure that no sublease, delivery, transfer or
relinquishment permitted under Section 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the provisions
of Section 7.1.2.
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under paragraph (c), (d), or (e) of the definition
of such term (as set forth in Annex A) shall not be deemed to violate the
provisions of Section 7.2; and
(e) Any Wet Lease shall not constitute a delivery, transfer or
relinquishment of possession for purposes of Section 7.2 and shall not be
prohibited by the terms hereof.
<PAGE>
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS;
OTHER LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
At all times during the Term, Lessee shall comply with, or cause to be
complied with, each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 INFORMATION, CERTIFICATES, NOTICES AND REPORTS
8.2.1 FINANCIAL INFORMATION
Lessee will furnish to Lessor:
(a) Within 90 days after the end of each of the first three fiscal
quarters in each fiscal year of Lessee, a consolidated balance sheet of Lessee
as of the end of such quarter and related statements of income and cash flows
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
prepared in accordance with GAAP; PROVIDED THAT so long as Lessee is subject to
the reporting requirements of the Securities Exchange Act of 1934, a copy of
Lessee's report on Form 10-Q for such fiscal quarter (excluding exhibits) will
satisfy this paragraph (a).
(b) Within 120 days after the end of each fiscal year of Lessee, a
consolidated balance sheet of Lessee as of the end of such fiscal year and
related statements of income and cash flows of Lessee for such fiscal year, in
comparative form with the preceding fiscal year, prepared in accordance with
GAAP, together with a report of Lessee's independent certified public
accountants with respect to their audit of such financial statements; PROVIDED
THAT so long as Lessee is subject to the reporting requirements of the
Securities Exchange Act of 1934, a copy of Lessee's report on Form 10-K for such
fiscal year (excluding exhibits) will satisfy this paragraph (b).
8.2.2 ANNUAL CERTIFICATE
Within 120 days after the close of each fiscal year of Lessee, Lessee
shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee to the
effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
<PAGE>
Agreements and that such officer does not have knowledge of the existence as at
the date of such certificate of any Lease Default or Lease Event of Default.
8.2.3 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor timely to file any reports required to be filed by it
as lessor under the Lease or to enable Owner Participant to timely file any
reports required to be filed by it, as the beneficiary of the Trust Estate, in
either case, with any Government Entity because of, or in connection with, the
interest of Owner Participant or Lessor in the Aircraft, Airframe or Engines,
this Lease or any other part of the Trust Estate; provided, however, that with
respect to any such information which Lessee reasonably deems commercially
sensitive or confidential, Owner Participant or Lessor, as the case may be,
shall afford Lessee a reasonable opportunity to seek from any such Government
Entity a waiver of the obligation of Owner Participant or Lessor to file any
such information, or shall consent to the filing of such information directly by
Lessee in lieu of filing by Owner Participant or Lessor, and if any such waiver
or consent is evidenced to the reasonable satisfaction of Owner Participant or
Lessor, as the case may be, then Lessee shall not be required to furnish such
information to Owner Participant or Lessor.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) Unless a Lease Event of Default, Payment Default or Bankruptcy
Default shall have occurred and be continuing, Lessee shall have the right at
its option to terminate this Lease during the Base Lease Term, effective only on
a Termination Date occurring after the end of the Tax Attribute Period, if:
(i) Lessee makes a good faith determination that the Aircraft either
has become economically obsolete or is surplus to Lessee's requirements and
the Chief Financial Officer or Treasurer of Lessee so certifies in writing
to Lessor; and
(ii) written notice of Lessee's exercise of its option to terminate
this Agreement shall be given to Lessor not less than 90 days prior to the
proposed Termination Date specified in such notice.
<PAGE>
(b) Lessor shall notify Lessee and Mortgagee of Lessor's intention to
sell or retain the Aircraft, as provided in this Section 9, no later than 45
days after Lessee gives Lessor written notice pursuant to Section 9.1(a)(ii).
Any failure by Lessor to give such notice of its election shall be deemed to be
an election to sell the Aircraft, as provided in this Section 9.
(c) Any termination pursuant to this Section 9 shall become effective
on the date of the sale, if any, pursuant to Section 9.2 or upon the date of
termination and payment by Lessee and Lessor in accordance with Section 9.3 if
Lessor elects to retain the Aircraft.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has given Lessee notice of Lessor's election to retain
the Aircraft, Lessee, as agent for Lessor, shall, until the date ten Business
Days prior to the proposed Termination Date, use commercially reasonable efforts
to obtain bids for a cash purchase of the Aircraft and Lessor may, if it desires
to do so, also seek to obtain such bids. In the event Lessee receives any bid,
Lessee shall promptly, and in any event at least ten Business Days prior to the
proposed date of sale, certify to Lessor in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person (who
shall not be Lessee or any Affiliate of Lessee or any person with whom Lessee or
any such Affiliate has an arrangement for the future use of the Aircraft by
Lessee or any such Affiliate) submitting such bid. In the event Lessor receives
any bid on or prior to the date ten Business Days prior to the proposed
Termination Date, Lessor shall, at least ten Business Days prior to the proposed
date of sale, certify to Lessee in writing the amount and terms of such bid, the
proposed date of such sale and the name and address of the person submitting
such bid.
9.2.2 CLOSING OF SALE
(a) On the proposed Termination Date (i) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder,
if any, which shall have submitted the highest cash bid (net of applicable
brokerage commissions) on or before the date ten Business Days prior to such
Termination Date, in the same manner as if delivery were made to Lessor pursuant
to Section 5 and Annex B and in full compliance with the terms thereof, and
shall duly transfer to Lessor title to any such engines not owned by Lessor, all
<PAGE>
in accordance with the terms of Section 5 and Annex B, and (ii) Lessor shall
simultaneously therewith transfer the Airframe and Engines or engines to such
bidder, in the manner described in Section 4.5, against cash paid to Lessor in
the amount of such highest bid (net of applicable brokerage commissions and all
reasonable out-of-pocket fees and expenses incurred by Lessor, Mortgagee and
Owner Participant in connection with such sale and the related termination of
this Lease (collectively, the "Expenses of Sale") and in the manner and in funds
of the type specified in Section 3.3.
(b) All proceeds of any sale described in Section 9.2.2(a), net of
Expenses of Sale, shall be paid to and retained by Lessor and, on such
Termination Date, and as a condition precedent to such sale and the delivery of
the Aircraft and Engines or engines to such bidder, Lessee shall pay to Lessor,
in the manner and in funds of the type specified in Section 3.3:
(i) all unpaid Basic Rent due at any time prior to such Termination
Date; plus
(ii) an amount equal to the excess, if any, of the Termination Value
for the Aircraft, computed as of such Termination Date, over the proceeds
of such sale, net of Expenses of Sale; plus
(iii) as provided in Section 3.2.2, interest on the amounts specified
in the foregoing clause (i) at the Payment Due Rate from and including the
date on which any such amount was due to the date of payment of such amount
in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent due by Lessee to Lessor, Mortgagee or the
Participants under this Lease (including, without limitation, (A) Supplemental
Rent in respect of Make-Whole Amount, if any, payable pursuant to Section
2.10(b) of the Trust Indenture in connection with a prepayment of the Equipment
Notes upon such sale, (B) all interest charges provided for hereunder or under
any other Lessee Operative Agreement with respect to the late payment of any
amounts so payable, (C) the Expenses of Sale).
(c) Upon and subject to any such sale and receipt of proceeds by
Lessor, and full and final payment of all amounts described in Section 9.2.2(b),
and compliance by Lessee with all the other provisions of this Section 9.2,
<PAGE>
(i) Lessor will transfer to Lessee, in accordance with Section 4.5,
any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on or after the
Payment Date with reference to which Termination Value is computed, shall
cease, and the Term for the Aircraft shall end effective as of the date of
such sale.
(d) A sale of the Aircraft pursuant to this Section 9.2.2 shall take
place only on a Termination Date. Subject to Section 9.3, if no sale shall have
occurred on or as of the proposed Termination Date, this Agreement shall
continue in full force and effect, and all of Lessee's obligations shall
continue, including, without limitation, its obligation to pay Rent, in each
case, as if the notice under Section 9.1 shall not have been given and, subject
to Section 9.2.3(b), Lessee may give another notice pursuant to Section 9.1.
9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) Lessee may withdraw any notice given pursuant to Section 9.1 at
any time on or before the date 20 days prior to the proposed Termination Date,
whereupon this Agreement shall continue in full force and effect and all of
Lessee's obligations shall continue, including, without limitation, its
obligation to pay Rent, in each case, as if the notice under Section 9.1 shall
not have been given and Lessee may give another notice pursuant to Section 9.1;
PROVIDED that Lessee shall not be entitled to give more than three notices
pursuant to Section 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and expenses of
Lessor, Mortgagee and Owner Participant in connection with any notice of
termination withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor shall elect to retain the Aircraft in accordance with
Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the manner and in funds
of the type specified in Section 3.3, to the Mortgagee an amount sufficient
to prepay all outstanding Equipment Notes pursuant to Section 2.10(b) of
the Trust Indenture;
<PAGE>
(ii) subject to receipt by Mortgagee of the funds described in
paragraph (i) above, Lessee shall deliver the Airframe and Engines or
engines constituting part of the Aircraft to Lessor pursuant to Section 5
and Annex B and in full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by Lessor, all in
accordance with the terms of Section 5 and Annex B;
(iii) Lessee shall pay to Lessor, in the manner and in funds of the
type specified in Section 3.3:
(1) all unpaid Basic Rent due at any time prior to such Termination
Date; plus
(2) as provided in Section 3.2.2, interest on the amounts specified
in the foregoing clause (1) at the Payment Due Rate from and
including the date on which any such amount was due to the date
of payment of such amount in full; and
(iv) Lessee shall also pay all Supplemental Rent due and payable by
Lessee to Lessor, Mortgagee or the Participants under this Lease (including
without limitation (A) Supplemental Rent in respect of Make-Whole Amount,
if any, payable pursuant to Section 2.10(b) of the Trust Indenture in
connection with a prepayment of the Equipment Notes, (B) all interest
charges provided for hereunder or under any other Lessee Operative
Agreement with respect to the late payment of any amounts so payable, and
(C) the reasonable out-of-pocket fees and expenses incurred by Lessor and
Owner Participant in connection with such termination and sale).
(b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance with Section 4.5,
any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) The obligation of Lessee to pay Basic Rent otherwise due on or
after the Termination Date shall cease, and the Term for the Aircraft shall
end effective as of such Termination Date.
<PAGE>
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS WITH RESPECT TO AIRCRAFT
10.1.1 NOTICE
Upon the occurrence of an Event of Loss with respect to the Airframe,
and any Engine or Engines installed thereon at the time of such Event of Loss,
Lessee shall promptly (and in any event within 10 Business Days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss. For
purposes of Section 10.1, an Event of Loss with respect to the Airframe shall be
deemed to constitute an Event of Loss with respect to the Aircraft.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If an Event of Loss with respect to the Aircraft occurs, then
Lessee shall pay, in the manner and in funds of the type specified in Section
3.3, the following amounts:
(i) on the Stipulated Loss Value Date next following the earlier of
(x) the 120th day following the date of the occurrence of such Event of
Loss, and (y) the twentieth day following the receipt of insurance proceeds
with respect to such occurrence, Lessee shall pay to Lessor:
(1) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to such Stipulated Loss Value Date; plus
(2) the Stipulated Loss Value of the Aircraft computed as of such
Stipulated Loss Value Date; plus
(3) as provided in Section 3.2.2, interest on the amount specified in
the foregoing clause (1) at the Payment Due Rate from and
including the date on which any such amount was due to the date
of payment of such amount in full;
PROVIDED, that if such Stipulated Loss Value Date is a Payment Date, Lessee
shall not be obligated to pay the Basic Rent or Renewal Rent otherwise
required to be paid on such date.
(ii) on or before the date required for payment of the amounts
specified in paragraph (i) above, Lessee shall also pay to Lessor,
Mortgagee and the Participants all other amounts due and payable by Lessee
<PAGE>
to Lessor, Mortgagee and the Participants under this Lease, the
Participation Agreement or any other Lessee Operative Agreement.
(b) Upon payment in full of all amounts described in the foregoing
paragraph (a),(i) the obligation of Lessee to pay Basic Rent or Renewal Rent
hereunder with respect to the Aircraft shall terminate, (ii) the Term for the
Aircraft shall end and (iii) Lessor will transfer the Aircraft to Lessee, as-is
and where-is, and subject to any insurer's salvage rights, but otherwise in the
manner described in Section 4.5.
10.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE
10.2.1 NOTICE
Upon the occurrence of an Event of Loss with respect to an Engine
under circumstances in which an Event of Loss with respect to the Airframe has
not occurred, Lessee shall promptly (and in any event within 10 Business Days
after such occurrence) give Lessor written notice of such Event of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 90 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Engine with respect to
which any Event of Loss occurred, title to a Replacement Engine free and clear
of all Liens other than Permitted Liens. Such Replacement Engine shall be an
engine manufactured by Engine Manufacturer that is the same model as the Engine
to be replaced thereby, or an improved model, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 ENGINE EXCHANGE
Unless a Payment Default, Bankruptcy Default or Lease Event of Default
shall have occurred and be continuing, upon not less than five (5) Business
Days' prior written notice to Lessor, Lessee may replace any Engine leased
hereunder with another engine (the "Exchanged Engine") meeting the requirements
of Section 10.2.2. Such Exchanged Engine shall be deemed to be a "Replacement
Engine" and Lessor and Lessee shall comply with the provisions of Section 10.3
with regard to the Exchanged Engine and the Engine so replaced.
<PAGE>
10.3 CONDITIONS TO ANY REPLACEMENT OF ENGINE
10.3.1 DOCUMENTS
Prior to or at the time of conveyance of title to any Replacement
Engine to Lessor, Lessee shall take each of the following actions:
(a) furnish Lessor with a full warranty bill of sale duly conveying to
Lessor such Replacement Engine in form and substance reasonably satisfactory to
Lessor;
(b) cause (i) a Lease Supplement subjecting such Replacement Engine to
this Lease, duly executed by Lessee, to be delivered to Lessor for execution
and, upon such execution, to be filed for recordation with the FAA pursuant to
the Act, (ii) a Trust Indenture Supplement, subjecting such Replacement Engine
to the Trust Indenture, to be delivered to Lessor for execution and, upon
execution, to be filed for recordation with the FAA pursuant to the Act and
(iii) such Financing Statements and other filings, as Lessor or Mortgagee may
reasonably request, duly executed by Lessee and, to the extent applicable,
Lessor and Mortgagee (and Lessor and Mortgagee shall execute and deliver the
same), to be filed in such locations as any such party may reasonably request;
(c) furnish such evidence of compliance with the insurance provisions
of Section 11 with respect to such Replacement Engine as Lessor may reasonably
request;
(d) furnish an opinion or opinions of Lessee's counsel (which may be
Lessee's legal department) reasonably satisfactory to Lessor and addressed to
Lessor and Mortgagee to the effect that such full warranty bill of sale
constitutes an effective instrument for the conveyance of title to such
Replacement Engine;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Lessor and addressed to Lessor and Mortgagee as to the due
filing for recordation of each Lease Supplement and Trust Indenture Supplement
with respect to such Replacement Engine under the Act; and
(f) furnish a certificate of a qualified aircraft engineer (who may be
an employee of Lessee) certifying that such Replacement Engine complies with the
value, utility and remaining useful life requirements set forth in Section
10.2.2.
Lessor and Lessee understand and agree that if at the time of any
replacement of any Engine, as contemplated in this Section 10, the Airframe was
registered in a jurisdiction other than the United States, then the requirements
<PAGE>
set forth above in this Section 10.3.1 relating to compliance with the
requirements of the Act or the FAA, shall be deemed to refer to the comparable
applicable Law of, and the Aviation Authority of, such other jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor shall, in all events, be entitled to the benefits of
Section 1110 with respect to any Replacement Engine and Lessee and Lessor shall
cooperate and take such action as the other may reasonably request so as to
ensure that Lessor shall be entitled to such benefits.
(b) No Event of Loss with respect to an Engine shall result in, or
otherwise allow or permit, any reduction, deferral, discharge or other change in
the timing or amount of any Rent payable by Lessee hereunder, and Lessee shall
pay all such Rent and other amounts as though such Event of Loss had not
occurred.
10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of Sections 10.2
and 10.3.1, Lessor will transfer to Lessee the Engine with respect to which such
Event of Loss occurred, in accordance with Section 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of damage or
loss not constituting an Event of Loss (the application of which is provided for
in Section 11), received at any time by Lessor, Lessee or any Permitted
Sublessee from any Government Entity or any other Person in respect of any Event
of Loss will be applied as follows:
10.5.1 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other than an
Engine installed on the Airframe at the time such Airframe suffers an Event of
Loss), upon compliance by Lessee with the applicable terms of Section 10.2.2
with respect to the Event of Loss for which such amounts are received, such
amounts shall be paid over to, or retained by, Lessee.
10.5.2 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with respect to the
Airframe, such amounts shall be applied as follows:
<PAGE>
(a) FIRST, if the sum described in Section 10.1.2 has not then been
paid in full by Lessee, such amounts shall be paid to Lessor (or to Mortgagee so
long as Mortgagee has not given notice to Lessee that the Trust Indenture has
been duly discharged, except with respect to Excluded Payments) to the extent
necessary to pay in full such sum;
(b) SECOND, the remainder, if any, shall be paid to Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity shall requisition for use the Airframe and
the Engines or engines installed thereon, and if the same does not constitute an
Event of Loss, Lessee shall promptly notify Lessor and Mortgagee of such
requisition and all of Lessee's obligations under this Agreement shall continue
to the same extent as if such requisition had not occurred; PROVIDED, HOWEVER,
that if the Airframe and Engines or engines installed thereon are not returned
to Lessor by Lessee at the end of the Term, unless Lessor shall have elected,
upon notice given not less than 30 days nor more than 120 days before the end of
the Term, not to treat such event as constituting an Event of Loss with respect
to the Aircraft, Lessee shall be obligated to pay the Stipulated Loss Value and
all other amounts payable pursuant to Section 10.1.2 with respect to the
Aircraft. If Lessor shall have elected not to treat such event as an Event of
Loss, Lessee shall be obligated to return the Airframe and Engines or engines to
Lessor pursuant to, and in all other respects to comply with the provisions of,
Section 5 promptly upon their return by such Government Entity, and Lessee shall
pay to Lessor upon such return an amount equal to the average daily Basic Rent
payable by Lessee during the Term for each day after the end of the Term to but
excluding the day of such return, up to a maximum of 30 days.
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity shall requisition for use any Engine but not
the Airframe, Lessee will replace such Engine by complying with the applicable
terms of Sections 10.2 and 10.3 to the same extent as if an Event of Loss had
occurred with respect to such Engine, and any payments received by Lessor or
Lessee from such Government Entity with respect to such requisition shall be
paid or retained in accordance with Section 10.5.1.
10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted Sublessee,
from any Government Entity for the use of the Airframe and Engines or engines
installed thereon during the Term shall be paid over to, or retained by, Lessee
<PAGE>
and all payments received by Lessor or Lessee from any Government Entity for the
use of the Airframe and Engines or engines installed thereon after the Term
shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, then all such payments shall be paid
over to Lessor (or to Mortgagee so long as Mortgagee has not given notice to
Lessee that the Trust Indenture has been duly discharged), and held as provided
in Section 10.5.
10.9 APPLICATION OF PAYMENTS DURING EXISTENCE OF A LEASE
EVENT OF DEFAULT
Any amount described in this Section 10 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Payment Default or Bankruptcy Default shall have occurred and be continuing, but
shall instead be held by or paid over to Lessor (or to Mortgagee so long as
Mortgagee has not given notice to Lessee that the Trust Indenture has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until Lessor shall have demanded liquidated damages pursuant
to Section 15.1.3 or 15.1.4 and such amount is applied, at the option of Lessor,
or upon the written request of Lessee to Lessor, from time to time during the
continuance of a Lease Event of Default, to Lessee's obligations under this
Lease as and when due, it being understood that any such application shall be
made to such obligations of Lessee as Lessor may determine in its sole
discretion. At such time as there shall not be continuing any Payment Default or
Bankruptcy Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 10.9.
SECTION 11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Mortgagee or Owner Participant
from obtaining insurance for its own account (and any proceeds payable under
such separate insurance shall be payable as provided in the policy relating
<PAGE>
thereto); PROVIDED, HOWEVER, that no insurance may be obtained or maintained
that would limit or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to this Section 11 and
Annex D.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
Lessor agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft described in Annex D, indemnification from, or insurance
provided by, the U.S. Government, or upon the written consent of Lessor, other
Government Entity, against such risk in an amount that, when added to the amount
of insurance (including permitted self-insurance), if any, against such risk
that Lessee (or any Permitted Sublessee) may continue to maintain, in accordance
with this Section 11, during the period of such requisition or transfer, shall
be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss with respect to the Aircraft or any
Engine under policies required to be maintained by Lessee pursuant to this
Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Lessee) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 11 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Lease Event of Default shall have occurred and be continuing, but shall instead
be held by or paid over to Lessor (or to Mortgagee so long as Mortgagee has not
given notice to Lessee that the Trust Indenture has been duly discharged) as
security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4.4 hereof unless and until Lessor shall have demanded
liquidated damages pursuant to Section 15.1.3 or 15.1.4 and such amount is
<PAGE>
applied, at the option of Lessor, or upon the written request of Lessee to
Lessor, from time to time during the continuance of a Lease Event of Default, to
Lessee's obligations under this Lease and the other Lessee Operative Agreements
as and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Lease Event of Default, such
amount shall be paid to Lessee to the extent not previously applied in
accordance with this Section 11.5.
SECTION 12. INSPECTION
(a) Lessor, Mortgagee or their respective authorized representatives
(the "Inspecting Parties") may, upon reasonable notice to Lessee, inspect the
Aircraft, Airframe and Engines (including, without limitation, the Aircraft
Documents) and Lessee shall cooperate, and shall cause any Permitted Sublessee
to cooperate, with the Inspecting Parties in connection with any such inspection
(including, without limitation, permitting any such Inspecting Party to make
copies of such Aircraft Documents not reasonably deemed confidential by Lessee
or such Permitted Sublessee).
(b) Except during the continuance of any Lease Event of Default while
the Section 1110 Period shall not be in effect, any inspection of the Aircraft
hereunder shall be limited to a visual, walk-around inspection and shall not
include the opening of any panels, bays or other components of the Aircraft,
Airframe or Engines. Any inspection permitted hereunder, including any
inspection conducted during the continuance of a Lease Event of Default, shall
be conducted in a manner which does not interfere with Lessee's or a Permitted
Sublessee's operation, use and maintenance of such Aircraft, which determination
of interference shall be made by Lessee in its reasonable sole discretion.
(c) With respect to such rights of inspection, neither Lessor nor
Mortgagee shall have any duty or liability to make, or any duty or liability by
reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with Section 12(a)); PROVIDED, that if a Lease Event of Default shall have
occurred and be continuing, Lessee shall bear all such reasonable expenses,
except, in the case of a Chapter 11 reorganization, during the Section 1110
Period.
<PAGE>
(e) If requested by Lessor, Lessee shall promptly advise, or shall
cause any Permitted Sublessee to advise, Lessor of the date upon which the
Aircraft, Airframe or any Engine undergoes its next scheduled maintenance visit
or next major check, and with respect to any Engine, the next off-the-wing
maintenance, and shall advise Lessor of the name and location of the relevant
maintenance performer. Lessor shall have the opportunity to attend such
scheduled maintenance visit or major check, subject to the other provisions of
this Section 12.
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 IN GENERAL
This Lease and the other Lessee Operative Agreements shall be binding
upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease. Except as otherwise provided herein (including, without
limitation, under the provisions of Section 15 hereof), Lessor and Mortgagee may
not assign or convey any of its right, title and interest in and to this Lease
or the Aircraft without the prior written consent of Lessee, such consent not to
be unreasonably withheld.
13.2 MERGER OF LESSEE
13.2.1 IN GENERAL
Lessee shall not consolidate with or merge into any other person under
circumstances in which Lessee is not the surviving corporation, or convey,
transfer or lease in one or more transactions all or substantially all of its
assets to any other person, unless:
(a) such person is organized, existing and in good standing under the
Laws of the United States, any State of the United States or the District
Columbia and, upon consummation of such transaction, such person will be a U.S.
Air Carrier;
(b) such person executes and delivers to Lessor and Mortgagee a duly
authorized, legal, valid, binding and enforceable agreement, reasonably
satisfactory in form and substance to Lessor, containing an effective assumption
by such person of the due and punctual performance and observance of each
covenant, agreement and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;
<PAGE>
(c) such person makes such filings and recordings with the FAA
pursuant to the Act as shall be necessary to evidence such consolidation or
merger; and
(d) immediately after giving effect to such consolidation or merger no
Lease Event of Default shall have occurred and be continuing.
13.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this Section 13.2, such Person will
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lessee Operative Agreements with the same effect as if such
person had been named as "Lessee" therein. No such consolidation or merger, or
conveyance, transfer or lease, shall have the effect of releasing Lessee or such
Person from any of the obligations, liabilities, covenants or undertakings of
Lessee under the Lease.
13.3 ASSIGNMENT SECURITY FOR LESSOR'S OBLIGATIONS
In order to secure the indebtedness evidenced by the Equipment Notes,
Lessor has agreed in the Trust Indenture, among other things, to assign to
Mortgagee this Lease and to mortgage the Aircraft, Airframe and Engines in favor
of Mortgagee, subject to the reservations and conditions therein set forth.
Lessee hereby accepts and consents to the assignment of all Lessor's right,
title and interest in and to this Lease pursuant to the terms of the Trust
Indenture. In accordance with Section 3.3(c), Lessee agrees to pay directly to
Mortgagee (or, after receipt by Lessee of notice from Mortgagee 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 Mortgagee and Lessee
agrees that Mortgagee's right to such payments hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, the circumstances set forth in Section 16 hereof. Notwithstanding
the foregoing assignment of this Lease, the obligations of Lessee to Lessor to
perform the terms and conditions of this Lease shall remain in full force and
effect.
13.4 SUCCESSOR OWNER TRUSTEE
Lessee agrees that in the case of the appointment of any successor
Owner Trustee pursuant to the terms of the Participation Agreement and the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee to Lessee, succeed to all the rights, powers and title
<PAGE>
of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following circumstances,
conditions, acts or events, for any reason whatsoever and whether any such
circumstance, condition, act or 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, order, rule or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:
14.1 PAYMENTS
Lessee shall fail to pay any amount of Basic Rent, Renewal Rent,
Stipulated Loss Value or Termination Value within five (5) Business Days after
the same shall have become due; or Lessee shall fail to pay any Supplemental
Rent (other than Stipulated Loss Value or Termination Value) when due and such
failure shall continue for a period in excess of ten (10) Business Days from and
after the date of any written notice to Lessee from Lessor, Mortgagee or Owner
Participant of the failure to make such payment when due; provided that any such
failure to pay any Excluded Payment shall not constitute a Lease Event of
Default until written notice is given by the Owner Participant to Lessee and
Mortgagee that such failure constitutes a Lease Event of Default and such
failure shall have continued for a period in excess of ten (10) Business Days
after such notice.
14.2 INSURANCE
Lessee shall fail to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft, Airframe and Engines in
accordance with the provisions of Section 11.
<PAGE>
14.3 OTHER COVENANTS
Lessee shall fail to observe or perform (or caused to be observed and
performed) in any material respect any other covenant, agreement or obligation
set forth herein or in any other Lessee Operative Agreement (other than the
covenants, agreements and obligations set forth in the Tax Indemnity Agreement),
and such failure shall continue unremedied for a period of 30 days from and
after the date of written notice thereof to Lessee from Lessor, Owner
Participant or Mortgagee, unless such failure is capable of being corrected and
Lessee shall be diligently proceeding to correct such failure, in which case
there shall be no Lease Event of Default unless and until such failure shall
continue unremedied for a period of 90 days after receipt of such notice.
14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, (c) and the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor, Owner Participant or Mortgagee to Lessee (except
that this clause (c) shall be inapplicable in the case of Section 6.1.7 of the
Participation Agreement).
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee shall consent to the appointment of or the taking of
possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, liquidation or other relief in a case under
any bankruptcy Laws or other insolvency Laws (as in effect at such time), or
Lessee shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or
Lessee's board of directors shall adopt a resolution authorizing any of the
foregoing; or
<PAGE>
(b) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
trustee or liquidator of Lessee or of substantially all of its property, or
substantially all of the property of Lessee shall be sequestered, and any such
order, judgment or decree of appointment or sequestration shall remain in force
undismissed, unstayed and unvacated for a period of 90 days after the date of
entry thereof; or
(c) a petition against Lessee in a case under any bankruptcy Laws or
other insolvency Laws (as in effect at such time) is filed and not withdrawn or
dismissed within 90 days thereafter, or if, under the provisions of any Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction, custody or
control of Lessee or of substantially all of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and unterminated
for a period of 90 days.
SECTION 15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Lease Event of Default shall occur and be continuing, Lessor
may, at its option and at any time and from time to time, exercise any one or
more of the following remedies as Lessor in its sole discretion shall elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines 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 the Airframe or Engine were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise, and Lessee expressly waives any right it may
have to a hearing prior to repossession of the Aircraft.
<PAGE>
15.1.2 SALE AND USE
Lessor may sell the Airframe and/or any Engine at public or private
sale, at such times and places, and to such Persons (including Lessor, Mortgagee
or any Participant), as Lessor may determine; or Lessor may otherwise dispose
of, hold, use, operate, lease to others or keep idle the Airframe and/or any
Engine, as Lessor, in its sole discretion, may determine, all free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to
such action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this Section 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give Lessee at least 15 days prior written notice of the date fixed
for any public sale of the Airframe and/or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under Section 15.1.1 or 15.1.2 with respect to
the Airframe and/or any Engine, or any Part thereof, Lessor, by written notice
to Lessee specifying a payment date (which shall be the Stipulated Loss Value
Date next occurring not less than 10 days after the date of such notice), may
demand Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the payment
date so specified and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date specified for payment
in such notice), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date specified in such notice; plus
(b) an amount equal to the excess, if any, of the Stipulated Loss
Value for the Aircraft, computed as of the Stipulated Loss Value Date specified
in such notice, over the Fair Market Sales Value of the Aircraft, as of the
Stipulated Loss Value Date specified in such notice; plus
(c) interest on the amounts specified in the foregoing clause (a) at
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
<PAGE>
(d) interest on the amount specified in the foregoing clause (b) at
the Payment Due Rate from and including the Stipulated Loss Value Date specified
in such notice to the date of payment of such amount.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under Section 15.1.3
with respect to the Aircraft, may, if Lessor shall so elect, upon giving written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date of such sale), the
following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date on or immediately preceding the
date of such sale; plus
(b) an amount equal to the excess, if any, of (i) the Stipulated Loss
Value of the Aircraft, computed as of the Stipulated Loss Value Date used in the
foregoing clause (a) for the computation of unpaid Rent, over (ii) the proceeds
of such sale, minus all reasonable costs of Lessor in connection with the sale;
plus
(c) if the date of such sale is not a Stipulated Loss Value Date, an
amount equal to interest on the outstanding principal amount of the Equipment
Notes at the rate per annum borne thereby from and including the Stipulated Loss
Value Date used in the foregoing clause (a) for the computation of unpaid Rent
to the date of such sale; plus
(d) interest on the amounts specified in the foregoing clause (a) at
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
(e) interest on the sum of the amounts specified in the foregoing
clause (b) at the Payment Due Rate from and including the date of such sale to
the date of payment of such amounts.
<PAGE>
15.1.5 RESCISSION
Lessor may (i) at its option, rescind or terminate this Lease as to
the Aircraft, Airframe or any Engine, or any Part thereof, or (ii) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof, including without limitation Lessee's agreement
to lease the Aircraft for the Term and to pay Rent.
15.1.6 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication of
amounts otherwise paid under this Section 15), Lessee shall be liable for any
and all unpaid Rent due hereunder before, during or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, including,
without limitation, interest on overdue Rent at the rate as herein provided,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all reasonable
costs and expenses of Lessor incurred in connection with the return of the
Airframe or any Engine, in accordance with the terms of Section 5 or in placing
the Airframe or any Engine, in the condition and airworthiness required by
Section 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of Section 15.1, during any period that
the Aircraft, Airframe or any Engine is subject to CRAF in accordance with the
provisions of Section 7.2.3 and in the possession of the U.S. Government, Lessor
shall not, as a result of any Lease Event of Default, exercise its remedies
hereunder in such manner as to limit Lessee's control under this Lease (or any
Permitted Sublessee's control under any Permitted Sublease) of the Aircraft,
Airframe or such Engine, unless at least 30 days' (or such other period as may
then be applicable under CRAF) written notice of default hereunder shall have
been given by Lessor or Mortgagee by registered or certified mail to Lessee (and
any Permitted Sublessee) with a copy to the Contracting Officer Representative
or Representatives for the Military Airlift Command of the United States Air
Force to whom notices must be given under the contract governing Lessee's (or
any Permitted Sublessee's) participation in CRAF with respect to the Aircraft,
Airframe or any Engine.
<PAGE>
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (i) fails to make any payment of Rent required to be made by
it hereunder or (ii) fails to perform or comply with any of its agreements
contained herein and such failure continues for a period of thirty days after
written notice thereof is given by Lessor, Mortgagee or Owner Participant to
Lessee, Lessor may (but shall not be obligated to) make such payment or perform
or comply with such agreement, and the amount of such payment and the amount of
the expenses of Lessor or Mortgagee 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 Payment Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand by Lessor or Mortgagee,
whichever is entitled thereto. No such payment, performance or compliance shall
be deemed to cure any Lease Default or Lease Event of Default or otherwise
relieve Lessee of its obligations with respect thereto.
15.4 DETERMINATION OF FAIR MARKET SALES VALUE
For the purpose of this Section 15, the "Fair Market Sales Value" of
the Aircraft shall be determined on an "as is, where is" basis and shall take
into account customary brokerage and other out-of-pocket fees and expenses which
typically would be incurred in connection with a sale of the Aircraft. Any such
determination shall be made by an Appraiser selected by Lessor and the costs and
expenses associated therewith shall be borne by Lessee, unless Lessor does not
obtain possession of the Aircraft, Airframe and Engines pursuant to this Section
15, in which case an Appraiser shall not be appointed and Fair Market Sales
Value for purposes of this Section 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in any way
any right, power, remedy or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy and privilege hereby given to, or retained by, Lessor
in this Lease shall be in addition to and not in limitation of every other
right, power, remedy and privilege given under the Operative Agreements or now
or hereafter existing at law or in equity. Each and every right, power, remedy
and privilege of Lessor under this Lease and any other Operative Agreement may
be exercised from time to time or simultaneously and as often and in such order
as may be deemed expedient by Lessor. All such rights, powers, remedies and
privileges shall be cumulative and not mutually exclusive, and the exercise of
one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
<PAGE>
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder shall be absolute and
unconditional, and shall not be affected by any event or circumstance,
including, without limitation: (i) any setoff, counterclaim, recoupment, defense
or other right that Lessee may have against Lessor, Mortgagee, any Participant,
any Note Holder, or any other Person for any reason whatsoever; (ii) any defect
in the title, airworthiness, condition, design, operation or fitness for use of,
or any damage to or loss or destruction of, the Aircraft, Airframe or any
Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
or (iv) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Agreement not been terminated in whole or in
part. Lessee hereby waives, to the extent permitted by applicable law, any and
all rights that it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Agreement, except in accordance with the express terms hereof.
(c) Nothing set forth in this Section 16 shall be construed to
prohibit Lessee from separately pursuing any claim that it may have from time to
time against Lessor or any other Person with respect to any matter (other than
the absolute and unconditional nature of Lessee's obligations hereunder to pay
Rent, and other than the matters specified in paragraphs (a) and (b) above).
Without limiting the foregoing, nothing in this Section 16 shall be construed as
a waiver by Lessee, or otherwise limit Lessee in pursuing any claim by Lessee,
of any breach by Lessor, Owner Participant or any other Person of any covenant
or obligation contained in any Operative Agreement.
<PAGE>
SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) At least 225 days but not more than 375 days prior to the
Scheduled Expiration Date or, if a Renewal Lease Term is then in effect, prior
to the Scheduled Renewal Term Expiration Date of such Renewal Lease Term, Lessee
may provide notice to Lessor that Lessee may exercise either the option to
extend the leasing of the Aircraft for a Renewal Lease Term pursuant to Section
17.2 or the option to purchase the Aircraft on the Scheduled Expiration Date or
Scheduled Renewal Term Expiration Date of such Renewal Lease Term, as the case
may be, pursuant to Section 17.3 (a "Preliminary Notice").
(b) If any such Preliminary Notice is given by Lessee, then Lessee may
provide a further notice specifying which option it intends to elect, with
respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1, as the
case may be.
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as specified in Section
17.1, and subject to the terms and conditions of this Section 17.2, Lessee may
exercise its option to extend the leasing of the Aircraft hereunder on two
occasions, in each case until the next Scheduled Renewal Term Expiration Date,
on the same terms, provisions and conditions (except as contemplated by this
Section 17) set forth herein and in the other Lessee Operative Agreements with
respect to the Base Lease Term, by delivery of a notice (a "Renewal Notice") to
Lessor not less than 180 days but not more than 375 days prior to (i) if the
Base Lease Term is then in effect, the Scheduled Expiration Date, or (ii) if a
Renewal Lease Term is then in effect, the Scheduled Renewal Term Expiration Date
for such Renewal Lease Term.
(b) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) No Preliminary Notice or Renewal Notice shall be binding on Lessor
or oblige Lessor to extend the leasing of the Aircraft hereunder for a
Renewal Lease Term if any Payment Default, Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing on and as of the
date that such Renewal Lease Term would otherwise commence.
<PAGE>
(ii) Any Renewal Notice shall be revocable by Lessee until 10 Business
Days after the Renewal Rent is determined in accordance with Sections
17.2.2 and unless revoked by written notice by Lessee to Lessor shall
thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to extend the leasing of the Aircraft hereunder for
the Renewal Lease Term to which such Renewal Notice relates.
(iii) Lessee shall not be entitled to give any Renewal Notice if it
has (x) not delivered a Preliminary Notice or (y) delivered a Purchase
Notice to Lessor.
17.2.2 RENEWAL RENT
(a) During the Renewal Lease Term, Lessee shall pay to Lessor on each
Payment Date, in the manner and in the funds of the type specified in Section
3.3, Renewal Rent in advance.
(b) The Renewal Rent payable by Lessee on each Payment Date during any
Renewal Lease Term shall be the Fair Market Rental Value of the Aircraft for
such Renewal Lease Term. Any such Fair Market Rental Value shall be determined
not more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) For any Renewal Lease Term, Stipulated Loss Value Dates and
Termination Value dates shall be extended throughout such Renewal Lease Term on
the same days and for the same months as during the Base Lease Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Lease Term shall be determined at the same time
that the Renewal Rent for such Renewal Lease Term is determined under Section
17.2.2. Stipulated Loss Values and Termination Values for any such Renewal Lease
Term shall, commencing on the first day of such Renewal Lease Term, be equal to
the Fair Market Sales Value of the Aircraft, computed as of the first day of
such Renewal Lease Term, and shall decline ratably on a monthly basis to the
Fair Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.
(c) Any Fair Market Sales Value of the Aircraft, for purposes of
calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined by mutual agreement of
<PAGE>
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
17.3 PURCHASE OPTION
17.3.1 PURCHASE NOTICE
(a) Subject to Section 17.1 and the terms and conditions of this
Section 17.3, Lessee may elect to purchase the Aircraft, on any Purchase Date,
at a purchase price equal to the lesser of (i) 61.35% of Lessor's Cost and (ii)
the Fair Market Sales Value of the Aircraft computed as of the Purchase Date.
(b) Lessee may exercise such option to purchase the Aircraft, by
delivery of a notice (a "Purchase Notice") to Lessor not less than 180 and not
more than 375 days prior to the Purchase Date specified in such Purchase Notice.
(c) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) Any Purchase Notice (whether delivered or deemed to have been
delivered) shall be revocable until 10 Business Days after the
determination of the Fair Market Sales Value in accordance with Section
17.3.2 and unless revoked by written notice by Lessee to Lessor shall
thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to purchase the Aircraft under this Section 17.3.
(ii) No Preliminary Notice or Purchase Notice shall be binding on
Lessor or oblige Lessor to sell the Aircraft hereunder if any Payment
Default, Bankruptcy Default or Lease Event of Default shall have occurred
and be continuing on and as of such Purchase Date.
(iii) Lessee shall not be entitled to give any Purchase Notice in
respect of any Purchase Date if it has (x) not delivered a Preliminary
Notice or (y) delivered a Renewal Notice for a Renewal Lease Term that
would commence immediately following such Purchase Date.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be determined not
more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
<PAGE>
17.3.3 TITLE
Upon full and final payment by Lessee of (a) the applicable purchase
price of the Aircraft, (b) all unpaid Rent due and payable through and including
the Purchase Date and (c) all other amounts due and payable by Lessee under this
Agreement, Lessor will transfer to Lessee title to the Aircraft in accordance
with Section 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this Section 17,
Lessee and Lessor shall appoint a mutually satisfactory Appraiser to conduct
such appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser
then each shall promptly appoint a separate Appraiser and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor fails to so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within 7 days after the appointment of the
latter of such two Appraisers, they cannot agree upon such amount, such two
Appraisers shall, within 8 days after such latter appointment, appoint a third
Appraiser and such amount shall be determined by such three Appraisers, who
shall make their separate appraisals within 7 days following the appointment of
the third Appraiser, and any determination so made shall be conclusive and
binding upon Lessor and Lessee. If no such third Appraiser is appointed within
such 8-day period, either Lessor or Lessee may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by such
appointment. The foregoing appraisal procedure shall in any event be completed
no less than 190 days before the end of the Base Lease Term or the current
Renewal Lease Term, as the case may be. If three Appraisers are appointed and
the difference between the determination which is farther from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such farther
determination shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor, PROVIDED that
if Lessee elects not to renew this Lease or purchase the Aircraft following the
conclusion of such appraisal, Lessee shall pay all expenses of such appraisal.
<PAGE>
SECTION 18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee with the written
consent of the Mortgagee if required by the Trust Indenture. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or performance or other
manner not set forth in an agreement, document or instrument in writing and
signed by Lessor and Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.3 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than Mortgagee, the Participants and the Persons
referred to in Section 4.6, with respect to matters expressly for their benefit
in this Lease) with any rights of any nature whatsoever against either of the
parties hereto, and no person not a party hereto (other than Mortgagee, the
Participants and the Persons referred to in Section 4.6, with respect to matters
expressly for their benefit in this Lease) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.
<PAGE>
18.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by such party in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile or
telecommunication transmission (which in either case provides written
confirmation to the sender of its delivery), sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective address or facsimile number set
forth for such party in Schedule 1 to the Participation Agreement, or to such
other address or number as either party hereto may hereafter specify by notice
to the other party hereto. Each such notice, request, demand, authorization,
direction, consent, waiver or other communication shall be effective when
received or, if made, given, furnished or filed (a) by facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
<PAGE>
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 18.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 18.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(D) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by Lessor
in exercising, any of its rights, powers, remedies or privileges under this
Agreement or provided at Law, in equity or otherwise shall impair, prejudice or
constitute a wavier of any such right, power, remedy or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Lessor to any other further action in any circumstances without notice or
demand.
18.9 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and
as of the date hereof constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, between the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Agreement
is hereby acknowledged on this ____ day of _________, _______.
WILMINGTON TRUST COMPANY,
as Mortgagee
By______________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided, a
reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner Trustee,"
"Owner Participant," "Mortgagee," "Note Holder" or any other person
includes, without prejudice to the provisions of any Operative Agreement,
any successor in interest to it and any permitted transferee, permitted
purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without prejudice to
the provisions of any Operative Agreement, that agreement, instrument or
document, or annex, schedule or exhibit, or part, respectively, as amended,
modified or supplemented from time to time in accordance with its terms and
in accordance with the Operative Agreements, and any agreement, instrument
or document entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to the
Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import when used in
any Operative Agreement refer to such Operative Agreement as a whole and
not to any particular provision of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
<PAGE>
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in any
Operative Agreement, or in any annex thereto, is a reference to a section
of, or an exhibit, an annex or a schedule to, such Operative Agreement or
such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement, all
accounting terms therein shall be construed and all accounting determinations
thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only and
shall not in any way affect the construction of, or be taken into consideration
in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or Mortgagee,
as the case may be, actual knowledge of a responsible officer in the Corporate
Trust Department or the Corporate Trust Office, respectively, and (b) as it
applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee and
Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering the
Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books, and
all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (PROVIDED, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from time
to time installed thereon) manufactured by Airframe Manufacturer and identified
by Airframe Manufacturer's model number, United States registration number and
Airframe Manufacturer's serial number set forth in Lease Supplement No. 1 and
(b) any and all Parts incorporated or installed in or attached or appurtenant to
such airframe, and any and all Parts removed from such airframe, unless title to
such Parts shall not be vested in Lessor in accordance with Section 8.1 and
Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de Aeronautica
S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the Participation
Agreement, the Purchase Agreement and the Consent and Agreement.
<PAGE>
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as of any
Payment Date, the amount determined by multiplying the percentage set forth
opposite such Date on the Amortization Schedule by the Original Amount of such
Equipment Note.
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note, the
amortization schedule for such Equipment Note delivered pursuant to Section 2.02
of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to be,
and is, registered with any other Government Entity under and in accordance with
Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. ss.
101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section 14.5 of
the Lease.
"BASE LEASE TERM" means the period beginning on and including the Closing
Date and ending on the Scheduled Expiration Date, or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.
<PAGE>
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
"BASIC RENT" means the rent payable for the Aircraft pursuant to Section
3.2.1 of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required by law to close in New York,
New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of the
Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code or the
regulations promulgated thereunder or any change in the interpretation of the
Code or such regulations in a decision by the United States Supreme Court, the
United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
<PAGE>
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events: (i) sale
of the Aircraft to the Owner Trustee and the filing of the FAA Bill of Sale with
the FAA in connection therewith; (ii) payment of Lessor's Cost by Owner Trustee
to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee to Lessee
pursuant to the Lease; and (iv) completion of the other events contemplated by
the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement No. 1
as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; PROVIDED, that
when used in relation to a Plan, "Code" shall mean the Internal Revenue Code of
1986 and any regulations and rulings issued thereunder, all as amended and in
effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its participation in
the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the Participation
Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement ____,
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee located at
Mortgagee's address for notices under the Participation Agreement or such other
office at which Mortgagee's corporate trust business shall be administered which
Mortgagee shall have specified by notice in writing to Lessee, Owner Trustee and
each Note Holder.
<PAGE>
"CRAF" means the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C.ss. 9511-13 or any similar substitute ---- program.
"DEBT" means any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice or
the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to Lessee,
Existing Lessor, each Participant, Owner Trustee and Mortgagee by Existing
Mortgagee pursuant to Section 4.3 of the Participation Agreement, which delayed
Closing Date shall be a Business Day not later than the Commitment Termination
Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to Lessee
by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of the
United States.
"DOT" means the Department of Transportation of the United States or any
Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine Manufacturer
and identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number set forth in Lease Supplement No. 1 and originally installed on
the Airframe on delivery thereof pursuant to the Lease, and any Replacement
Engine, in any case whether or not from time to time installed on such Airframe
or installed on any other airframe or aircraft, and (b) any and all Parts
incorporated or installed in or attached or appurtenant to such engine, and any
<PAGE>
and all Parts removed from such engine, unless title to such Parts shall not be
vested in Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Engine under and in accordance with the Lease,
such Replacement Engine shall become subject to the Lease and shall be an
"Engine" for all purposes of the Lease and the other Operative Agreements and
thereupon the Engine for which the substitution is made shall no longer be
subject to the Lease, and such replaced Engine shall cease to be an "Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
"EQUIPMENT NOTES" means and includes any equipment notes issued under the
Trust Indenture in the form specified in Section 2.01 thereof (as such form may
be varied pursuant to the terms of the Trust Indenture) and any Equipment Note
issued under the Trust Indenture in exchange for or replacement of any Equipment
Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations and rulings issued thereunder all as amended and in effect from time
to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit for
normal use by Lessee;
(b) the actual or constructive total loss of such property or any damage
to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property
on the basis of a total loss or constructive or compromised total
loss;
(c) any theft, hijacking or disappearance of such property for a period of
180 consecutive days or more or, if earlier, the end of the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government or
<PAGE>
purported Government Entity (other than a requisition of use by the
U.S. Government) for a period exceeding 180 consecutive days or, if
earlier, at the end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition of use
of such property by the U.S. Government that continues until the last
day of the Term, PROVIDED that no such Event of Loss shall exist if
Lessor shall have elected not to treat such event as an Event of Loss
pursuant to Section 10.6 of the Lease; and
(f) as a result of any law, rule, regulation, order or other action by the
Aviation Authority or by any Government Entity of the government of
registry of the Aircraft or by any Government Entity otherwise having
jurisdiction over the operation or use of the Aircraft, the use of
such property in the normal course of Lessee's business of passenger
air transportation is prohibited for a period of 180 consecutive days,
unless Lessee, prior to the expiration of such 180 day period, shall
have undertaken and shall be diligently carrying forward such steps as
may be 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 720 days, provided that no Event of Loss
shall be deemed to have occurred if such prohibition has been
applicable to Lessee's (or a Permitted Sublessee's) entire U.S. fleet
of such property and Lessee (or a Permitted Sublessee), prior to the
expiration of such 720-day period, shall have conformed at least one
unit of such property 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 and shall be
diligently carrying forward, in a manner which does not discriminate
against such property in so conforming such property, 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 three years or such use shall be prohibited at the
expiration of the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by Lessee
to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
<PAGE>
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) any
amount payable to the Owner Participant by any transferee as the purchase price
of the Owner Participant's interest in the Trust Estate, (vi) any interest that
pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (v) above, (vii) proceeds of
any right to enforce the payment of any amount described in clauses (i) through
(vi) above (PROVIDED, that the rights referred to in this clause (vii) shall not
be deemed to include the exercise of any remedies provided for in the Lease
other than the right to sue for specific performance of any covenant to make
such payment or to sue for damages in respect of the breach of any such
covenant) and (viii) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized under
the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement and the
Termination Agreement with respect to the Existing Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in Schedule 3
to the Participation Agreement.
<PAGE>
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the date
of the Existing Participation Agreement, between Lessee and Express relating to
the Aircraft.
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the Participation
Agreement.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary of
Lessee.
"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date of
the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner Trustee on
the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the Express
Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
<PAGE>
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars for
the Aircraft that would apply in an arm's-length transaction between an informed
and willing buyer under no compulsion to buy, and an informed and willing seller
under no compulsion to sell, the Aircraft, in a transaction that would close on
or about the relevant time of determination, assuming (except as otherwise
provided in Section 15.4 of the Lease) that (a) the Aircraft has been maintained
in accordance with, and is in the condition required by, the Lease and (b) the
Aircraft would be delivered to such informed and willing buyer in the return
condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing statements
(i) covering the Trust Indenture Estate, by Owner Trustee, as debtor, showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction that,
in the opinion of Mortgagee, is necessary to perfect its Lien on the Trust
Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
such principles may at any time or from time to time be varied by any applicable
financial accounting rules or regulations issued by the SEC and, with respect to
any person, shall mean such principles applied on a basis consistent with prior
periods except as may be disclosed in such person's financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
<PAGE>
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) the Trust
Estate and the Trust Indenture Estate, (vi) the Subordination Agent, (vii) the
Liquidity Providers, (viii) the Pass Through Trustees, (ix) each Affiliate of
the persons described in clauses (i) through (iv), inclusive, (x) each Affiliate
of the persons described in clauses (vi), (vii) and (viii), (xi) the respective
directors, officers, employees, agents and servants of each of the persons
described in clauses (i) through (iv) inclusive and in clause (ix), (xii) the
respective directors, officers, employees, agents and servants of each of the
persons described in clauses (vi), (vii), (viii), and (x), (xiii) the successors
and permitted assigns of the persons described in clauses (i) through (iv),
inclusive, and in clauses (ix) and (xi), and (xiv) the successors and permitted
assigns of the persons described in clauses (vi), (vii), (viii), (x) and (xii);
PROVIDED THAT the persons described in clauses (vi), (vii), (viii), (x), (xii)
and (xiv) are Indemnitees only for purposes of Section 9.1 of the Participation
Agreement. If any Indemnitee is Airframe Manufacturer or Engine Manufacturer or
any subcontractor or supplier of either thereof, such Person shall be an
Indemnitee only in its capacity as Owner Participant, Loan Participant or Note
Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease, the
Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each separate
or additional trustee appointed pursuant to the Trust Indenture, (iii) the
Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through Trustee
and (vi) each of the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (v) inclusive
above.
<PAGE>
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement among
the Pass Through Trustees, the Liquidity Providers and the Subordination Agent,
dated as of the Issuance Date, PROVIDED that, for purposes of any obligation of
Lessee, no amendment, modification or supplement to, or substitution or
replacement of, such Intercreditor Agreement shall be effective unless consented
to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that, with
the giving of notice, the lapse of time or both, would constitute a Lease Event
of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of Exhibit
A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Continental Airlines, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the Lease,
Lease Supplement No. 1, the Express Sublease, the Termination Agreement with
respect to the Existing Sublease and the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or other
user or person in possession of the Aircraft, Airframe or an Engine with or
<PAGE>
without color of right, or any Affiliate of any of the foregoing (excluding any
Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any person
using or claiming any rights with respect to the Aircraft, Airframe or an Engine
directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
"LESSOR RENT" means, with respect to any Payment Date, the amount set forth
in Schedule 4 to the Participation Agreement with respect to such Payment Date.
"LESSOR'S COST" means the amount paid by Owner Trustee to Existing Lessor
to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
<PAGE>
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider
(as such terms are defined in the Intercreditor Agreement) under the respective
Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been consummated,
the Pass Through Trustees, and after the Closing shall have been consummated,
each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date of
determination, the holders of a majority in aggregate unpaid Original Amount of
all Equipment Notes outstanding as of such date (excluding any Equipment Notes
held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of any such
party or any interests of Owner Trustee or Owner Participant therein by reason
of subrogation pursuant to Section 4.03 of the Trust Indenture (unless all
Equipment Notes then outstanding shall be held by Owner Trustee, Lessee, Owner
Participant or any Affiliate of any thereof)); PROVIDED that for the purposes of
directing any action or casting any vote or giving any consent, waiver or
instruction hereunder any Note Holder of an Equipment Note or Equipment Notes
may allocate, in such Note Holder's sole discretion, any fractional portion of
the principal amount of such Equipment Note or Equipment Notes in favor of or in
opposition to any such action, vote, consent, waiver or instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
<PAGE>
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity but solely as loan trustee under the Trust
Indenture.
<PAGE>
"MORTGAGEE AGREEMENTS" means, collectively, the Participation Agreement and
the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization proceeding
involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the trustee in
such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax yield
utilizing the multiple investment sinking fund method of analysis and aggregate
net after-tax cash flow, computed on the basis of the same methodology and
assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
"NET WORTH" means, for any person, the excess of its total assets over its
total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person, as
defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or more
Equipment Notes.
"OFFICER'S CERTIFICATE" means, in respect of any party to the Participation
Agreement, a certificate signed by the Chairman, the President, any Vice
President (including those with varying ranks such as Executive, Senior,
Assistant or Staff Vice President), the Treasurer or the Secretary of such
party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation Agreement,
the Trust Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the initial
<PAGE>
Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity Agreement, the
Equipment Notes, the Letter Agreement and the Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes have
been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the stated
original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation Agreement
as "Owner Participant" or, if a second person becomes an "Owner Participant"
pursuant to Section 10.1.1 of the Participation Agreement, both of such persons;
PROVIDED that if an Owner Participant Transfers 100% of its interest to a
successor Owner Participant, such transferring Owner Participant shall
thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ____ dated as
of September 25, 1997 among Lessee, Owner Participant, Owner Trustee, the Pass
<PAGE>
Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor, the
Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing gear,
instruments, appurtenances, accessories, furnishings, seats and other equipment
of whatever nature (other than (a) Engines or engines, and (b) any items leased
by Lessee from a third party other than Lessor)), that may from time to time be
installed or incorporated in or attached or appurtenant to the Airframe or any
Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as defined
in the Intercreditor Agreement), provided, that no amendment, modification or
supplement to, or substitution or replacement of, any such Fee Letter shall be
effective for purposes of any obligation of Lessee, unless consented to by
Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates issued by
the Pass Through Trusts (and any other pass through certificates for which such
pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through trusts
created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, in its capacity as trustee under each Pass Through Trust Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement, the
Pass Through Trust Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means the Closing Date and each March 24, June 24, September
24 and December 24 during the Term, commencing with the first such date to occur
after the Closing Date.
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of Basic
Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
<PAGE>
"PAYMENT PERIOD" means each of the consecutive quarterly periods during the
Term ending on a Payment Date, the first such period commencing on and including
the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier, (ii)
any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its principal
executive offices in any Permitted Country and which is authorized to conduct
commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance company,
financial institution or corporation (other than, without Lessee's consent, a
commercial air carrier, a commercial aircraft operator, a freight forwarder or
Affiliate of any of the foregoing), in each case with a combined capital and
surplus or net worth of at least $25,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7 of the
Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
<PAGE>
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the Series
A Equipment Notes, April 30, 2004 in the case of the Series B Equipment Notes
and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee, the
percentage of Lessor's Cost allocated to such Pass Through Trustee in Schedule 2
to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement Assignment
____, dated as of even date with the Participation Agreement, between Existing
Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or any
Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
"RENEWAL RENT" for the Aircraft means the rent payable therefor in respect
of a Renewal Lease Term determined pursuant to Section 17.2.2 of the Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine pursuant to
the Lease.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement, dated
as of the date the Aircraft is returned to Lessor pursuant to Section 5 of the
Lease, by Lessor and Lessee substantially in the form of Exhibit B to the Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
<PAGE>
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the first
Renewal Lease Term, the second anniversary of the Scheduled Expiration Date, and
in the case of the second Renewal Lease Term, the fourth anniversary of the
Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of such Securities and
Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy Code and the trustee
or debtor-in-possession in such proceedings (i) having agreed to perform its
obligations under the Lease with the approval of the applicable court and
thereafter having continued to perform such obligations in accordance with
Section 1110 or (ii) having assumed the Lease with the approval of the relevant
court and thereafter having continued to perform its obligations under the
Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such other
period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code,
plus an additional period, if any, resulting from the trustee or
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the Securities
Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
<PAGE>
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series A" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series B" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series C" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a) during the
Base Lease Term, the amount determined by multiplying (i) the percentage set
forth in Schedule 3 to the Lease (as adjusted from time to time in accordance
with Section 3.2.3 of the Lease) opposite the Stipulated Loss Value Date by (ii)
Lessor's Cost and (b) during any Renewal Term, the amount determined pursuant to
Section 17.2.3 of the Lease. Notwithstanding anything to the contrary in any
Operative Agreement, Stipulated Loss Value shall always be sufficient to pay in
full, as of the date of payment thereof (assuming timely payment of the
Equipment Notes prior to such date), the aggregate unpaid principal amount of
all Equipment Notes outstanding as of such date, together with accrued and
unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such month
specified in Schedule 3 to the Lease or, if such day is not a Business Day, the
immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as subordination
agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement, the
Liquidity Facilities and the Intercreditor Agreement.
<PAGE>
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), PROVIDED that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and PROVIDED, FURTHER, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax Indemnity
Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC and
Mortgagee, (c) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
<PAGE>
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as of
even date with the Participation Agreement, between Lessee and Owner
Participant.
"TAXES" means all license, recording, documentary, registration and other
similar fees and all taxes, levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever imposed by any Taxing Authority, together
with any penalties, additions to tax, fines or interest thereon or additions
thereto.
"TAXING AUTHORITY" means any federal, state or local government or other
taxing authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority or
any territory or possession of the United States or any taxing authority
thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION AGREEMENTS" means, collectively, the termination agreement
with respect to the Existing Lease, the termination agreement with respect to
the Existing Sublease and the release from the Lien of the Existing Mortgage, in
each case delivered pursuant to Section 5.1.2(xiii) of the Participation
Agreement.
"TERMINATION DATE" means any Payment Date occurring after the end of the
Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
<PAGE>
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the Participation
Agreement and the other Operative Agreements to occur on the Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements (including,
without limitation, the reasonable fees and expenses of counsel for such
parties), (b) all costs and expenses for the recording or filing of any
documents, certificates or instruments in accordance with any Operative
Agreement, including, without limitation, the FAA Filed Documents and the
Financing Statements, (c) one ninth of (i) the underwriting fees and expenses
attributable to the offering and sale of the Pass Through Certificates and (ii)
all costs and expenses incurred by Existing Mortgagee, the Pass Through
Trustees, the Subordination Agent, Owner Trustee and Mortgagee in connection
with the preparation, execution and delivery of the Pass Through Agreements
(including, without limitation, the reasonable fees and expenses of counsel for
such parties), (d) the equity placement fee and expenses of Equity Advisor
attributable to the Aircraft, (e) the reasonable fees and disbursements of
special counsel in Oklahoma City, Oklahoma, in connection with the Closing, (f)
all initial and ongoing fees, disbursements and expenses of Owner Trustee and
Mortgagee, and (g) the fees and expenses of the Appraiser contemplated by
Section 5.1.2(xv) of the Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance of all
or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner Trustee
or any Loan Participant or Note Holder purports or intends to Transfer any or
all of its right, title or interest in the Trust Estate or in its Equipment Note
and the Trust Indenture Estate, respectively, as described in Section 10.1.1(a),
10.1.2 or 10.1.3 (but excluding participants in any participation referred to in
Section 10.1.3), respectively, of the Participation Agreement.
<PAGE>
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ____, dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner Trustee
in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ____, dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the Trust
Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage ____
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" or "U.S." means the United States of America; PROVIDED,
that for geographic purposes, "United States" means, in aggregate, the 50 states
and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued by the
<PAGE>
Secretary of Transportation pursuant to chapter 447 of title 49 of the United
States Code for aircraft capable of carrying 10 or more individuals or 6000
pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any specified
Debt, at the time of the determination thereof the number of years obtained by
dividing the then Remaining Dollar-years of such Debt by the then outstanding
principal amount of such Debt. The term "Remaining Dollar-years" shall mean the
amount obtained by (1) multiplying the amount of each then-remaining principal
payment on such Debt by the number of years (calculated at the nearest
one-twelfth) that will elapse between the date of determination of the Weighted
Average Life to Maturity of such Debt and the date of that required payment and
(2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted Sublessee
agrees to furnish the Aircraft, Airframe or any Engine to a third party pursuant
to which the Aircraft, Airframe or Engine shall at all times be in the
operational control of Lessee or a Permitted Sublessee, provided that Lessee's
obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking corporation, not
in its capacity as Mortgagee under the Trust Indenture, but in its individual
capacity.
<PAGE>
[ANNEXES B, C AND D HAVE BEEN OMITTED FROM THIS DOCUMENT AS
CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
|------------------------------|
| EXHIBIT A - LEASE SUPPLEMENT|
| LEASE AGREEMENT ____ |
|------------------------------|
LEASE SUPPLEMENT NO.__
LEASE SUPPLEMENT No. __, dated ________, 199_, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ____,
dated as of September 25,1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ____, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 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 of this Lease Supplement 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 to which this Lease Supplement is attached and of which
this Lease Supplement is a part, is being filed for recordation on the date
hereof with the Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee has been duly authorized by Lessor to accept, and does
hereby irrevocably accept on behalf of Lessor delivery of the Aircraft from
Airframe Manufacturer under, and for all purposes of, the Aircraft Bill of Sale,
the Participation Agreement and the Purchase Agreement Assignment.
2. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease the following
described Embraer EMB-145 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: U.S. Registration No. _____; manufacturer's serial
no.____; and
(ii) Engines: two (2) Allison AE3007A engines bearing, respectively,
manufacturer's serial nos. _____ and ________ (each of which engines has
750 or more rated takeoff horsepower or the equivalent of such horsepower).
<PAGE>
3. The Closing Date for the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Operative Agreements.
5. All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference in the Lease to the same extent as if fully set forth
therein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
7. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Mortgagee on the
signature page thereof.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ____ day of _________, __________.
WILMINGTON TRUST COMPANY,
as Mortgagee
By______________________________________
Name:
Title:
<PAGE>
|------------------------------|
| EXHIBIT B - LEASE SUPPLEMENT|
| LEASE AGREEMENT ____ |
|------------------------------|
RETURN ACCEPTANCE SUPPLEMENT
RETURN ACCEPTANCE SUPPLEMENT dated ________, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ____,
dated as of September 25, 1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ____, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease relates to the Airframe and
Engines described below.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. This Return Acceptance Supplement is executed by Lessor and Lessee
to confirm that on the date hereof the following described Airframe and Engines
were returned by Lessor to Lessee:
(i) Airframe: U.S. Registration No._____; manufacturer's serial
no.______; and
(ii) Engines: two (2) Allison AE3007A engines bearing, respectively,
manufacturer's serial nos. ______ and CAE___________.
2. This Return Acceptance Supplement is intended to be delivered in
_____________________.
3. Lessor and Lessee agree that the return of the Aircraft is in
compliance with Section 5 and Annex B of the Lease, except as set forth below:
4. Lessor and Lessee agree that the Lease is terminated, except for
the provisions thereof that expressly survive termination.
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Return
Acceptance Supplement to be duly executed as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
SCHEDULES 1-4 HAVE BEEN OMITTED FROM THIS DOCUMENT AS
CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
|--------------------------------|
|SCHEDULE 5 - PERMITTED COUNTRIES|
| LEASE AGREEMENT ____ |
|--------------------------------|
<TABLE>
<CAPTION>
PERMITTED COUNTRIES
<S> <C>
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Ecuador Portugal
Egypt Republic of China (Taiwan)
Finland Singapore
France South Africa
Germany South Korea
Greece Spain
Hungary Sweden
Iceland Switzerland
India Thailand
Indonesia Tobago
Ireland Trinidad
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
</TABLE>
<PAGE>
|------------------------------|
| EXHIBIT D - INSURANCE |
| LEASE AGREEMENT ____ |
|------------------------------|
PLACARDS
Leased from
First Security Bank, National Association,
not in its individual capacity but solely as
Owner Trustee, Owner and Lessor
and
Mortgaged to
Wilmington Trust Company,
not in its individual capacity but solely as Mortgagee
--------------------------------------------------------------------
| CONFIDENTIAL: ANNEXES B, C AND D AND SCHEDULES 1, 2, 3 AND 4 |
| OF THIS LEASE AGREEMENT ARE SUBJECT TO RESTRICTIONS ON |
| DISSEMINATION SET FORTH IN SECTION 8 OF THE PARTICIPATION |
| AGREEMENT (AS DEFINED HEREIN) |
--------------------------------------------------------------------
================================================================================
LEASE AGREEMENT ___
Dated as of September 25, 1997
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
CONTINENTAL AIRLINES, INC.,
Lessee
- --------------------------------------------------------------------------------
One Embraer Model EMB-145 Aircraft
Bearing United States Registration No. N_____ and
Bearing Manufacturer's Serial No. 145.___ with two
Allison AE3007A Engines
Bearing Engine Manufacturer's Serial Nos. _______ and _______
================================================================================
The right, title and interest of Lessor in and to, among other things, this
Lease Agreement has been assigned to and is subject to a security interest in
favor of Wilmington Trust Company, a Delaware banking corporation, as Mortgagee,
under the Trust Indenture and Mortgage ___, dated as of September 25, 1997, for
the benefit of the holders of the Equipment Notes referred to in such Trust
Indenture, all to the extent provided in such Trust Indenture. This Lease
Agreement has been executed in multiple counterparts; to the extent, if any,
that this Lease Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in Lessor's right, title and interest in and to this Lease Agreement
may be perfected through the delivery or possession of any counterpart of this
Lease Agreement other than the counterpart of this Lease Agreement that contains
the original receipt executed by Wilmington Trust Company, as Mortgagee.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION............................ 1
SECTION 2. DELIVERY AND ACCEPTANCE................................. 1
2.1 Delivery and Lease of Aircraft.......................... 1
2.2 Acceptance by Lessee.................................... 2
SECTION 3. TERM AND RENT........................................... 2
3.1 Term.................................................... 2
3.2 Rent.................................................... 2
3.3 Payments................................................ 4
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR;
SECTION 1110 MATTERS.................................... 5
4.1 Disclaimer.............................................. 5
4.2 Certain Agreements of Lessor............................ 6
4.3 Quiet Enjoyment......................................... 6
4.4 Investment of Funds Held as Security.................... 6
4.5 Title Transfers by Lessor............................... 7
4.6 Lessor's Interest in Certain Engines.................... 8
4.7 Section 1110 of Bankruptcy Code......................... 8
SECTION 5. RETURN OF AIRCRAFT...................................... 8
5.1 Compliance with Annex B................................. 8
5.2 Storage and Related Matters............................. 9
5.3 Return of Other Engines................................. 9
SECTION 6. LIENS................................................... 9
SECTION 7. REGISTRATION, OPERATION, POSSESSION,
SUBLEASING AND RECORDS.................................. 10
7.1 Registration and Operation.............................. 10
7.2 Possession.............................................. 12
7.3 Certain Limitations on Subleasing or
Other Relinquishment of Possession...................... 16
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF
PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS; OTHER LESSEE COVENANTS....................... 17
8.1 Maintenance; Replacement and Pooling of
Parts; Alterations, Modifications and
Additions............................................... 17
8.2 Information, Certificates, Notices and
Reports................................................. 17
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE................. 19
9.1 Right of Termination.................................... 19
9.2 Election by Lessor to Sell.............................. 20
<PAGE>
9.3 Retention of Aircraft by Lessor......................... 22
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC..................... 23
10.1 Event of Loss With Respect to Aircraft.................. 23
10.2 Event of Loss With Respect to an Engine................. 25
10.3 Conditions to any Replacement of Engine................. 25
10.4 Conveyance to Lessee.................................... 27
10.5 Application of Payments................................. 27
10.6 Requisition of Aircraft for Use......................... 28
10.7 Requisition of an Engine for Use........................ 28
10.8 Application of Payments................................. 29
10.9 Application of Payments During Existence
of a Lease Event of Default............................. 29
SECTION 11. INSURANCE............................................... 30
11.1 Lessee's Obligation to Insure........................... 30
11.2 Insurance for Own Account............................... 30
11.3 Indemnification by Government in Lieu of
Insurance............................................... 30
11.4 Application of Insurance Proceeds....................... 30
11.5 Application of Payments During Existence
of Default.............................................. 31
SECTION 12. INSPECTION.............................................. 31
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE............. 32
13.1 In General.............................................. 32
13.2 Merger of Lessee........................................ 33
13.3 Assignment Security for Lessor's
Obligations............................................. 34
13.4 Successor Owner Trustee................................. 34
SECTION 14. LEASE EVENTS OF DEFAULT................................. 34
14.1 Payments................................................ 35
14.2 Insurance............................................... 35
14.3 Other Covenants......................................... 35
14.4 Representations and Warranties.......................... 36
14.5 Bankruptcy and Insolvency............................... 36
SECTION 15. REMEDIES AND WAIVERS.................................... 37
15.1 Remedies................................................ 37
15.2 Limitations Under CRAF.................................. 40
15.3 Right to Perform for Lessee............................. 40
15.4 Determination of Fair Market Sales Value................ 41
15.5 Remedies Cumulative..................................... 41
<PAGE>
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF,
COUNTERCLAIM, ETC....................................... 41
SECTION 17. RENEWAL AND PURCHASE OPTIONS............................ 42
17.1 Notices Generally....................................... 42
17.2 Renewal Options......................................... 43
17.3 Purchase Option......................................... 44
17.4 Appraisals.............................................. 45
SECTION 18. MISCELLANEOUS........................................... 46
18.1 Amendments.............................................. 46
18.2 Severability............................................ 47
18.3 Third-Party Beneficiary................................. 47
18.4 Reproduction of Documents............................... 47
18.5 Counterparts............................................ 48
18.6 Notices................................................. 48
18.7 GOVERNING LAW; SUBMISSION TO
JURISDICTION; VENUE..................................... 48
18.8 No Waiver............................................... 49
18.9 Entire Agreement........................................ 50
</TABLE>
<TABLE>
<CAPTION>
ANNEXES, EXHIBITS AND SCHEDULES
- -------------------------------
<S> <C>
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Form of Lease Supplement
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent
SCHEDULE 3 Stipulated Loss Value Schedule
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
</TABLE>
<PAGE>
LEASE AGREEMENT ___
LEASE AGREEMENT ___, dated as of September 25, 1997 (this "Agreement"
or "Lease"), between (a) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) CONTINENTAL
AIRLINES, INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to the Participation Agreement,
pursuant to which, among other things, Lessor and Lessee have agreed to enter
into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant has authorized
Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby agrees (subject to the satisfaction or waiver of the
conditions set forth in Section 5 of the Participation Agreement) to lease to
Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing immediately upon
acquisition of the Aircraft by Lessor pursuant to the Participation Agreement.
<PAGE>
2.2 ACCEPTANCE BY LESSEE
By executing and delivering Lease Supplement No. 1, Lessee confirms to
Lessor that Lessee has duly and irrevocably accepted delivery of the Aircraft
for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless this
Agreement or the leasing of the Aircraft is earlier terminated in accordance
with any provision of this Agreement. Lessee shall have the option to renew the
leasing of the Aircraft hereunder pursuant to, and subject to the terms and
conditions of, Section 17, for the Renewal Lease Term.
3.2 RENT
3.2.1 BASIC RENT
(a) During the Base Lease Term, Lessee shall pay to Lessor, on each
Payment Date, Basic Rent in the amount specified in Schedule 2 for such Payment
Date, which shall be allocated to the Payment Period commencing on such Payment
Date.
(b) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Date), the
aggregate principal amount of scheduled installments due on the Equipment Notes
outstanding on such Payment Date, together with the accrued and unpaid interest
thereon, due on such Payment Date in respect of the Equipment Notes; provided,
however, that no installment of Basic Rent shall be increased to the extent such
increase would be based upon (i) any attachment or diversion of Basic Rent on
account of Lessor Liens attributable to Lessor or Owner Participant, (ii) any
modification of the payment terms of the Equipment Notes, or (iii) the
acceleration of any Equipment Note or Equipment Notes due solely to the
occurrence of an Indenture Event of Default that does not constitute a Lease
Event of Default.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever shall be entitled thereto,
any and all Supplemental Rent when and as the same shall become due and owing.
Lessee will also pay to Lessor, or to whomever shall be entitled thereto as
<PAGE>
Supplemental Rent, to the extent permitted by applicable law, interest at the
Payment Due Rate on any part of any amount of Rent (including, without
limitation, Supplemental Rent) not paid by 12:30 p.m., New York time, on the
date when due (so long as, in the case of any person not a party to the
Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to, but excluding, the date of payment in
full.
3.2.3 ADJUSTMENTS TO STIPULATED LOSS VALUES AND TERMINATION VALUES
(a) In the event that Lessee is required to indemnify the Owner
Participant under the Tax Indemnity Agreement, the Stipulated Loss Value
percentages set forth in Schedule 3 and the Termination Value percentages set
forth in Schedule 4 shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the extent such
assumptions shall be varied to take into account the Loss or Foreign Tax Credit
Loss (as each such term is defined in the Tax Indemnity Agreement) that is the
subject of such indemnification and any prior or contemporaneous Loss or Foreign
Tax Credit Loss) used to calculate the Stipulated Loss Value percentages and the
Termination Value percentages on the Closing Date, in order to maintain the
Owner Participant's Net Economic Return.
(b) All adjustments pursuant to Section 3.2.3(a) shall be made as
promptly as practicable after either Owner Participant or Lessee gives notice to
the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Stipulated Loss
Value and Termination Value shall be prepared by Owner Participant, subject to
verification at the request of Lessee in accordance with this Section 3.2.3(b),
on the basis of the same methodology and assumptions used by Owner Participant
in determining the percentages of Stipulated Loss Value and Termination Value as
of the Closing Date, except as such assumptions have been modified to reflect
the events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments required pursuant to Section 3.2.3(a) shall be set forth in a Lease
Supplement or in an amendment to this Lease, and, promptly after execution
thereof by Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee.
<PAGE>
(c) If Lessee believes that any calculations by Owner Participant
pursuant to Section 3.2.3(b) are in error, and if, after consultation, Lessee
and Owner Participant are unable to agree on an adjustment, then a nationally
recognized firm of accountants selected by Lessee and reasonably satisfactory to
Owner Participant shall verify such calculations. Owner Participant will make
available to such firm, but not, in any circumstances, to Lessee or any
representative of Lessee, the methodology and assumptions referred to in Section
3.2.3(b) and any modifications thereto made to reflect the events giving rise to
adjustments hereunder (subject to the execution by such firm of a
confidentiality agreement, reasonably acceptable to Owner Participant,
prohibiting disclosure of such methodology and assumptions to any third party).
The determination by such firm of accountants shall be final. Lessee will pay
the reasonable costs and expenses of such further verification by such
accountants, provided that if it results in a decrease in the present value
(discounted at the Debt Rate) of any Stipulated Loss Value or Termination Value
by ten or more basis points from such Stipulated Loss Value or Termination Value
as recalculated by the Owner Participant, then the Owner Participant will pay
such costs and expenses.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 12:30 p.m., New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior to the
date such payment of Rent is due or, in the case of any payment of Supplemental
Rent expressly payable to a person other than Lessor, to the person that shall
be entitled thereto to such account in the United States as such person may
specify from time to time to Lessee at least 10 Business Days prior to the date
such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any
payment of Rent shall be due on a day that is not a Business Day, such payment
shall be made on the next day that is a Business Day, and, if such payment is
made on such next Business Day, no interest shall accrue on the amount of such
payment during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Trust Indenture has been discharged, and notwithstanding
Section 3.3(a), Lessor hereby irrevocably directs, and Lessee agrees, that all
payments of Rent and all other amounts payable by Lessee hereunder, other than
<PAGE>
Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor by
wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.
(d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the person specified in the Participation
Agreement or, if not so specified, to such account in the United States as may
be specified by such person by written notice to Lessor and Lessee from time to
time at least 10 Business Days prior to the date such payment is required to be
made.
(e) All computations of interest under this Agreement shall be made on
the basis of a year of 360 days comprised of twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION
1110 MATTERS
4.1 DISCLAIMER
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE
ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR, MORTGAGEE,
OWNER PARTICIPANT PARENT AND ANY PARTICIPANT (i) LESSEE HAS SELECTED THE
AIRCRAFT AND MANUFACTURER THEREOF AND (ii) NONE OF LESSOR, MORTGAGEE, OWNER
PARTICIPANT PARENT AND 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:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY PARTICULAR
PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY ENGINE
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT
OR THE LIKE; OR
<PAGE>
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless a Lease 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, or made available, by Airframe
Manufacturer or any of its subcontractors or suppliers, as the case may be,
pursuant to and in accordance with the terms of the Purchase Agreement
Assignment.
4.3 QUIET ENJOYMENT
So long as no Lease Event of Default shall have occurred and be
continuing, Lessor shall not interfere with Lessee's rights hereunder to
continued possession, use and operation of, and quiet enjoyment of, the Aircraft
during the Term. The foregoing, however, shall not be construed or deemed to
modify or condition in any respect the obligations of the Lessee pursuant to
Section 16, which obligations are absolute and unconditional.
4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any moneys required to be paid to or retained by Lessor that are
required to be paid to Lessee or applied as provided herein shall, until paid to
Lessee as provided herein or applied as provided herein, be invested by Lessor
from time to time as directed in writing by Lessee (or, if Lessee fails to so
direct, by or as directed by Lessor in its sole discretion) and at the expense
and risk of Lessee in Cash Equivalents so long as such Cash Equivalents
specified by Lessee or Lessor, as the case may be, can be acquired by Lessor
using its best efforts; provided, that so long as the Lien of the Trust
Indenture shall not have been discharged, such moneys shall be invested and held
by Mortgagee, as assignee of Lessor, in accordance with this Lease and upon
discharge of such Lien, Mortgagee shall pay any such money held by it to Lessor
to be held and invested in accordance with this Section.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the result of
investments pursuant to Section 4.4.1 (net of any fees, commissions and other
<PAGE>
reasonable expenses, if any, incurred in connection with such investment) shall
be held and applied in the same manner as the principal amount is to be held and
applied hereunder. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment), such amount so paid to be held and applied by Lessor as
contemplated in Section 4.4.1 above.
4.4.3 LIMITATION OF LIABILITY
All investments under this Section 4.4 shall be at the expense and
risk of Lessee, and Lessor and Mortgagee shall not be liable for any loss
resulting from any investment made under this Section 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor without instructions whenever such
sale is necessary to make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens
but otherwise on an "as-is", "where is" basis, (2) so long as the Lien of the
Trust Indenture has not been discharged, comply with the Trust Indenture
relating to the release of the Aircraft, Airframe or such Engine, (3) assign to
Lessee or such other person, as the case may be, if and to the extent permitted
under the Purchase Agreement, all warranties of Airframe Manufacturer with
respect to the Aircraft, Airframe or such Engine, and (4) assign to Lessee or
such other person, as the case may be, if and to the extent permitted, all
claims, if any, for damage to the Aircraft, Airframe or such Engine, in each
case free of Lessor Liens, and without recourse or warranty of any kind
whatsoever (except as to the transfer described in clause (1) above and as to
the absence of such Lessor Liens, as aforesaid), and (b) Lessor shall promptly
deliver to Lessee or such other person, as the case may be, a bill of sale and
agreements of assignment, evidencing such transfer and assignment, and such
other instruments of transfer, all in form and substance reasonably satisfactory
to Lessee (or such other person, as the case may be), as Lessee (or such other
person, as the case may be) may reasonably request.
<PAGE>
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any engine leased to, or purchased
by, Lessee or any Permitted Sublessee subject to a lease, conditional sale,
trust indenture or other security agreement that Lessor, its successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
indenture trustee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party.
4.7 SECTION 1110 OF BANKRUPTCY CODE
It is the intention of each of Lessee and Lessor that Lessor (and
Mortgagee as assignee of Lessor under the Trust Indenture) shall be entitled to
the benefits of Section 1110 with respect to the right to take possession of the
Aircraft, Airframe, Engines and Parts as provided in this Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B hereto,
which provisions are hereby incorporated by this reference as if set forth in
full herein.
5.2 STORAGE AND RELATED MATTERS
If Lessor gives written notice to Lessee not less than 60 days nor
more than 120 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft for a period up
to 30 days, commencing on the date of such return, and upon request of Lessor to
Lessee made at least 10 days prior to the end of such initial 30 day period, for
an additional 120 day period commencing upon expiration of such initial period,
at such storage facility in the 48 contiguous states of the United States on
Lessee's route system for Similar Aircraft as Lessor may select as the site for
such return of the Aircraft. Such storage shall be at Lessor's risk, and Lessor
shall pay all applicable storage fees, except that Lessee shall pay the parking
fees for the initial 30 day storage period; PROVIDED that Lessee's obligation to
<PAGE>
provide parking shall be subject to Lessor entering into an agreement prior to
the commencement of the storage period with the storage facility providing,
among other things, that Lessor shall bear all maintenance charges and other
costs (other than parking fees for the initial 30 day period) incurred.
5.3 RETURN OF OTHER ENGINES
In the event that any Engine owned by Lessor shall not be installed on
the Airframe at the time of return hereunder, Lessee shall be required to return
the Airframe hereunder with a Replacement Engine meeting the requirements of,
and in accordance with, Section 10 hereof and Annex B hereto. Thereupon, Lessor
will transfer to Lessee the Engine constituting part of such Aircraft but not
installed on such Airframe at the time of the return of the Airframe.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine or any Part, title to any of the foregoing or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens with respect to any Participant, Lessor or
Mortgagee; (c) the rights of others under agreements or arrangements to the
extent permitted by the terms of Sections 7.2 and 7.3; (d) Liens for Taxes of
Lessee (and its U.S. federal tax law consolidated group), or Liens for Taxes of
any Tax Indemnitee (and its U.S. federal tax law consolidated group) for which
Lessee is obligated to indemnify such Tax Indemnitee under any of the Lessee
Operative Agreements, in any such case either not yet due or being contested in
good faith by appropriate proceedings so long as such Liens and such proceedings
do not involve any material danger of the sale, forfeiture or loss of the
Aircraft, the Airframe, any Engine or any Part thereof; (e) materialmen's,
mechanics', workers', repairers', employees' or other like Liens arising in the
ordinary course of business for amounts the payment of which is either not yet
delinquent for more than 35 days or is being contested in good faith by
appropriate proceedings, so long as such Liens and such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or any Part thereof; and (f) Liens arising out of any
judgment or award against Lessee (or against any Permitted Sublessee), so long
as such judgment shall, within 30 days after the entry thereof, have been
<PAGE>
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 30 days after the expiration of such
stay, and so long as during any such 30-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 Aircraft, the Airframe or any Engine. Lessee shall promptly (and in
any case, by the end of the Term), at its own expense, take (or cause to be
taken) such action as may be necessary to duly discharge (by bonding or
otherwise) any Lien not excepted above if the same shall at any time arise in
respect of the Aircraft, the Airframe, any Engine or any Part during the Term.
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to the compliance by Lessor and Owner Participant with their
respective obligations under Section 13 of the Participation Agreement, Lessee
shall cause the Aircraft to be, and at all times during the Term to remain, duly
registered with the FAA under the Act or with such other country of registry as
shall be permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot be
effected with the FAA because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Act). Lessor shall execute and all such documents as Lessee (or any
Permitted Sublessee) may reasonably request for the purpose of effecting and
continuing such registration. Unless Mortgagee has given Lessee notice that the
Trust Indenture has been discharged, Lessee shall also cause the Trust Indenture
to be duly recorded and at all times maintained of record as a first-priority
perfected mortgage (subject to Permitted Liens) on the Aircraft, the Airframe
and each of the Engines (except to the extent that such perfection or priority
cannot be maintained as a result of the failure by Lessor or Mortgagee to
execute and deliver any necessary documents).
7.1.2 REREGISTRATION
So long as no Lease Event of Default shall have occurred and be
continuing, Lessee may, by written notice to Lessor, request to change the
country of registration of the Aircraft. Any such change in registration shall
be effected only in compliance with, and subject to all of the conditions set
forth in, Section 7.6.11 of the Participation Agreement.
<PAGE>
7.1.3 MARKINGS
If permitted by Applicable Law, on or reasonably promptly after the
Closing, Lessee will cause to be affixed to, and maintained in, the cockpit of
the Airframe and on each Engine, in each case, in a clearly visible location (it
being understood that the location of such placards, as identified to the Owner
Participant prior to the Closing, shall be deemed to be in compliance with this
requirement), a placard of a reasonable size and shape bearing the legend, in
English, set forth in Schedule 6. Such placards may be removed temporarily, if
necessary, in the course of maintenance of the Airframe or Engines. If any such
placard is damaged or becomes illegible, Lessee shall promptly replace it with a
placard complying with the requirements of this Section 7.1.3.
7.1.4 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other person to, operate,
use, maintain, service, repair or overhaul the Aircraft (a) in violation of any
Law binding on or applicable to the Aircraft, the Airframe or any Engine, or (b)
in violation of any airworthiness certificate, license or registration of any
Government Entity relating to Lessee or the Aircraft, the Airframe or any
Engine, except (1) immaterial or non-recurring violations with respect to which
corrective measures are taken promptly by Lessee or a Permitted Sublessee, as
the case may be, upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license or registration in good
faith in any reasonable manner that does not involve a material danger of the
sale, forfeiture or loss of the Aircraft, the Airframe, or any Engine, any risk
of criminal liability or a greater than de minimis risk of material civil
penalties being imposed against Lessor, Mortgagee or any Participant or impair
the Lien of the Trust Indenture.
7.1.5 OPERATION
Lessee agrees not to operate, use or locate the Aircraft, the Airframe
or any Engine, or allow the Aircraft, the Airframe or any Engine to be operated,
used or located (a) in any area excluded from coverage by any insurance required
by the terms of Section 11, except in the case of a requisition by the U.S.
Government where Lessee obtains an indemnity in lieu of such insurance from the
U.S. Government, or insurance from the U.S. Government, covering such area, in
accordance with Section 11.3 or (b) in any recognized area of hostilities unless
fully covered in accordance with Annex D by war-risk insurance as required by
the terms of Section 11 (including, without limitation, Section 11.3), unless in
<PAGE>
any case referred to in this Section 7.1.5 the Aircraft is only temporarily
operated, used or located in such area as a result of an emergency, equipment
malfunction, navigational error, hijacking, weather condition or other similar
unforeseen circumstances, so long as Lessee diligently and in good faith
proceeds to remove the Aircraft from such area.
7.2 POSSESSION
Lessee will not, without the prior written consent of Lessor and Owner
Participant (which consent shall not be unreasonably withheld), sublease or
otherwise in any manner deliver, transfer or relinquish possession of the
Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine
to be installed, on any airframe other than the Airframe; PROVIDED, however,
subject to the provisions of Section 7.3, Lessee may, without such prior written
consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject any Engine to
normal interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial airline industry and entered into by Lessee or
such Permitted Sublessee, as the case may be, in the ordinary course of
business; PROVIDED, HOWEVER, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with, Section
10.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver possession of the
Aircraft, Airframe, any Engine or any Part (i) to the manufacturer thereof or to
any third-party maintenance provider, for testing, service, repair, maintenance
or overhaul work on the Aircraft, Airframe, any Engine or any Part, or, to the
extent required or permitted by the terms of Annex C, for alterations or
modifications in or additions to the Aircraft, Airframe or any Engine or (ii) to
any Person for the purpose of transport to a Person referred to in the preceding
clause (i).
7.2.3 TRANSFER TO U.S. GOVERNMENT
Transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, Airframe or any Engine to the U.S. Government, in which event
Lessee shall promptly notify Lessor and Mortgagee in writing of any such
<PAGE>
transfer of possession and, in the case of any transfer pursuant to CRAF, in
such notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under CRAF.
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, as the case may be, free
and clear of all Liens, except (a) Permitted Liens and those that do not apply
to the Engines and (b) the rights of third parties under normal interchange or
pooling agreements and arrangements of the type that would be permitted under
Section 7.2.1.
7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased by Lessee or
such Permitted Sublessee subject to a mortgage, security agreement, conditional
sale or other secured financing arrangement, but only if (a) such airframe is
free and clear of all Liens, except (i) the rights of the parties to such lease,
or any such secured financing arrangement, covering such airframe and (ii) Liens
of the type permitted by clauses (a) and (b) of Section 7.2.4 and (b) Lessee or
Permitted Sublessee, as the case may be, shall have received from the lessor,
mortgagee, secured party or conditional seller, in respect of such airframe, a
written agreement (which may be a copy of the lease, mortgage, security
agreement, conditional sale or other agreement covering such airframe), whereby
such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease or is owned
by Lessor.
7.2.6 INSTALLATIONS OF ENGINES ON FINANCED
AIRCRAFT
So long as no Payment Default, Bankruptcy Default or Lease Event of
Default shall have occurred and be continuing, install or permit any Permitted
Sublessee to install an Engine on an airframe owned by Lessee or such Permitted
Sublessee, leased to Lessee or such Permitted Sublessee, or purchased by Lessee
or such Permitted Sublessee subject to a conditional sale or other security
agreement under circumstances where neither Section 7.2.4 or 7.2.5 is
applicable; PROVIDED, HOWEVER, that any such installation shall be deemed an
<PAGE>
Event of Loss with respect to such Engine, and Lessee shall comply with Section
10.2 hereof in respect thereof.
7.2.7 SUBLEASING
With respect to the Aircraft, Airframe or any Engine, so long as no
Payment Default, Bankruptcy Default or Lease Event of Default has occurred and
is continuing, enter into a sublease with any Permitted Air Carrier, but only
if:
(a) Lessee shall provide written notice to Lessor of Lessee's intent
to enter into a Permitted Sublease (except if the Permitted Sublessee is
Express), such notice in the event of a sublease to a U.S., Air Carrier to be
given promptly after entering into any such sublease or, in the case of a
sublease to any other Permitted Air Carrier, 20 days in advance of entering into
such sublease;
(b) At the time that Lessee enters into such Permitted Sublease, such
Permitted Sublessee shall not be subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding, shall not be
seeking any reorganization or any readjustment of its debts and shall not be,
shall not have substantially all of its property, in the possession of any
liquidator, trustee, receiver or similar person and, if such Permitted Sublessee
is a Permitted Foreign Air Carrier, the United States then maintains normal
diplomatic relations with the country in which such Permitted Sublessee has its
principal executive offices;
(c) Any such Permitted Sublease (i) shall include provisions for the
maintenance, operation, possession, inspection and insurance of the Aircraft
that are the same in all material respects as the applicable provisions of this
Lease, (ii) shall provide that, except if any subsidiary of Lessee is the
Permitted Sublessee, such Permitted Sublessee may not further sublease or
transfer its interests (except transfers of the type permitted in Sections 7.2.1
through 7.2.6, inclusive) in the Aircraft, Airframe or Engines, (iii) shall not
extend beyond the end of the Term and (iv) shall be expressly subject and
subordinate to all the terms of this Agreement and to the rights, powers and
remedies of Lessor hereunder;
(d) In connection with a sublease to a Permitted Foreign Air Carrier,
Lessee shall have furnished Lessor an opinion of counsel, reasonably
satisfactory to Lessor, in the country of domicile of such Permitted Foreign Air
Carrier, that (i) the terms of such sublease are the legal, valid and binding
obligations of the parties thereto enforceable under the laws of such
jurisdiction, (ii) it is not necessary for Owner Participant, Lessor or
<PAGE>
Mortgagee to register or qualify to do business in such jurisdiction, if not
already so registered or qualified, as a result, in whole or in part, of the
proposed sublease, (iii) Lessor's title to, and Mortgagee's Lien in respect of,
the Aircraft, Airframe and Engines will be recognized in such jurisdiction, (iv)
the Laws of such jurisdiction of domicile require fair compensation by the
government of such jurisdiction, payable in a currency freely convertible into
Dollars, for the loss of title to the Aircraft, Airframe or Engines in the event
of the requisition by such government of such title (unless Lessee shall provide
insurance in the amounts required with respect to hull insurance under Section
11 covering the requisition of title to the Aircraft, Airframe or Engines by the
government of such jurisdiction so long as the Aircraft, Airframe or Engines are
subject to such sublease), (v) the agreement of such Permitted Air Carrier that
its rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such Permitted Air Carrier under applicable
law, and (vi) there is no tort liability of the owner or Lessor of an aircraft
not in possession thereof under the laws of such country (it being agreed 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 is provided to cover such risk);
(e) No such sublease shall be made to a "tax exempt entity" as defined
in Section 168(h)(2) of the Code (including any Permitted Foreign Air Carrier)
prior to the close of the Tax Attribute Period, unless Lessee prepays on a
lump-sum basis any liability due under the Tax Indemnity Agreement as a result
of such sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease, PROVIDED, that notwithstanding
the foregoing, such sublease may be made without requiring such prepayment
during the taxable year in which the seventh anniversary of the Closing Date
occurs so long as the Aircraft is not "used predominantly outside the United
States" within the meaning of Section 168(g) of the Code during such taxable
year;
(f) Lessee shall furnish to Lessor and Mortgagee evidence reasonably
satisfactory to Lessor that the insurance required by Section 11 remains in
effect;
(g) All necessary documents shall have been duly filed, registered or
recorded in such public offices as may be required fully to preserve the title
of Lessor, and the first priority security interest (subject to Permitted Liens)
of Mortgagee, in the Aircraft, Airframe and Engines;
<PAGE>
(h) Except for the initial sublease to Express, Lessee shall reimburse
Lessor for all of its reasonable out-of-pocket fees and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred by
Lessor in connection with any such sublease; and
(i) For all purposes of this Section 7.2.7, the term "sublease" shall
be deemed to include interchange agreements with respect to the Aircraft or
Airframe.
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER
RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of the Aircraft
in accordance with Section 7.2 shall be subject and subordinate to all the terms
of this Lease, and to Lessor's rights, powers and remedies hereunder, including,
without limitation (i) Lessor's right to repossess the Aircraft pursuant to
Section 15, (ii) Lessor's right to terminate and avoid such sublease, delivery,
transfer or relinquishment of possession upon the occurrence of a Lease Event of
Default and (iii) the right to require such person to forthwith deliver the
Aircraft, the Airframe and Engines subject to such transfer upon the occurrence
of a Lease Event of Default;
(b) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer had not
occurred, and no transfer of possession of the Aircraft, the Airframe, any
Engine or any Part shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or under any Operative Agreement;
(c) Lessee shall ensure that no sublease, delivery, transfer or
relinquishment permitted under Section 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the provisions
of Section 7.1.2.
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under paragraph (c), (d), or (e) of the definition
of such term (as set forth in Annex A) shall not be deemed to violate the
provisions of Section 7.2; and
(e) Any Wet Lease shall not constitute a delivery, transfer or
relinquishment of possession for purposes of Section 7.2 and shall not be
prohibited by the terms hereof.
<PAGE>
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS; OTHER
LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
At all times during the Term, Lessee shall comply with, or cause to be
complied with, each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 INFORMATION, CERTIFICATES, NOTICES AND REPORTS
8.2.1 FINANCIAL INFORMATION
Lessee will furnish to Lessor:
(a) Within 90 days after the end of each of the first three fiscal
quarters in each fiscal year of Lessee, a consolidated balance sheet of Lessee
as of the end of such quarter and related statements of income and cash flows
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
prepared in accordance with GAAP; PROVIDED THAT so long as Lessee is subject to
the reporting requirements of the Securities Exchange Act of 1934, a copy of
Lessee's report on Form 10-Q for such fiscal quarter (excluding exhibits) will
satisfy this paragraph (a).
(b) Within 120 days after the end of each fiscal year of Lessee, a
consolidated balance sheet of Lessee as of the end of such fiscal year and
related statements of income and cash flows of Lessee for such fiscal year, in
comparative form with the preceding fiscal year, prepared in accordance with
GAAP, together with a report of Lessee's independent certified public
accountants with respect to their audit of such financial statements; PROVIDED
THAT so long as Lessee is subject to the reporting requirements of the
Securities Exchange Act of 1934, a copy of Lessee's report on Form 10-K for such
fiscal year (excluding exhibits) will satisfy this paragraph (b).
8.2.2 ANNUAL CERTIFICATE
Within 120 days after the close of each fiscal year of Lessee, Lessee
shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee to the
effect that such officer is familiar with or has reviewed or caused to be
<PAGE>
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements and that such officer does not have knowledge of the existence as at
the date of such certificate of any Lease Default or Lease Event of Default.
8.2.3 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor timely to file any reports required to be filed by it
as lessor under the Lease or to enable Owner Participant to timely file any
reports required to be filed by it, as the beneficiary of the Trust Estate, in
either case, with any Government Entity because of, or in connection with, the
interest of Owner Participant or Lessor in the Aircraft, Airframe or Engines,
this Lease or any other part of the Trust Estate; provided, however, that with
respect to any such information which Lessee reasonably deems commercially
sensitive or confidential, Owner Participant or Lessor, as the case may be,
shall afford Lessee a reasonable opportunity to seek from any such Government
Entity a waiver of the obligation of Owner Participant or Lessor to file any
such information, or shall consent to the filing of such information directly by
Lessee in lieu of filing by Owner Participant or Lessor, and if any such waiver
or consent is evidenced to the reasonable satisfaction of Owner Participant or
Lessor, as the case may be, then Lessee shall not be required to furnish such
information to Owner Participant or Lessor.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) Unless a Lease Event of Default, Payment Default or Bankruptcy
Default shall have occurred and be continuing, Lessee shall have the right at
its option to terminate this Lease during the Base Lease Term, effective only on
a Termination Date occurring after the end of the Tax Attribute Period, if:
(i) Lessee makes a good faith determination that the Aircraft either
has become economically obsolete or is surplus to Lessee's requirements and
the Chief Financial Officer or Treasurer of Lessee so certifies in writing
to Lessor; and
(ii) written notice of Lessee's exercise of its option to terminate
this Agreement shall be given to Lessor not less than 90 days prior to the
proposed Termination Date specified in such notice.
<PAGE>
(b) Lessor shall notify Lessee and Mortgagee of Lessor's intention to
sell or retain the Aircraft, as provided in this Section 9, no later than 45
days after Lessee gives Lessor written notice pursuant to Section 9.1(a)(ii).
Any failure by Lessor to give such notice of its election shall be deemed to be
an election to sell the Aircraft, as provided in this Section 9.
(c) Any termination pursuant to this Section 9 shall become effective
on the date of the sale, if any, pursuant to Section 9.2 or upon the date of
termination and payment by Lessee and Lessor in accordance with Section 9.3 if
Lessor elects to retain the Aircraft.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has given Lessee notice of Lessor's election to retain
the Aircraft, Lessee, as agent for Lessor, shall, until the date ten Business
Days prior to the proposed Termination Date, use commercially reasonable efforts
to obtain bids for a cash purchase of the Aircraft and Lessor may, if it desires
to do so, also seek to obtain such bids. In the event Lessee receives any bid,
Lessee shall promptly, and in any event at least ten Business Days prior to the
proposed date of sale, certify to Lessor in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person (who
shall not be Lessee or any Affiliate of Lessee or any person with whom Lessee or
any such Affiliate has an arrangement for the future use of the Aircraft by
Lessee or any such Affiliate) submitting such bid. In the event Lessor receives
any bid on or prior to the date ten Business Days prior to the proposed
Termination Date, Lessor shall, at least ten Business Days prior to the proposed
date of sale, certify to Lessee in writing the amount and terms of such bid, the
proposed date of such sale and the name and address of the person submitting
such bid.
9.2.2 CLOSING OF SALE
(a) On the proposed Termination Date (i) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder,
if any, which shall have submitted the highest cash bid (net of applicable
<PAGE>
brokerage commissions) on or before the date ten Business Days prior to such
Termination Date, in the same manner as if delivery were made to Lessor pursuant
to Section 5 and Annex B and in full compliance with the terms thereof, and
shall duly transfer to Lessor title to any such engines not owned by Lessor, all
in accordance with the terms of Section 5 and Annex B, and (ii) Lessor shall
simultaneously therewith transfer the Airframe and Engines or engines to such
bidder, in the manner described in Section 4.5, against cash paid to Lessor in
the amount of such highest bid (net of applicable brokerage commissions and all
reasonable out-of-pocket fees and expenses incurred by Lessor, Mortgagee and
Owner Participant in connection with such sale and the related termination of
this Lease (collectively, the "Expenses of Sale") and in the manner and in funds
of the type specified in Section 3.3.
(b) All proceeds of any sale described in Section 9.2.2(a), net of
Expenses of Sale, shall be paid to and retained by Lessor and, on such
Termination Date, and as a condition precedent to such sale and the delivery of
the Aircraft and Engines or engines to such bidder, Lessee shall pay to Lessor,
in the manner and in funds of the type specified in Section 3.3:
(i) all unpaid Basic Rent due at any time prior to such Termination
Date; plus
(ii) an amount equal to the excess, if any, of the Termination Value
for the Aircraft, computed as of such Termination Date, over the proceeds
of such sale, net of Expenses of Sale; plus
(iii) as provided in Section 3.2.2, interest on the amounts specified
in the foregoing clause (i) at the Payment Due Rate from and including the
date on which any such amount was due to the date of payment of such amount
in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent due by Lessee to Lessor, Mortgagee or the
Participants under this Lease (including, without limitation, (A) Supplemental
Rent in respect of Make-Whole Amount, if any, payable pursuant to Section
2.10(b) of the Trust Indenture in connection with a prepayment of the Equipment
Notes upon such sale, (B) all interest charges provided for hereunder or under
any other Lessee Operative Agreement with respect to the late payment of any
amounts so payable, (C) the Expenses of Sale).
(c) Upon and subject to any such sale and receipt of proceeds by
Lessor, and full and final payment of all amounts described in Section 9.2.2(b),
and compliance by Lessee with all the other provisions of this Section 9.2,
<PAGE>
(i) Lessor will transfer to Lessee, in accordance with Section 4.5,
any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on or after the
Payment Date with reference to which Termination Value is computed, shall
cease, and the Term for the Aircraft shall end effective as of the date of
such sale.
(d) A sale of the Aircraft pursuant to this Section 9.2.2 shall take
place only on a Termination Date. Subject to Section 9.3, if no sale shall have
occurred on or as of the proposed Termination Date, this Agreement shall
continue in full force and effect, and all of Lessee's obligations shall
continue, including, without limitation, its obligation to pay Rent, in each
case, as if the notice under Section 9.1 shall not have been given and, subject
to Section 9.2.3(b), Lessee may give another notice pursuant to Section 9.1.
9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) Lessee may withdraw any notice given pursuant to Section 9.1 at
any time on or before the date 20 days prior to the proposed Termination Date,
whereupon this Agreement shall continue in full force and effect and all of
Lessee's obligations shall continue, including, without limitation, its
obligation to pay Rent, in each case, as if the notice under Section 9.1 shall
not have been given and Lessee may give another notice pursuant to Section 9.1;
PROVIDED that Lessee shall not be entitled to give more than three notices
pursuant to Section 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and expenses of
Lessor, Mortgagee and Owner Participant in connection with any notice of
termination withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor shall elect to retain the Aircraft in accordance with
Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the manner and in funds
of the type specified in Section 3.3, to the Mortgagee an amount sufficient
to prepay all outstanding Equipment Notes pursuant to Section 2.10(b) of
the Trust Indenture;
<PAGE>
(ii) subject to receipt by Mortgagee of the funds described in
paragraph (i) above, Lessee shall deliver the Airframe and Engines or
engines constituting part of the Aircraft to Lessor pursuant to Section 5
and Annex B and in full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by Lessor, all in
accordance with the terms of Section 5 and Annex B;
(iii) Lessee shall pay to Lessor, in the manner and in funds of the
type specified in Section 3.3:
(1) all unpaid Basic Rent due at any time prior to such Termination
Date; plus
(2) as provided in Section 3.2.2, interest on the amounts specified
in the foregoing clause (1) at the Payment Due Rate from and
including the date on which any such amount was due to the date
of payment of such amount in full; and
(iv) Lessee shall also pay all Supplemental Rent due and payable by
Lessee to Lessor, Mortgagee or the Participants under this Lease (including
without limitation (A) Supplemental Rent in respect of Make-Whole Amount,
if any, payable pursuant to Section 2.10(b) of the Trust Indenture in
connection with a prepayment of the Equipment Notes, (B) all interest
charges provided for hereunder or under any other Lessee Operative
Agreement with respect to the late payment of any amounts so payable, and
(C) the reasonable out-of-pocket fees and expenses incurred by Lessor and
Owner Participant in connection with such termination and sale).
(b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance with Section 4.5,
any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) The obligation of Lessee to pay Basic Rent otherwise due on or
after the Termination Date shall cease, and the Term for the Aircraft shall
end effective as of such Termination Date.
<PAGE>
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS WITH RESPECT TO AIRCRAFT
10.1.1 NOTICE
Upon the occurrence of an Event of Loss with respect to the Airframe,
and any Engine or Engines installed thereon at the time of such Event of Loss,
Lessee shall promptly (and in any event within 10 Business Days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss. For
purposes of Section 10.1, an Event of Loss with respect to the Airframe shall be
deemed to constitute an Event of Loss with respect to the Aircraft.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If an Event of Loss with respect to the Aircraft occurs, then
Lessee shall pay, in the manner and in funds of the type specified in Section
3.3, the following amounts:
(i) on the Stipulated Loss Value Date next following the earlier of
(x) the 120th day following the date of the occurrence of such Event of
Loss, and (y) the twentieth day following the receipt of insurance proceeds
with respect to such occurrence, Lessee shall pay to Lessor:
(1) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to such Stipulated Loss Value Date; plus
(2) the Stipulated Loss Value of the Aircraft computed as of such
Stipulated Loss Value Date; plus
(3) as provided in Section 3.2.2, interest on the amount specified in
the foregoing clause (1) at the Payment Due Rate from and
including the date on which any such amount was due to the date
of payment of such amount in full;
PROVIDED, that if such Stipulated Loss Value Date is a Payment Date, Lessee
shall not be obligated to pay the Basic Rent or Renewal Rent otherwise
required to be paid on such date.
(ii) on or before the date required for payment of the amounts
specified in paragraph (i) above, Lessee shall also pay to Lessor,
Mortgagee and the Participants all other amounts due and payable by Lessee
<PAGE>
to Lessor, Mortgagee and the Participants under this Lease, the
Participation Agreement or any other Lessee Operative Agreement.
(b) Upon payment in full of all amounts described in the foregoing
paragraph (a),(i) the obligation of Lessee to pay Basic Rent or Renewal Rent
hereunder with respect to the Aircraft shall terminate, (ii) the Term for the
Aircraft shall end and (iii) Lessor will transfer the Aircraft to Lessee, as-is
and where-is, and subject to any insurer's salvage rights, but otherwise in the
manner described in Section 4.5.
10.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE
10.2.1 NOTICE
Upon the occurrence of an Event of Loss with respect to an Engine
under circumstances in which an Event of Loss with respect to the Airframe has
not occurred, Lessee shall promptly (and in any event within 10 Business Days
after such occurrence) give Lessor written notice of such Event of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 90 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Engine with respect to
which any Event of Loss occurred, title to a Replacement Engine free and clear
of all Liens other than Permitted Liens. Such Replacement Engine shall be an
engine manufactured by Engine Manufacturer that is the same model as the Engine
to be replaced thereby, or an improved model, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 ENGINE EXCHANGE
Unless a Payment Default, Bankruptcy Default or Lease Event of Default
shall have occurred and be continuing, upon not less than five (5) Business
Days' prior written notice to Lessor, Lessee may replace any Engine leased
hereunder with another engine (the "Exchanged Engine") meeting the requirements
of Section 10.2.2. Such Exchanged Engine shall be deemed to be a "Replacement
Engine" and Lessor and Lessee shall comply with the provisions of Section 10.3
with regard to the Exchanged Engine and the Engine so replaced.
<PAGE>
10.3 CONDITIONS TO ANY REPLACEMENT OF ENGINE
10.3.1 DOCUMENTS
Prior to or at the time of conveyance of title to any Replacement
Engine to Lessor, Lessee shall take each of the following actions:
(a) furnish Lessor with a full warranty bill of sale duly conveying to
Lessor such Replacement Engine in form and substance reasonably satisfactory to
Lessor;
(b) cause (i) a Lease Supplement subjecting such Replacement Engine to
this Lease, duly executed by Lessee, to be delivered to Lessor for execution
and, upon such execution, to be filed for recordation with the FAA pursuant to
the Act, (ii) a Trust Indenture Supplement, subjecting such Replacement Engine
to the Trust Indenture, to be delivered to Lessor for execution and, upon
execution, to be filed for recordation with the FAA pursuant to the Act and
(iii) such Financing Statements and other filings, as Lessor or Mortgagee may
reasonably request, duly executed by Lessee and, to the extent applicable,
Lessor and Mortgagee (and Lessor and Mortgagee shall execute and deliver the
same), to be filed in such locations as any such party may reasonably request;
(c) furnish such evidence of compliance with the insurance provisions
of Section 11 with respect to such Replacement Engine as Lessor may reasonably
request;
(d) furnish an opinion or opinions of Lessee's counsel (which may be
Lessee's legal department) reasonably satisfactory to Lessor and addressed to
Lessor and Mortgagee to the effect that such full warranty bill of sale
constitutes an effective instrument for the conveyance of title to such
Replacement Engine;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Lessor and addressed to Lessor and Mortgagee as to the due
filing for recordation of each Lease Supplement and Trust Indenture Supplement
with respect to such Replacement Engine under the Act; and
(f) furnish a certificate of a qualified aircraft engineer (who may be
an employee of Lessee) certifying that such Replacement Engine complies with the
value, utility and remaining useful life requirements set forth in Section
10.2.2.
Lessor and Lessee understand and agree that if at the time of any
replacement of any Engine, as contemplated in this Section 10, the Airframe was
registered in a jurisdiction other than the United States, then the requirements
<PAGE>
set forth above in this Section 10.3.1 relating to compliance with the
requirements of the Act or the FAA, shall be deemed to refer to the comparable
applicable Law of, and the Aviation Authority of, such other jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor shall, in all events, be entitled to the benefits of
Section 1110 with respect to any Replacement Engine and Lessee and Lessor shall
cooperate and take such action as the other may reasonably request so as to
ensure that Lessor shall be entitled to such benefits.
(b) No Event of Loss with respect to an Engine shall result in, or
otherwise allow or permit, any reduction, deferral, discharge or other change in
the timing or amount of any Rent payable by Lessee hereunder, and Lessee shall
pay all such Rent and other amounts as though such Event of Loss had not
occurred.
10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of Sections 10.2
and 10.3.1, Lessor will transfer to Lessee the Engine with respect to which such
Event of Loss occurred, in accordance with Section 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of damage or
loss not constituting an Event of Loss (the application of which is provided for
in Section 11), received at any time by Lessor, Lessee or any Permitted
Sublessee from any Government Entity or any other Person in respect of any Event
of Loss will be applied as follows:
10.5.1 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other than an
Engine installed on the Airframe at the time such Airframe suffers an Event of
Loss), upon compliance by Lessee with the applicable terms of Section 10.2.2
with respect to the Event of Loss for which such amounts are received, such
amounts shall be paid over to, or retained by, Lessee.
10.5.2 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with respect to the
Airframe, such amounts shall be applied as follows:
<PAGE>
(a) FIRST, if the sum described in Section 10.1.2 has not then been
paid in full by Lessee, such amounts shall be paid to Lessor (or to Mortgagee so
long as Mortgagee has not given notice to Lessee that the Trust Indenture has
been duly discharged, except with respect to Excluded Payments) to the extent
necessary to pay in full such sum;
(b) SECOND, the remainder, if any, shall be paid to Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity shall requisition for use the Airframe and
the Engines or engines installed thereon, and if the same does not constitute an
Event of Loss, Lessee shall promptly notify Lessor and Mortgagee of such
requisition and all of Lessee's obligations under this Agreement shall continue
to the same extent as if such requisition had not occurred; PROVIDED, HOWEVER,
that if the Airframe and Engines or engines installed thereon are not returned
to Lessor by Lessee at the end of the Term, unless Lessor shall have elected,
upon notice given not less than 30 days nor more than 120 days before the end of
the Term, not to treat such event as constituting an Event of Loss with respect
to the Aircraft, Lessee shall be obligated to pay the Stipulated Loss Value and
all other amounts payable pursuant to Section 10.1.2 with respect to the
Aircraft. If Lessor shall have elected not to treat such event as an Event of
Loss, Lessee shall be obligated to return the Airframe and Engines or engines to
Lessor pursuant to, and in all other respects to comply with the provisions of,
Section 5 promptly upon their return by such Government Entity, and Lessee shall
pay to Lessor upon such return an amount equal to the average daily Basic Rent
payable by Lessee during the Term for each day after the end of the Term to but
excluding the day of such return, up to a maximum of 30 days.
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity shall requisition for use any Engine but not
the Airframe, Lessee will replace such Engine by complying with the applicable
terms of Sections 10.2 and 10.3 to the same extent as if an Event of Loss had
occurred with respect to such Engine, and any payments received by Lessor or
Lessee from such Government Entity with respect to such requisition shall be
paid or retained in accordance with Section 10.5.1.
10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted Sublessee,
from any Government Entity for the use of the Airframe and Engines or engines
installed thereon during the Term shall be paid over to, or retained by, Lessee
<PAGE>
and all payments received by Lessor or Lessee from any Government Entity for the
use of the Airframe and Engines or engines installed thereon after the Term
shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, then all such payments shall be paid
over to Lessor (or to Mortgagee so long as Mortgagee has not given notice to
Lessee that the Trust Indenture has been duly discharged), and held as provided
in Section 10.5.
10.9 APPLICATION OF PAYMENTS DURING EXISTENCE OF A LEASE
EVENT OF DEFAULT
Any amount described in this Section 10 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Payment Default or Bankruptcy Default shall have occurred and be continuing, but
shall instead be held by or paid over to Lessor (or to Mortgagee so long as
Mortgagee has not given notice to Lessee that the Trust Indenture has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until Lessor shall have demanded liquidated damages pursuant
to Section 15.1.3 or 15.1.4 and such amount is applied, at the option of Lessor,
or upon the written request of Lessee to Lessor, from time to time during the
continuance of a Lease Event of Default, to Lessee's obligations under this
Lease as and when due, it being understood that any such application shall be
made to such obligations of Lessee as Lessor may determine in its sole
discretion. At such time as there shall not be continuing any Payment Default or
Bankruptcy Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 10.9.
SECTION 11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Mortgagee or Owner Participant
from obtaining insurance for its own account (and any proceeds payable under
<PAGE>
such separate insurance shall be payable as provided in the policy relating
thereto); PROVIDED, HOWEVER, that no insurance may be obtained or maintained
that would limit or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Lessee pursuant to this Section 11 and
Annex D.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
Lessor agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft described in Annex D, indemnification from, or insurance
provided by, the U.S. Government, or upon the written consent of Lessor, other
Government Entity, against such risk in an amount that, when added to the amount
of insurance (including permitted self-insurance), if any, against such risk
that Lessee (or any Permitted Sublessee) may continue to maintain, in accordance
with this Section 11, during the period of such requisition or transfer, shall
be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss with respect to the Aircraft or any
Engine under policies required to be maintained by Lessee pursuant to this
Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Lessee) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 11 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Lease Event of Default shall have occurred and be continuing, but shall instead
be held by or paid over to Lessor (or to Mortgagee so long as Mortgagee has not
given notice to Lessee that the Trust Indenture has been duly discharged) as
security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4.4 hereof unless and until Lessor shall have demanded
liquidated damages pursuant to Section 15.1.3 or 15.1.4 and such amount is
<PAGE>
applied, at the option of Lessor, or upon the written request of Lessee to
Lessor, from time to time during the continuance of a Lease Event of Default, to
Lessee's obligations under this Lease and the other Lessee Operative Agreements
as and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Lease Event of Default, such
amount shall be paid to Lessee to the extent not previously applied in
accordance with this Section 11.5.
SECTION 12. INSPECTION
(a) Lessor, Mortgagee or their respective authorized representatives
(the "Inspecting Parties") may, upon reasonable notice to Lessee, inspect the
Aircraft, Airframe and Engines (including, without limitation, the Aircraft
Documents) and Lessee shall cooperate, and shall cause any Permitted Sublessee
to cooperate, with the Inspecting Parties in connection with any such inspection
(including, without limitation, permitting any such Inspecting Party to make
copies of such Aircraft Documents not reasonably deemed confidential by Lessee
or such Permitted Sublessee).
(b) Except during the continuance of any Lease Event of Default while
the Section 1110 Period shall not be in effect, any inspection of the Aircraft
hereunder shall be limited to a visual, walk-around inspection and shall not
include the opening of any panels, bays or other components of the Aircraft,
Airframe or Engines. Any inspection permitted hereunder, including any
inspection conducted during the continuance of a Lease Event of Default, shall
be conducted in a manner which does not interfere with Lessee's or a Permitted
Sublessee's operation, use and maintenance of such Aircraft, which determination
of interference shall be made by Lessee in its reasonable sole discretion.
(c) With respect to such rights of inspection, neither Lessor nor
Mortgagee shall have any duty or liability to make, or any duty or liability by
reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with Section 12(a)); PROVIDED, that if a Lease Event of Default shall have
occurred and be continuing, Lessee shall bear all such reasonable expenses,
except, in the case of a Chapter 11 reorganization, during the Section 1110
Period.
<PAGE>
(e) If requested by Lessor, Lessee shall promptly advise, or shall
cause any Permitted Sublessee to advise, Lessor of the date upon which the
Aircraft, Airframe or any Engine undergoes its next scheduled maintenance visit
or next major check, and with respect to any Engine, the next off-the-wing
maintenance, and shall advise Lessor of the name and location of the relevant
maintenance performer. Lessor shall have the opportunity to attend such
scheduled maintenance visit or major check, subject to the other provisions of
this Section 12.
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 IN GENERAL
This Lease and the other Lessee Operative Agreements shall be binding
upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease. Except as otherwise provided herein (including, without
limitation, under the provisions of Section 15 hereof), Lessor and Mortgagee may
not assign or convey any of its right, title and interest in and to this Lease
or the Aircraft without the prior written consent of Lessee, such consent not to
be unreasonably withheld.
13.2 MERGER OF LESSEE
13.2.1 IN GENERAL
Lessee shall not consolidate with or merge into any other person under
circumstances in which Lessee is not the surviving corporation, or convey,
transfer or lease in one or more transactions all or substantially all of its
assets to any other person, unless:
(a) such person is organized, existing and in good standing under the
Laws of the United States, any State of the United States or the District
Columbia and, upon consummation of such transaction, such person will be a U.S.
Air Carrier;
(b) such person executes and delivers to Lessor and Mortgagee a duly
authorized, legal, valid, binding and enforceable agreement, reasonably
satisfactory in form and substance to Lessor, containing an effective assumption
by such person of the due and punctual performance and observance of each
covenant, agreement and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;
<PAGE>
(c) such person makes such filings and recordings with the FAA
pursuant to the Act as shall be necessary to evidence such consolidation or
merger; and
(d) immediately after giving effect to such consolidation or merger no
Lease Event of Default shall have occurred and be continuing.
13.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this Section 13.2, such Person will
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lessee Operative Agreements with the same effect as if such
person had been named as "Lessee" therein. No such consolidation or merger, or
conveyance, transfer or lease, shall have the effect of releasing Lessee or such
Person from any of the obligations, liabilities, covenants or undertakings of
Lessee under the Lease.
13.3 ASSIGNMENT SECURITY FOR LESSOR'S OBLIGATIONS
In order to secure the indebtedness evidenced by the Equipment Notes,
Lessor has agreed in the Trust Indenture, among other things, to assign to
Mortgagee this Lease and to mortgage the Aircraft, Airframe and Engines in favor
of Mortgagee, subject to the reservations and conditions therein set forth.
Lessee hereby accepts and consents to the assignment of all Lessor's right,
title and interest in and to this Lease pursuant to the terms of the Trust
Indenture. In accordance with Section 3.3(c), Lessee agrees to pay directly to
Mortgagee (or, after receipt by Lessee of notice from Mortgagee 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 Mortgagee and Lessee
agrees that Mortgagee's right to such payments hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, the circumstances set forth in Section 16 hereof. Notwithstanding
the foregoing assignment of this Lease, the obligations of Lessee to Lessor to
perform the terms and conditions of this Lease shall remain in full force and
effect.
13.4 SUCCESSOR OWNER TRUSTEE
Lessee agrees that in the case of the appointment of any successor
Owner Trustee pursuant to the terms of the Participation Agreement and the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee to Lessee, succeed to all the rights, powers and title
<PAGE>
of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following circumstances,
conditions, acts or events, for any reason whatsoever and whether any such
circumstance, condition, act or 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, order, rule or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:
14.1 PAYMENTS
Lessee shall fail to pay any amount of Basic Rent, Renewal Rent,
Stipulated Loss Value or Termination Value within five (5) Business Days after
the same shall have become due; or Lessee shall fail to pay any Supplemental
Rent (other than Stipulated Loss Value or Termination Value) when due and such
failure shall continue for a period in excess of ten (10) Business Days from and
after the date of any written notice to Lessee from Lessor, Mortgagee or Owner
Participant of the failure to make such payment when due; provided that any such
failure to pay any Excluded Payment shall not constitute a Lease Event of
Default until written notice is given by the Owner Participant to Lessee and
Mortgagee that such failure constitutes a Lease Event of Default and such
failure shall have continued for a period in excess of ten (10) Business Days
after such notice.
14.2 INSURANCE
Lessee shall fail to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft, Airframe and Engines in
accordance with the provisions of Section 11.
<PAGE>
14.3 OTHER COVENANTS
Lessee shall fail to observe or perform (or caused to be observed and
performed) in any material respect any other covenant, agreement or obligation
set forth herein or in any other Lessee Operative Agreement (other than the
covenants, agreements and obligations set forth in the Tax Indemnity Agreement),
and such failure shall continue unremedied for a period of 30 days from and
after the date of written notice thereof to Lessee from Lessor, Owner
Participant or Mortgagee, unless such failure is capable of being corrected and
Lessee shall be diligently proceeding to correct such failure, in which case
there shall be no Lease Event of Default unless and until such failure shall
continue unremedied for a period of 90 days after receipt of such notice.
14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, (c) and the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor, Owner Participant or Mortgagee to Lessee (except
that this clause (c) shall be inapplicable in the case of Section 6.1.7 of the
Participation Agreement).
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee shall consent to the appointment of or the taking of
possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, liquidation or other relief in a case under
any bankruptcy Laws or other insolvency Laws (as in effect at such time), or
Lessee shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or
Lessee's board of directors shall adopt a resolution authorizing any of the
foregoing; or
<PAGE>
(b) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
trustee or liquidator of Lessee or of substantially all of its property, or
substantially all of the property of Lessee shall be sequestered, and any such
order, judgment or decree of appointment or sequestration shall remain in force
undismissed, unstayed and unvacated for a period of 90 days after the date of
entry thereof; or
(c) a petition against Lessee in a case under any bankruptcy Laws or
other insolvency Laws (as in effect at such time) is filed and not withdrawn or
dismissed within 90 days thereafter, or if, under the provisions of any Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction, custody or
control of Lessee or of substantially all of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and unterminated
for a period of 90 days.
SECTION 15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Lease Event of Default shall occur and be continuing, Lessor
may, at its option and at any time and from time to time, exercise any one or
more of the following remedies as Lessor in its sole discretion shall elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines 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 the Airframe or Engine were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise, and Lessee expressly waives any right it may
have to a hearing prior to repossession of the Aircraft.
<PAGE>
15.1.2 SALE AND USE
Lessor may sell the Airframe and/or any Engine at public or private
sale, at such times and places, and to such Persons (including Lessor, Mortgagee
or any Participant), as Lessor may determine; or Lessor may otherwise dispose
of, hold, use, operate, lease to others or keep idle the Airframe and/or any
Engine, as Lessor, in its sole discretion, may determine, all free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to
such action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this Section 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give Lessee at least 15 days prior written notice of the date fixed
for any public sale of the Airframe and/or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under Section 15.1.1 or 15.1.2 with respect to
the Airframe and/or any Engine, or any Part thereof, Lessor, by written notice
to Lessee specifying a payment date (which shall be the Stipulated Loss Value
Date next occurring not less than 10 days after the date of such notice), may
demand Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the payment
date so specified and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date specified for payment
in such notice), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date specified in such notice; plus
(b) an amount equal to the excess, if any, of the Stipulated Loss
Value for the Aircraft, computed as of the Stipulated Loss Value Date specified
in such notice, over the Fair Market Sales Value of the Aircraft, as of the
Stipulated Loss Value Date specified in such notice; plus
(c) interest on the amounts specified in the foregoing clause (a) at
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
<PAGE>
(d) interest on the amount specified in the foregoing clause (b) at
the Payment Due Rate from and including the Stipulated Loss Value Date specified
in such notice to the date of payment of such amount.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under Section 15.1.3
with respect to the Aircraft, may, if Lessor shall so elect, upon giving written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date of such sale), the
following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date on or immediately preceding the
date of such sale; plus
(b) an amount equal to the excess, if any, of (i) the Stipulated Loss
Value of the Aircraft, computed as of the Stipulated Loss Value Date used in the
foregoing clause (a) for the computation of unpaid Rent, over (ii) the proceeds
of such sale, minus all reasonable costs of Lessor in connection with the sale;
plus
(c) if the date of such sale is not a Stipulated Loss Value Date, an
amount equal to interest on the outstanding principal amount of the Equipment
Notes at the rate per annum borne thereby from and including the Stipulated Loss
Value Date used in the foregoing clause (a) for the computation of unpaid Rent
to the date of such sale; plus
(d) interest on the amounts specified in the foregoing clause (a) at
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
(e) interest on the sum of the amounts specified in the foregoing
clause (b) at the Payment Due Rate from and including the date of such sale to
the date of payment of such amounts.
<PAGE>
15.1.5 RESCISSION
Lessor may (i) at its option, rescind or terminate this Lease as to
the Aircraft, Airframe or any Engine, or any Part thereof, or (ii) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof, including without limitation Lessee's agreement
to lease the Aircraft for the Term and to pay Rent.
15.1.6 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication of
amounts otherwise paid under this Section 15), Lessee shall be liable for any
and all unpaid Rent due hereunder before, during or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, including,
without limitation, interest on overdue Rent at the rate as herein provided,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all reasonable
costs and expenses of Lessor incurred in connection with the return of the
Airframe or any Engine, in accordance with the terms of Section 5 or in placing
the Airframe or any Engine, in the condition and airworthiness required by
Section 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of Section 15.1, during any period that
the Aircraft, Airframe or any Engine is subject to CRAF in accordance with the
provisions of Section 7.2.3 and in the possession of the U.S. Government, Lessor
shall not, as a result of any Lease Event of Default, exercise its remedies
hereunder in such manner as to limit Lessee's control under this Lease (or any
Permitted Sublessee's control under any Permitted Sublease) of the Aircraft,
Airframe or such Engine, unless at least 30 days' (or such other period as may
then be applicable under CRAF) written notice of default hereunder shall have
been given by Lessor or Mortgagee by registered or certified mail to Lessee (and
any Permitted Sublessee) with a copy to the Contracting Officer Representative
or Representatives for the Military Airlift Command of the United States Air
Force to whom notices must be given under the contract governing Lessee's (or
any Permitted Sublessee's) participation in CRAF with respect to the Aircraft,
Airframe or any Engine.
<PAGE>
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (i) fails to make any payment of Rent required to be made by
it hereunder or (ii) fails to perform or comply with any of its agreements
contained herein and such failure continues for a period of thirty days after
written notice thereof is given by Lessor, Mortgagee or Owner Participant to
Lessee, Lessor may (but shall not be obligated to) make such payment or perform
or comply with such agreement, and the amount of such payment and the amount of
the expenses of Lessor or Mortgagee 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 Payment Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand by Lessor or Mortgagee,
whichever is entitled thereto. No such payment, performance or compliance shall
be deemed to cure any Lease Default or Lease Event of Default or otherwise
relieve Lessee of its obligations with respect thereto.
15.4 DETERMINATION OF FAIR MARKET SALES VALUE
For the purpose of this Section 15, the "Fair Market Sales Value" of
the Aircraft shall be determined on an "as is, where is" basis and shall take
into account customary brokerage and other out-of-pocket fees and expenses which
typically would be incurred in connection with a sale of the Aircraft. Any such
determination shall be made by an Appraiser selected by Lessor and the costs and
expenses associated therewith shall be borne by Lessee, unless Lessor does not
obtain possession of the Aircraft, Airframe and Engines pursuant to this Section
15, in which case an Appraiser shall not be appointed and Fair Market Sales
Value for purposes of this Section 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in any way
any right, power, remedy or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy and privilege hereby given to, or retained by, Lessor
in this Lease shall be in addition to and not in limitation of every other
right, power, remedy and privilege given under the Operative Agreements or now
or hereafter existing at law or in equity. Each and every right, power, remedy
and privilege of Lessor under this Lease and any other Operative Agreement may
be exercised from time to time or simultaneously and as often and in such order
as may be deemed expedient by Lessor. All such rights, powers, remedies and
privileges shall be cumulative and not mutually exclusive, and the exercise of
<PAGE>
one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder shall be absolute and
unconditional, and shall not be affected by any event or circumstance,
including, without limitation: (i) any setoff, counterclaim, recoupment, defense
or other right that Lessee may have against Lessor, Mortgagee, any Participant,
any Note Holder, or any other Person for any reason whatsoever; (ii) any defect
in the title, airworthiness, condition, design, operation or fitness for use of,
or any damage to or loss or destruction of, the Aircraft, Airframe or any
Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
or (iv) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Agreement not been terminated in whole or in
part. Lessee hereby waives, to the extent permitted by applicable law, any and
all rights that it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Agreement, except in accordance with the express terms hereof.
(c) Nothing set forth in this Section 16 shall be construed to
prohibit Lessee from separately pursuing any claim that it may have from time to
time against Lessor or any other Person with respect to any matter (other than
the absolute and unconditional nature of Lessee's obligations hereunder to pay
Rent, and other than the matters specified in paragraphs (a) and (b) above).
Without limiting the foregoing, nothing in this Section 16 shall be construed as
a waiver by Lessee, or otherwise limit Lessee in pursuing any claim by Lessee,
of any breach by Lessor, Owner Participant or any other Person of any covenant
or obligation contained in any Operative Agreement.
<PAGE>
SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) At least 225 days but not more than 375 days prior to the
Scheduled Expiration Date or, if a Renewal Lease Term is then in effect, prior
to the Scheduled Renewal Term Expiration Date of such Renewal Lease Term, Lessee
may provide notice to Lessor that Lessee may exercise either the option to
extend the leasing of the Aircraft for a Renewal Lease Term pursuant to Section
17.2 or the option to purchase the Aircraft on the Scheduled Expiration Date or
Scheduled Renewal Term Expiration Date of such Renewal Lease Term, as the case
may be, pursuant to Section 17.3 (a "Preliminary Notice").
(b) If any such Preliminary Notice is given by Lessee, then Lessee may
provide a further notice specifying which option it intends to elect, with
respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1, as the
case may be.
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as specified in Section
17.1, and subject to the terms and conditions of this Section 17.2, Lessee may
exercise its option to extend the leasing of the Aircraft hereunder on two
occasions, in each case until the next Scheduled Renewal Term Expiration Date,
on the same terms, provisions and conditions (except as contemplated by this
Section 17) set forth herein and in the other Lessee Operative Agreements with
respect to the Base Lease Term, by delivery of a notice (a "Renewal Notice") to
Lessor not less than 180 days but not more than 375 days prior to (i) if the
Base Lease Term is then in effect, the Scheduled Expiration Date, or (ii) if a
Renewal Lease Term is then in effect, the Scheduled Renewal Term Expiration Date
for such Renewal Lease Term.
(b) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) No Preliminary Notice or Renewal Notice shall be binding on Lessor
or oblige Lessor to extend the leasing of the Aircraft hereunder for a
Renewal Lease Term if any Payment Default, Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing on and as of the
date that such Renewal Lease Term would otherwise commence.
<PAGE>
(ii) Any Renewal Notice shall be revocable by Lessee until 10 Business
Days after the Renewal Rent is determined in accordance with Sections
17.2.2 and unless revoked by written notice by Lessee to Lessor shall
thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to extend the leasing of the Aircraft hereunder for
the Renewal Lease Term to which such Renewal Notice relates.
(iii) Lessee shall not be entitled to give any Renewal Notice if it
has (x) not delivered a Preliminary Notice or (y) delivered a Purchase
Notice to Lessor.
17.2.2 RENEWAL RENT
(a) During the Renewal Lease Term, Lessee shall pay to Lessor on each
Payment Date, in the manner and in the funds of the type specified in Section
3.3, Renewal Rent in advance.
(b) The Renewal Rent payable by Lessee on each Payment Date during any
Renewal Lease Term shall be the Fair Market Rental Value of the Aircraft for
such Renewal Lease Term. Any such Fair Market Rental Value shall be determined
not more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) For any Renewal Lease Term, Stipulated Loss Value Dates and
Termination Value dates shall be extended throughout such Renewal Lease Term on
the same days and for the same months as during the Base Lease Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Lease Term shall be determined at the same time
that the Renewal Rent for such Renewal Lease Term is determined under Section
17.2.2. Stipulated Loss Values and Termination Values for any such Renewal Lease
Term shall, commencing on the first day of such Renewal Lease Term, be equal to
the Fair Market Sales Value of the Aircraft, computed as of the first day of
such Renewal Lease Term, and shall decline ratably on a monthly basis to the
Fair Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.
(c) Any Fair Market Sales Value of the Aircraft, for purposes of
calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined by mutual agreement of
<PAGE>
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
17.3 PURCHASE OPTION
17.3.1 PURCHASE NOTICE
(a) Subject to Section 17.1 and the terms and conditions of this
Section 17.3, Lessee may elect to purchase the Aircraft, on any Purchase Date,
at a purchase price equal to the lesser of (i) 61.35% of Lessor's Cost and (ii)
the Fair Market Sales Value of the Aircraft computed as of the Purchase Date.
(b) Lessee may exercise such option to purchase the Aircraft, by
delivery of a notice (a "Purchase Notice") to Lessor not less than 180 and not
more than 375 days prior to the Purchase Date specified in such Purchase Notice.
(c) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) Any Purchase Notice (whether delivered or deemed to have been
delivered) shall be revocable until 10 Business Days after the
determination of the Fair Market Sales Value in accordance with Section
17.3.2 and unless revoked by written notice by Lessee to Lessor shall
thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to purchase the Aircraft under this Section 17.3.
(ii) No Preliminary Notice or Purchase Notice shall be binding on
Lessor or oblige Lessor to sell the Aircraft hereunder if any Payment
Default, Bankruptcy Default or Lease Event of Default shall have occurred
and be continuing on and as of such Purchase Date.
(iii) Lessee shall not be entitled to give any Purchase Notice in
respect of any Purchase Date if it has (x) not delivered a Preliminary
Notice or (y) delivered a Renewal Notice for a Renewal Lease Term that
would commence immediately following such Purchase Date.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be determined not
more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
<PAGE>
17.3.3 TITLE
Upon full and final payment by Lessee of (a) the applicable purchase
price of the Aircraft, (b) all unpaid Rent due and payable through and including
the Purchase Date and (c) all other amounts due and payable by Lessee under this
Agreement, Lessor will transfer to Lessee title to the Aircraft in accordance
with Section 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this Section 17,
Lessee and Lessor shall appoint a mutually satisfactory Appraiser to conduct
such appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser
then each shall promptly appoint a separate Appraiser and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor fails to so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within 7 days after the appointment of the
latter of such two Appraisers, they cannot agree upon such amount, such two
Appraisers shall, within 8 days after such latter appointment, appoint a third
Appraiser and such amount shall be determined by such three Appraisers, who
shall make their separate appraisals within 7 days following the appointment of
the third Appraiser, and any determination so made shall be conclusive and
binding upon Lessor and Lessee. If no such third Appraiser is appointed within
such 8-day period, either Lessor or Lessee may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by such
appointment. The foregoing appraisal procedure shall in any event be completed
no less than 190 days before the end of the Base Lease Term or the current
Renewal Lease Term, as the case may be. If three Appraisers are appointed and
the difference between the determination which is farther from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such farther
determination shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor, PROVIDED that
if Lessee elects not to renew this Lease or purchase the Aircraft following the
conclusion of such appraisal, Lessee shall pay all expenses of such appraisal.
<PAGE>
SECTION 18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee with the written
consent of the Mortgagee if required by the Trust Indenture. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or performance or other
manner not set forth in an agreement, document or instrument in writing and
signed by Lessor and Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.3 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than Mortgagee, the Participants and the Persons
referred to in Section 4.6, with respect to matters expressly for their benefit
in this Lease) with any rights of any nature whatsoever against either of the
parties hereto, and no person not a party hereto (other than Mortgagee, the
Participants and the Persons referred to in Section 4.6, with respect to matters
expressly for their benefit in this Lease) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.
<PAGE>
18.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by such party in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile or
telecommunication transmission (which in either case provides written
confirmation to the sender of its delivery), sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective address or facsimile number set
forth for such party in Schedule 1 to the Participation Agreement, or to such
other address or number as either party hereto may hereafter specify by notice
to the other party hereto. Each such notice, request, demand, authorization,
direction, consent, waiver or other communication shall be effective when
received or, if made, given, furnished or filed (a) by facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
<PAGE>
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 18.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 18.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(D) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by Lessor
in exercising, any of its rights, powers, remedies or privileges under this
Agreement or provided at Law, in equity or otherwise shall impair, prejudice or
constitute a wavier of any such right, power, remedy or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Lessor to any other further action in any circumstances without notice or
demand.
18.9 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and
as of the date hereof constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, between the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Agreement
is hereby acknowledged on this ____ day of _________, ________.
WILMINGTON TRUST COMPANY,
as Mortgagee
By______________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided, a
reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner Trustee,"
"Owner Participant," "Mortgagee," "Note Holder" or any other person
includes, without prejudice to the provisions of any Operative Agreement,
any successor in interest to it and any permitted transferee, permitted
purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without prejudice to
the provisions of any Operative Agreement, that agreement, instrument or
document, or annex, schedule or exhibit, or part, respectively, as amended,
modified or supplemented from time to time in accordance with its terms and
in accordance with the Operative Agreements, and any agreement, instrument
or document entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to the
Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import when used in
any Operative Agreement refer to such Operative Agreement as a whole and
not to any particular provision of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
<PAGE>
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in any
Operative Agreement, or in any annex thereto, is a reference to a section
of, or an exhibit, an annex or a schedule to, such Operative Agreement or
such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement, all
accounting terms therein shall be construed and all accounting determinations
thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only and
shall not in any way affect the construction of, or be taken into consideration
in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or Mortgagee,
as the case may be, actual knowledge of a responsible officer in the Corporate
Trust Department or the Corporate Trust Office, respectively, and (b) as it
applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee and
Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person directly or
indirectly controlling, controlled by or under common control with such person.
For purposes of this definition, "control" means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or by contract
or otherwise and "controlling," "controlled by" and "under common control with"
have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering the
Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books, and
all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (PROVIDED, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from time
to time installed thereon) manufactured by Airframe Manufacturer and identified
by Airframe Manufacturer's model number, United States registration number and
Airframe Manufacturer's serial number set forth in Lease Supplement No. 1 and
(b) any and all Parts incorporated or installed in or attached or appurtenant to
such airframe, and any and all Parts removed from such airframe, unless title to
such Parts shall not be vested in Lessor in accordance with Section 8.1 and
Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de Aeronautica
S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the Participation
Agreement, the Purchase Agreement and the Consent and Agreement.
<PAGE>
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as of any
Payment Date, the amount determined by multiplying the percentage set forth
opposite such Date on the Amortization Schedule by the Original Amount of such
Equipment Note.
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note, the
amortization schedule for such Equipment Note delivered pursuant to Section 2.02
of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to be,
and is, registered with any other Government Entity under and in accordance with
Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. ss.
101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section 14.5 of
the Lease.
"BASE LEASE TERM" means the period beginning on and including the Closing
Date and ending on the Scheduled Expiration Date, or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
"BASIC RENT" means the rent payable for the Aircraft pursuant to Section
3.2.1 of the Lease.
<PAGE>
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required by law to close in New York,
New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of the
Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code or the
regulations promulgated thereunder or any change in the interpretation of the
Code or such regulations in a decision by the United States Supreme Court, the
United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
<PAGE>
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events: (i) sale
of the Aircraft to the Owner Trustee and the filing of the FAA Bill of Sale with
the FAA in connection therewith; (ii) payment of Lessor's Cost by Owner Trustee
to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee to Lessee
pursuant to the Lease; and (iv) completion of the other events contemplated by
the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement No. 1
as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; PROVIDED, that
when used in relation to a Plan, "Code" shall mean the Internal Revenue Code of
1986 and any regulations and rulings issued thereunder, all as amended and in
effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its participation in
the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the Participation
Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement ___,
dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee located at
Mortgagee's address for notices under the Participation Agreement or such other
office at which Mortgagee's corporate trust business shall be administered which
Mortgagee shall have specified by notice in writing to Lessee, Owner Trustee and
each Note Holder.
<PAGE>
"CRAF" means the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C.ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice or
the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to Lessee,
Existing Lessor, each Participant, Owner Trustee and Mortgagee by Existing
Mortgagee pursuant to Section 4.3 of the Participation Agreement, which delayed
Closing Date shall be a Business Day not later than the Commitment Termination
Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to Lessee
by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of the
United States.
"DOT" means the Department of Transportation of the United States or any
Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine Manufacturer
and identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number set forth in Lease Supplement No. 1 and originally installed on
the Airframe on delivery thereof pursuant to the Lease, and any Replacement
Engine, in any case whether or not from time to time installed on such Airframe
or installed on any other airframe or aircraft, and (b) any and all Parts
incorporated or installed in or attached or appurtenant to such engine, and any
<PAGE>
and all Parts removed from such engine, unless title to such Parts shall not be
vested in Lessor in accordance with Section 8.1 and Annex C of the Lease. Upon
substitution of a Replacement Engine under and in accordance with the Lease,
such Replacement Engine shall become subject to the Lease and shall be an
"Engine" for all purposes of the Lease and the other Operative Agreements and
thereupon the Engine for which the substitution is made shall no longer be
subject to the Lease, and such replaced Engine shall cease to be an "Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
"EQUIPMENT NOTES" means and includes any equipment notes issued under the
Trust Indenture in the form specified in Section 2.01 thereof (as such form may
be varied pursuant to the terms of the Trust Indenture) and any Equipment Note
issued under the Trust Indenture in exchange for or replacement of any Equipment
Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations and rulings issued thereunder all as amended and in effect from time
to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit for normal
use by Lessee;
(b) the actual or constructive total loss of such property or any
damage to such property, or requisition of title or use of such property,
which results in an insurance settlement with respect to such property on
the basis of a total loss or constructive or compromised total loss;
(c) any theft, hijacking or disappearance of such property for a
period of 180 consecutive days or more or, if earlier, the end of the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government Entity or
<PAGE>
purported Government Entity (other than a requisition of use by the U.S.
Government) for a period exceeding 180 consecutive days or, if earlier, at
the end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition of
use of such property by the U.S. Government that continues until the last
day of the Term, PROVIDED that no such Event of Loss shall exist if Lessor
shall have elected not to treat such event as an Event of Loss pursuant to
Section 10.6 of the Lease; and
(f) as a result of any law, rule, regulation, order or other action by
the Aviation Authority or by any Government Entity of the government of
registry of the Aircraft or by any Government Entity otherwise having
jurisdiction over the operation or use of the Aircraft, the use of such
property in the normal course of Lessee's business of passenger air
transportation is prohibited for a period of 180 consecutive days, unless
Lessee, prior to the expiration of such 180 day period, shall have
undertaken and shall be diligently carrying forward such steps as may be
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 720
days, provided that no Event of Loss shall be deemed to have occurred if
such prohibition has been applicable to Lessee's (or a Permitted
Sublessee's) entire U.S. fleet of such property and Lessee (or a Permitted
Sublessee), prior to the expiration of such 720-day period, shall have
conformed at least one unit of such property 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 and shall
be diligently carrying forward, in a manner which does not discriminate
against such property in so conforming such property, 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
three years or such use shall be prohibited at the expiration of the Term.
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by Lessee
to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
<PAGE>
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) any
amount payable to the Owner Participant by any transferee as the purchase price
of the Owner Participant's interest in the Trust Estate, (vi) any interest that
pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (v) above, (vii) proceeds of
any right to enforce the payment of any amount described in clauses (i) through
(vi) above (PROVIDED, that the rights referred to in this clause (vii) shall not
be deemed to include the exercise of any remedies provided for in the Lease
other than the right to sue for specific performance of any covenant to make
such payment or to sue for damages in respect of the breach of any such
covenant) and (viii) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized under
the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement and the
Termination Agreement with respect to the Existing Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in Schedule 3
to the Participation Agreement.
<PAGE>
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the date
of the Existing Participation Agreement, between Lessee and Express relating to
the Aircraft.
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the Participation
Agreement.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary of
Lessee.
"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date of
the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner Trustee on
the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the Express
Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
<PAGE>
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars for
the Aircraft that would apply in an arm's-length transaction between an informed
and willing buyer under no compulsion to buy, and an informed and willing seller
under no compulsion to sell, the Aircraft, in a transaction that would close on
or about the relevant time of determination, assuming (except as otherwise
provided in Section 15.4 of the Lease) that (a) the Aircraft has been maintained
in accordance with, and is in the condition required by, the Lease and (b) the
Aircraft would be delivered to such informed and willing buyer in the return
condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing statements
(i) covering the Trust Indenture Estate, by Owner Trustee, as debtor, showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction that,
in the opinion of Mortgagee, is necessary to perfect its Lien on the Trust
Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
such principles may at any time or from time to time be varied by any applicable
financial accounting rules or regulations issued by the SEC and, with respect to
any person, shall mean such principles applied on a basis consistent with prior
periods except as may be disclosed in such person's financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
<PAGE>
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) Owner
Participant Parent, (vi) the Trust Estate and the Trust Indenture Estate, (vii)
the Subordination Agent, (viii) the Liquidity Providers, (ix) the Pass Through
Trustees, (x) each Affiliate of the persons described in clauses (i) through
(v), inclusive, (xi) each Affiliate of the persons described in clauses (vi),
(vii), (viii) and (ix), (xii) the respective directors, officers, employees,
agents and servants of each of the persons described in clauses (i) through (v)
inclusive and in clause (x), (xiii) the respective directors, officers,
employees, agents and servants of each of the persons described in clauses
(vii), (viii), (ix) and (xi), (xiv) the successors and permitted assigns of the
persons described in clauses (i) through (v), inclusive, and in clauses (x) and
(xii), and (xv) the successors and permitted assigns of the persons described in
clauses (vii), (viii), (ix), (xi) and (xiii); PROVIDED THAT the persons
described in clauses (vii), (viii), (ix), (xi) (xiii) and (xv) are Indemnitees
only for purposes of Section 9.1 of the Participation Agreement. If any
Indemnitee is Airframe Manufacturer or Engine Manufacturer or any subcontractor
or supplier of either thereof, such Person shall be an Indemnitee only in its
capacity as Owner Participant, Loan Participant or Note Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease, the
Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
"INDENTURE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each separate
or additional trustee appointed pursuant to the Trust Indenture, (iii) the
Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through Trustee
<PAGE>
and (vi) each of the respective directors, officers, employees, agents and
servants of each of the persons described in clauses (i) through (v) inclusive
above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement among
the Pass Through Trustees, the Liquidity Providers and the Subordination Agent,
dated as of the Issuance Date, PROVIDED that, for purposes of any obligation of
Lessee, no amendment, modification or supplement to, or substitution or
replacement of, such Intercreditor Agreement shall be effective unless consented
to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ___, dated as of
even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that, with
the giving of notice, the lapse of time or both, would constitute a Lease Event
of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of Exhibit
A to the Lease.
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Continental Airlines, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the Lease,
Lease Supplement No. 1, the Express Sublease, the Termination Agreement with
respect to the Existing Sublease and the Tax Indemnity Agreement.
<PAGE>
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or other
user or person in possession of the Aircraft, Airframe or an Engine with or
without color of right, or any Affiliate of any of the foregoing (excluding any
Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any person
using or claiming any rights with respect to the Aircraft, Airframe or an Engine
directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
"LESSOR RENT" means, with respect to any Payment Date, the amount set forth
in Schedule 4 to the Participation Agreement with respect to such Payment Date.
"LESSOR'S COST" means the amount paid by Owner Trustee to Existing Lessor
to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
<PAGE>
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance, lease
or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a Class A
Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider
(as such terms are defined in the Intercreditor Agreement) under the respective
Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been consummated,
the Pass Through Trustees, and after the Closing shall have been consummated,
each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date of
determination, the holders of a majority in aggregate unpaid Original Amount of
all Equipment Notes outstanding as of such date (excluding any Equipment Notes
held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of any such
party or any interests of Owner Trustee or Owner Participant therein by reason
of subrogation pursuant to Section 4.03 of the Trust Indenture (unless all
Equipment Notes then outstanding shall be held by Owner Trustee, Lessee, Owner
Participant or any Affiliate of any thereof)); PROVIDED that for the purposes of
directing any action or casting any vote or giving any consent, waiver or
instruction hereunder any Note Holder of an Equipment Note or Equipment Notes
may allocate, in such Note Holder's sole discretion, any fractional portion of
the principal amount of such Equipment Note or Equipment Notes in favor of or in
opposition to any such action, vote, consent, waiver or instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
<PAGE>
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity but solely as loan trustee under the Trust
Indenture.
<PAGE>
"MORTGAGEE AGREEMENTS" means, collectively, the Participation Agreement and
the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization proceeding
involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the trustee in
such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax yield
utilizing the multiple investment sinking fund method of analysis and aggregate
net after-tax cash flow, computed on the basis of the same methodology and
assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
"NET WORTH" means, for any person, the excess of its total assets over its
total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person, as
defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or more
Equipment Notes.
"OFFICER'S CERTIFICATE" means, in respect of any party to the Participation
Agreement, a certificate signed by the Chairman, the President, any Vice
President (including those with varying ranks such as Executive, Senior,
Assistant or Staff Vice President), the Treasurer or the Secretary of such
party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation Agreement,
the Trust Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the initial
Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity Agreement, the
<PAGE>
Owner Participant Guaranty, the Equipment Notes, the Letter Agreement and the
Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes have
been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the stated
original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation Agreement
as "Owner Participant" or, if a second person becomes an "Owner Participant"
pursuant to Section 10.1.1 of the Participation Agreement, both of such persons;
PROVIDED that if an Owner Participant Transfers 100% of its interest to a
successor Owner Participant, such transferring Owner Participant shall
thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT GUARANTY" means the Guaranty by Corporate Affiliate of
Owner Participant dated the Delivery Date from Owner Participant Parent to the
beneficiaries named therein.
"OWNER PARTICIPANT PARENT" means the person executing the Owner Participant
Guaranty.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
<PAGE>
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ___ dated as of
September 25, 1997 among Lessee, Owner Participant, Owner Trustee, the Pass
Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor, the
Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing gear,
instruments, appurtenances, accessories, furnishings, seats and other equipment
of whatever nature (other than (a) Engines or engines, and (b) any items leased
by Lessee from a third party other than Lessor)), that may from time to time be
installed or incorporated in or attached or appurtenant to the Airframe or any
Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as defined
in the Intercreditor Agreement), provided, that no amendment, modification or
supplement to, or substitution or replacement of, any such Fee Letter shall be
effective for purposes of any obligation of Lessee, unless consented to by
Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates issued by
the Pass Through Trusts (and any other pass through certificates for which such
pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through trusts
created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware banking
corporation, in its capacity as trustee under each Pass Through Trust Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement, the
Pass Through Trust Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means the Closing Date and each March 24, June 24, September
24 and December 24 during the Term, commencing with the first such date to occur
after the Closing Date.
<PAGE>
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of Basic
Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive quarterly periods during the
Term ending on a Payment Date, the first such period commencing on and including
the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier, (ii)
any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its principal
executive offices in any Permitted Country and which is authorized to conduct
commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance company,
financial institution or corporation (other than, without Lessee's consent, a
commercial air carrier, a commercial aircraft operator, a freight forwarder or
Affiliate of any of the foregoing), in each case with a combined capital and
surplus or net worth of at least $25,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7 of the
Lease.
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
<PAGE>
"PLAN" means any employee benefit plan within the meaning of Section 3(3)
of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the Series
A Equipment Notes, April 30, 2004 in the case of the Series B Equipment Notes
and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee, the
percentage of Lessor's Cost allocated to such Pass Through Trustee in Schedule 2
to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement Assignment
___, dated as of even date with the Participation Agreement, between Existing
Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or any
Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
"RENEWAL RENT" for the Aircraft means the rent payable therefor in respect
of a Renewal Lease Term determined pursuant to Section 17.2.2 of the Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine pursuant to
the Lease.
<PAGE>
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement, dated
as of the date the Aircraft is returned to Lessor pursuant to Section 5 of the
Lease, by Lessor and Lessee substantially in the form of Exhibit B to the Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the first
Renewal Lease Term, the second anniversary of the Scheduled Expiration Date, and
in the case of the second Renewal Lease Term, the fourth anniversary of the
Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of such Securities and
Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy Code and the trustee
or debtor-in-possession in such proceedings (i) having agreed to perform its
obligations under the Lease with the approval of the applicable court and
thereafter having continued to perform such obligations in accordance with
Section 1110 or (ii) having assumed the Lease with the approval of the relevant
court and thereafter having continued to perform its obligations under the
Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such other
period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code,
plus an additional period, if any, resulting from the trustee or
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust Indenture.
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the Securities
Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series A" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series B" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued under
the Trust Indenture and designated as "Series C" thereunder, in the Original
Amount and maturities and bearing interest as specified in Schedule I to the
Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a) during the
Base Lease Term, the amount determined by multiplying (i) the percentage set
forth in Schedule 3 to the Lease (as adjusted from time to time in accordance
with Section 3.2.3 of the Lease) opposite the Stipulated Loss Value Date by (ii)
Lessor's Cost and (b) during any Renewal Term, the amount determined pursuant to
Section 17.2.3 of the Lease. Notwithstanding anything to the contrary in any
Operative Agreement, Stipulated Loss Value shall always be sufficient to pay in
full, as of the date of payment thereof (assuming timely payment of the
Equipment Notes prior to such date), the aggregate unpaid principal amount of
all Equipment Notes outstanding as of such date, together with accrued and
unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such month
specified in Schedule 3 to the Lease or, if such day is not a Business Day, the
immediately succeeding Business Day.
<PAGE>
"SUBORDINATION AGENT" means Wilmington Trust Company, as subordination
agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement, the
Liquidity Facilities and the Intercreditor Agreement.
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), PROVIDED that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and PROVIDED, FURTHER, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax Indemnity
Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC and
Mortgagee, (c) each separate or additional trustee appointed pursuant to the
<PAGE>
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as of
even date with the Participation Agreement, between Lessee and Owner
Participant.
"TAXES" means all license, recording, documentary, registration and other
similar fees and all taxes, levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever imposed by any Taxing Authority, together
with any penalties, additions to tax, fines or interest thereon or additions
thereto.
"TAXING AUTHORITY" means any federal, state or local government or other
taxing authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority or
any territory or possession of the United States or any taxing authority
thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
"TERMINATION AGREEMENTS" means, collectively, the termination agreement
with respect to the Existing Lease, the termination agreement with respect to
the Existing Sublease and the release from the Lien of the Existing Mortgage, in
each case delivered pursuant to Section 5.1.2(xiii) of the Participation
Agreement.
<PAGE>
"TERMINATION DATE" means any Payment Date occurring after the end of the
Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the Participation
Agreement and the other Operative Agreements to occur on the Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements (including,
without limitation, the reasonable fees and expenses of counsel for such
parties), (b) all costs and expenses for the recording or filing of any
documents, certificates or instruments in accordance with any Operative
Agreement, including, without limitation, the FAA Filed Documents and the
Financing Statements, (c) one ninth of (i) the underwriting fees and expenses
attributable to the offering and sale of the Pass Through Certificates and (ii)
all costs and expenses incurred by Existing Mortgagee, the Pass Through
Trustees, the Subordination Agent, Owner Trustee and Mortgagee in connection
with the preparation, execution and delivery of the Pass Through Agreements
(including, without limitation, the reasonable fees and expenses of counsel for
such parties), (d) the equity placement fee and expenses of Equity Advisor
attributable to the Aircraft, (e) the reasonable fees and disbursements of
special counsel in Oklahoma City, Oklahoma, in connection with the Closing, (f)
all initial and ongoing fees, disbursements and expenses of Owner Trustee and
Mortgagee, and (g) the fees and expenses of the Appraiser contemplated by
Section 5.1.2(xv) of the Participation Agreement.
<PAGE>
"TRANSFER" means the transfer, sale, assignment or other conveyance of all
or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner Trustee
or any Loan Participant or Note Holder purports or intends to Transfer any or
all of its right, title or interest in the Trust Estate or in its Equipment Note
and the Trust Indenture Estate, respectively, as described in Section 10.1.1(a),
10.1.2 or 10.1.3 (but excluding participants in any participation referred to in
Section 10.1.3), respectively, of the Participation Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ___, dated as of even date with
the Participation Agreement, between Owner Participant and Owner Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner Trustee
in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ___, dated as of
even date with the Participation Agreement, between Owner Trustee and Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the Trust
Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage ___
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
<PAGE>
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" or "U.S." means the United States of America; PROVIDED,
that for geographic purposes, "United States" means, in aggregate, the 50 states
and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is 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 10 or more individuals or 6000
pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any specified
Debt, at the time of the determination thereof the number of years obtained by
dividing the then Remaining Dollar-years of such Debt by the then outstanding
principal amount of such Debt. The term "Remaining Dollar-years" shall mean the
amount obtained by (1) multiplying the amount of each then-remaining principal
payment on such Debt by the number of years (calculated at the nearest
one-twelfth) that will elapse between the date of determination of the Weighted
Average Life to Maturity of such Debt and the date of that required payment and
(2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted Sublessee
agrees to furnish the Aircraft, Airframe or any Engine to a third party pursuant
to which the Aircraft, Airframe or Engine shall at all times be in the
operational control of Lessee or a Permitted Sublessee, provided that Lessee's
obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
<PAGE>
"WTC" means Wilmington Trust Company, a Delaware banking corporation, not
in its capacity as Mortgagee under the Trust Indenture, but in its individual
capacity.
<PAGE>
[ANNEXES B, C AND D HAVE BEEN OMITTED FROM THIS DOCUMENT
AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
|------------------------------|
| EXHIBIT A - LEASE SUPPLEMENT|
| LEASE AGREEMENT ____ |
|------------------------------|
LEASE SUPPLEMENT NO.__
LEASE SUPPLEMENT No. __, dated ________, 199_, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ___,
dated as of September 25, 1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ___, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 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 of this Lease Supplement 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 to which this Lease Supplement is attached and of which
this Lease Supplement is a part, is being filed for recordation on the date
hereof with the Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee has been duly authorized by Lessor to accept, and does
hereby irrevocably accept on behalf of Lessor delivery of the Aircraft from
Airframe Manufacturer under, and for all purposes of, the Aircraft Bill of Sale,
the Participation Agreement and the Purchase Agreement Assignment.
2. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease the following
described Embraer EMB-145 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: U.S. Registration No. ___________; manufacturer's serial
no. ___________; and
(ii) Engines: two (2) Allison AE3007A engines bearing, respectively,
manufacturer's serial nos. ___________ and ____________(each of which
engines has 750 or more rated takeoff horsepower or the equivalent of such
horsepower).
<PAGE>
3. The Closing Date for the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Operative Agreements.
5. All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference in the Lease to the same extent as if fully set forth
therein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
7. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Mortgagee on the
signature page thereof.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ____ day of _________, __________.
WILMINGTON TRUST COMPANY,
as Mortgagee
By______________________________________
Name:
Title:
<PAGE>
|------------------------------|
| EXHIBIT B - LEASE SUPPLEMENT|
| LEASE AGREEMENT ____ |
|------------------------------|
RETURN ACCEPTANCE SUPPLEMENT
RETURN ACCEPTANCE SUPPLEMENT dated ________, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ___,
dated as of September 25, 1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ___, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease relates to the Airframe and
Engines described below.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. This Return Acceptance Supplement is executed by Lessor and Lessee
to confirm that on the date hereof the following described Airframe and Engines
were returned by Lessor to Lessee:
(i) Airframe: U.S. Registration No. ______________; manufacturer's
serial no. __________________; and
(ii) Engines: two (2) Allison AE3007A engines bearing, respectively,
manufacturer's serial nos. ____________________________ and
_________________________.
2. This Return Acceptance Supplement is intended to be delivered in
_____________________.
3. Lessor and Lessee agree that the return of the Aircraft is in
compliance with Section 5 and Annex B of the Lease, except as set forth below:
4. Lessor and Lessee agree that the Lease is terminated, except for
the provisions thereof that expressly survive termination.
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Return
Acceptance Supplement to be duly executed as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as
expressly provided herein, but solely
as Owner Trustee under the Trust
Agreement
By______________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Lessee
By______________________________________
Name:
Title:
<PAGE>
|------------------------------|
|SCHEDULE 4 - TERMINATION VALUE|
| LEASE AGREEMENT ____ |
|------------------------------|
[SCHEDULES 1-4 HAVE BEEN OMITTED FROM THIS DOCUMENT AS CONTAINING
CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
|--------------------------------|
|SCHEDULE 5 - PERMITTED COUNTRIES|
| LEASE AGREEMENT ____ |
|--------------------------------|
<TABLE>
<CAPTION>
PERMITTED COUNTRIES
<S> <C>
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Ecuador Portugal
Egypt Republic of China (Taiwan)
Finland Singapore
France South Africa
Germany South Korea
Greece Spain
Hungary Sweden
Iceland Switzerland
India Thailand
Indonesia Tobago
Ireland Trinidad
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
</TABLE>
<PAGE>
|------------------------------|
| EXHIBIT D - INSURANCE |
| LEASE AGREEMENT ____ |
|------------------------------|
PLACARDS
Leased from
First Security Bank, National Association,
not in its individual capacity but solely as
Owner Trustee, Owner and Lessor
and
Mortgaged to
Wilmington Trust Company,
not in its individual capacity but solely as Mortgagee
--------------------------------------------------------------------
| CONFIDENTIAL: ANNEXES B, C AND D AND SCHEDULES 1, 2, 3 AND 4 |
| OF THIS LEASE AGREEMENT ARE SUBJECT TO RESTRICTIONS ON |
| DISSEMINATION SET FORTH IN SECTION 8 OF THE PARTICIPATION |
| AGREEMENT (AS DEFINED HEREIN) |
--------------------------------------------------------------------
================================================================================
LEASE AGREEMENT ___
Dated as of September 25, 1997
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
Lessor
and
CONTINENTAL AIRLINES, INC.,
Lessee
- --------------------------------------------------------------------------------
One Embraer Model EMB-145 Aircraft
Bearing United States Registration No. N_____ and
Bearing Manufacturer's Serial No. 145.___ with two
Allison AE3007A Engines
Bearing Engine Manufacturer's Serial Nos. _______ and _______
================================================================================
The right, title and interest of Lessor in and to, among other things, this
Lease Agreement has been assigned to and is subject to a security interest in
favor of Wilmington Trust Company, a Delaware banking corporation, as Mortgagee,
under the Trust Indenture and Mortgage ___, dated as of September 25, 1997, for
the benefit of the holders of the Equipment Notes referred to in such Trust
Indenture, all to the extent provided in such Trust Indenture. This Lease
Agreement has been executed in multiple counterparts; to the extent, if any,
that this Lease Agreement constitutes chattel paper (as defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in Lessor's right, title and interest in and to this Lease Agreement
may be perfected through the delivery or possession of any counterpart of this
Lease Agreement other than the counterpart of this Lease Agreement that contains
the original receipt executed by Wilmington Trust Company, as Mortgagee.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION............................. 1
SECTION 2. DELIVERY AND ACCEPTANCE.................................. 1
2.1 Delivery and Lease of Aircraft........................... 1
2.2 Acceptance by Lessee..................................... 2
SECTION 3. TERM AND RENT............................................ 2
3.1 Term..................................................... 2
3.2 Rent..................................................... 2
3.3 Payments................................................. 4
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR;
SECTION 1110 MATTERS..................................... 5
4.1 Disclaimer............................................... 5
4.2 Certain Agreements of Lessor............................. 6
4.3 Quiet Enjoyment.......................................... 6
4.4 Investment of Funds Held as Security..................... 6
4.5 Title Transfers by Lessor................................ 7
4.6 Lessor's Interest in Certain Engines..................... 8
4.7 Section 1110 of Bankruptcy Code.......................... 8
SECTION 5. RETURN OF AIRCRAFT....................................... 8
5.1 Compliance with Annex B.................................. 8
5.2 Storage and Related Matters.............................. 9
5.3 Return of Other Engines.................................. 9
SECTION 6. LIENS.................................................... 9
SECTION 7. REGISTRATION, OPERATION, POSSESSION,
SUBLEASING AND RECORDS................................... 10
7.1 Registration and Operation............................... 10
7.2 Possession............................................... 12
7.3 Certain Limitations on Subleasing or
Other Relinquishment of Possession....................... 16
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF
PARTS; ALTERATIONS, MODIFICATIONS AND
ADDITIONS; OTHER LESSEE COVENANTS........................ 17
8.1 Maintenance; Replacement and Pooling of
Parts; Alterations, Modifications and
Additions................................................ 17
8.2 Information, Certificates, Notices and
Reports.................................................. 17
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE.................. 19
9.1 Right of Termination..................................... 19
9.2 Election by Lessor to Sell............................... 20
<PAGE>
9.3 Retention of Aircraft by Lessor.......................... 22
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC...................... 23
10.1 Event of Loss With Respect to Aircraft................... 23
10.2 Event of Loss With Respect to an Engine.................. 25
10.3 Conditions to any Replacement of Engine.................. 25
10.4 Conveyance to Lessee..................................... 27
10.5 Application of Payments.................................. 27
10.6 Requisition of Aircraft for Use.......................... 28
10.7 Requisition of an Engine for Use......................... 28
10.8 Application of Payments.................................. 29
10.9 Application of Payments During Existence
of a Lease Event of Default.............................. 29
SECTION 11. INSURANCE................................................ 30
11.1 Lessee's Obligation to Insure............................ 30
11.2 Insurance for Own Account................................ 30
11.3 Indemnification by Government in Lieu of
Insurance................................................ 30
11.4 Application of Insurance Proceeds........................ 30
11.5 Application of Payments During Existence
of Default............................................... 31
SECTION 12. INSPECTION............................................... 31
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER
TRUSTEE.................................................. 32
13.1 In General............................................... 32
13.2 Merger of Lessee......................................... 33
13.3 Assignment Security for Lessor's Obligations............. 34
13.4 Successor Owner Trustee.................................. 34
SECTION 14. LEASE EVENTS OF DEFAULT.................................. 34
14.1 Payments................................................. 35
14.2 Insurance................................................ 35
14.3 Other Covenants.......................................... 35
14.4 Representations and Warranties........................... 36
14.5 Bankruptcy and Insolvency................................ 36
SECTION 15. REMEDIES AND WAIVERS..................................... 37
15.1 Remedies................................................. 37
15.2 Limitations Under CRAF................................... 40
15.3 Right to Perform for Lessee.............................. 40
15.4 Determination of Fair Market Sales Value................. 41
15.5 Remedies Cumulative...................................... 41
<PAGE>
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF,
COUNTERCLAIM, ETC....................................... 41
SECTION 17. RENEWAL AND PURCHASE OPTIONS............................. 42
17.1 Notices Generally........................................ 42
17.2 Renewal Options.......................................... 43
17.3 Purchase Option.......................................... 44
17.4 Appraisals............................................... 45
SECTION 18. MISCELLANEOUS............................................ 46
18.1 Amendments............................................... 46
18.2 Severability............................................. 47
18.3 Third-Party Beneficiary.................................. 47
18.4 Reproduction of Documents................................ 47
18.5 Counterparts............................................. 48
18.6 Notices.................................................. 48
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE......... 48
18.8 No Waiver................................................ 49
18.9 Entire Agreement......................................... 50
</TABLE>
<TABLE>
<CAPTION>
ANNEXES, EXHIBITS AND SCHEDULES
- -------------------------------
<S> <C>
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Form of Lease Supplement
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent
SCHEDULE 3 Stipulated Loss Value Schedule
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
</TABLE>
<PAGE>
LEASE AGREEMENT ___
LEASE AGREEMENT ___, dated as of September 25, 1997 (this "Agreement"
or "Lease"), between (a) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) CONTINENTAL
AIRLINES, INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to the Participation Agreement,
pursuant to which, among other things, Lessor and Lessee have agreed to enter
into this Agreement.
B. Pursuant to the Trust Agreement, Owner Participant has authorized
Lessor to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements contained herein and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS AND CONSTRUCTION
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.
SECTION 2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby agrees (subject to the satisfaction or waiver of the
conditions set forth in Section 5 of the Participation Agreement) to lease to
Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing immediately upon
acquisition of the Aircraft by Lessor pursuant to the Participation Agreement.
<PAGE>
2.2 ACCEPTANCE BY LESSEE
By executing and delivering Lease Supplement No. 1, Lessee confirms to
Lessor that Lessee has duly and irrevocably accepted delivery of the Aircraft
for all purposes of this Agreement.
SECTION 3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless this
Agreement or the leasing of the Aircraft is earlier terminated in accordance
with any provision of this Agreement. Lessee shall have the option to renew the
leasing of the Aircraft hereunder pursuant to, and subject to the terms and
conditions of, Section 17, for the Renewal Lease Term.
3.2 RENT
3.2.1 BASIC RENT
(a) During the Base Lease Term, Lessee shall pay to Lessor, on each
Payment Date, Basic Rent in the amount specified in Schedule 2 for such Payment
Date, which shall be allocated to the Payment Period commencing on such Payment
Date.
(b) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Date), the
aggregate principal amount of scheduled installments due on the Equipment Notes
outstanding on such Payment Date, together with the accrued and unpaid interest
thereon, due on such Payment Date in respect of the Equipment Notes; provided,
however, that no installment of Basic Rent shall be increased to the extent such
increase would be based upon (i) any attachment or diversion of Basic Rent on
account of Lessor Liens attributable to Lessor or Owner Participant, (ii) any
modification of the payment terms of the Equipment Notes, or (iii) the
acceleration of any Equipment Note or Equipment Notes due solely to the
occurrence of an Indenture Event of Default that does not constitute a Lease
Event of Default.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever shall be entitled thereto,
any and all Supplemental Rent when and as the same shall become due and owing.
Lessee will also pay to Lessor, or to whomever shall be entitled thereto as
<PAGE>
Supplemental Rent, to the extent permitted by applicable law, interest at the
Payment Due Rate on any part of any amount of Rent (including, without
limitation, Supplemental Rent) not paid by 12:30 p.m., New York time, on the
date when due (so long as, in the case of any person not a party to the
Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to, but excluding, the date of payment in
full.
3.2.3 ADJUSTMENTS TO STIPULATED LOSS VALUES AND TERMINATION VALUES
(a) In the event that Lessee is required to indemnify the Owner
Participant under the Tax Indemnity Agreement, the Stipulated Loss Value
percentages set forth in Schedule 3 and the Termination Value percentages set
forth in Schedule 4 shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the extent such
assumptions shall be varied to take into account the Loss or Foreign Tax Credit
Loss (as each such term is defined in the Tax Indemnity Agreement) that is the
subject of such indemnification and any prior or contemporaneous Loss or Foreign
Tax Credit Loss) used to calculate the Stipulated Loss Value percentages and the
Termination Value percentages on the Closing Date, in order to maintain the
Owner Participant's Net Economic Return.
(b) All adjustments pursuant to Section 3.2.3(a) shall be made as
promptly as practicable after either Owner Participant or Lessee gives notice to
the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Stipulated Loss
Value and Termination Value shall be prepared by Owner Participant, subject to
verification at the request of Lessee in accordance with this Section 3.2.3(b),
on the basis of the same methodology and assumptions used by Owner Participant
in determining the percentages of Stipulated Loss Value and Termination Value as
of the Closing Date, except as such assumptions have been modified to reflect
the events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments required pursuant to Section 3.2.3(a) shall be set forth in a Lease
Supplement or in an amendment to this Lease, and, promptly after execution
thereof by Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee.
<PAGE>
(c) If Lessee believes that any calculations by Owner Participant
pursuant to Section 3.2.3(b) are in error, and if, after consultation, Lessee
and Owner Participant are unable to agree on an adjustment, then a nationally
recognized firm of accountants selected by Lessee and reasonably satisfactory to
Owner Participant shall verify such calculations. Owner Participant will make
available to such firm, but not, in any circumstances, to Lessee or any
representative of Lessee, the methodology and assumptions referred to in Section
3.2.3(b) and any modifications thereto made to reflect the events giving rise to
adjustments hereunder (subject to the execution by such firm of a
confidentiality agreement, reasonably acceptable to Owner Participant,
prohibiting disclosure of such methodology and assumptions to any third party).
The determination by such firm of accountants shall be final. Lessee will pay
the reasonable costs and expenses of such further verification by such
accountants, provided that if it results in a decrease in the present value
(discounted at the Debt Rate) of any Stipulated Loss Value or Termination Value
by ten or more basis points from such Stipulated Loss Value or Termination Value
as recalculated by the Owner Participant, then the Owner Participant will pay
such costs and expenses.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 12:30 p.m., New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior to the
date such payment of Rent is due or, in the case of any payment of Supplemental
Rent expressly payable to a person other than Lessor, to the person that shall
be entitled thereto to such account in the United States as such person may
specify from time to time to Lessee at least 10 Business Days prior to the date
such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any
payment of Rent shall be due on a day that is not a Business Day, such payment
shall be made on the next day that is a Business Day, and, if such payment is
made on such next Business Day, no interest shall accrue on the amount of such
payment during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Trust Indenture has been discharged, and notwithstanding
Section 3.3(a), Lessor hereby irrevocably directs, and Lessee agrees, that all
payments of Rent and all other amounts payable by Lessee hereunder, other than
<PAGE>
Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor by
wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.
(d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the person specified in the Participation
Agreement or, if not so specified, to such account in the United States as may
be specified by such person by written notice to Lessor and Lessee from time to
time at least 10 Business Days prior to the date such payment is required to be
made.
(e) All computations of interest under this Agreement shall be made on
the basis of a year of 360 days comprised of twelve 30-day months.
SECTION 4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 DISCLAIMER
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE
ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR, MORTGAGEE,
OWNER PARTICIPANT PARENT AND ANY PARTICIPANT (i) LESSEE HAS SELECTED THE
AIRCRAFT AND MANUFACTURER THEREOF AND (ii) NONE OF LESSOR, MORTGAGEE, OWNER
PARTICIPANT PARENT AND 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:
(v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR ANY
PARTICULAR PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(w) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE OR ANY PART THEREOF;
(x) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY
ENGINE OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(y) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT OR THE LIKE; OR
(z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR
<PAGE>
ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH
RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless a Lease 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, or made available, by Airframe
Manufacturer or any of its subcontractors or suppliers, as the case may be,
pursuant to and in accordance with the terms of the Purchase Agreement
Assignment.
4.3 QUIET ENJOYMENT
So long as no Lease Event of Default shall have occurred and be
continuing, Lessor shall not interfere with Lessee's rights hereunder to
continued possession, use and operation of, and quiet enjoyment of, the Aircraft
during the Term. The foregoing, however, shall not be construed or deemed to
modify or condition in any respect the obligations of the Lessee pursuant to
Section 16, which obligations are absolute and unconditional.
4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any moneys required to be paid to or retained by Lessor that are
required to be paid to Lessee or applied as provided herein shall, until paid to
Lessee as provided herein or applied as provided herein, be invested by Lessor
from time to time as directed in writing by Lessee (or, if Lessee fails to so
direct, by or as directed by Lessor in its sole discretion) and at the expense
and risk of Lessee in Cash Equivalents so long as such Cash Equivalents
specified by Lessee or Lessor, as the case may be, can be acquired by Lessor
using its best efforts; provided, that so long as the Lien of the Trust
Indenture shall not have been discharged, such moneys shall be invested and held
by Mortgagee, as assignee of Lessor, in accordance with this Lease and upon
discharge of such Lien, Mortgagee shall pay any such money held by it to Lessor
to be held and invested in accordance with this Section.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the result of
investments pursuant to Section 4.4.1 (net of any fees, commissions and other
reasonable expenses, if any, incurred in connection with such investment) shall
<PAGE>
be held and applied in the same manner as the principal amount is to be held and
applied hereunder. Lessee will promptly pay to Lessor, on demand, the amount of
any loss realized as the result of any such investment (together with any fees,
commissions and other reasonable expenses, if any, incurred in connection with
such investment), such amount so paid to be held and applied by Lessor as
contemplated in Section 4.4.1 above.
4.4.3 LIMITATION OF LIABILITY
All investments under this Section 4.4 shall be at the expense and
risk of Lessee, and Lessor and Mortgagee shall not be liable for any loss
resulting from any investment made under this Section 4.4 other than by reason
of its willful misconduct or gross negligence. Any such investment may be sold
(without regard to its maturity) by Lessor without instructions whenever such
sale is necessary to make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens
but otherwise on an "as-is", "where is" basis, (2) so long as the Lien of the
Trust Indenture has not been discharged, comply with the Trust Indenture
relating to the release of the Aircraft, Airframe or such Engine, (3) assign to
Lessee or such other person, as the case may be, if and to the extent permitted
under the Purchase Agreement, all warranties of Airframe Manufacturer with
respect to the Aircraft, Airframe or such Engine, and (4) assign to Lessee or
such other person, as the case may be, if and to the extent permitted, all
claims, if any, for damage to the Aircraft, Airframe or such Engine, in each
case free of Lessor Liens, and without recourse or warranty of any kind
whatsoever (except as to the transfer described in clause (1) above and as to
the absence of such Lessor Liens, as aforesaid), and (b) Lessor shall promptly
deliver to Lessee or such other person, as the case may be, a bill of sale and
agreements of assignment, evidencing such transfer and assignment, and such
other instruments of transfer, all in form and substance reasonably satisfactory
to Lessee (or such other person, as the case may be), as Lessee (or such other
person, as the case may be) may reasonably request.
<PAGE>
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor, conditional
seller, indenture trustee or secured party of any engine leased to, or purchased
by, Lessee or any Permitted Sublessee subject to a lease, conditional sale,
trust indenture or other security agreement that Lessor, its successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
indenture trustee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such indenture trustee or
secured party.
4.7 SECTION 1110 OF BANKRUPTCY CODE
It is the intention of each of Lessee and Lessor that Lessor (and
Mortgagee as assignee of Lessor under the Trust Indenture) shall be entitled to
the benefits of Section 1110 with respect to the right to take possession of the
Aircraft, Airframe, Engines and Parts as provided in this Lease.
SECTION 5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B hereto,
which provisions are hereby incorporated by this reference as if set forth in
full herein.
5.2 STORAGE AND RELATED MATTERS
If Lessor gives written notice to Lessee not less than 60 days nor
more than 120 days prior to the end of the Term requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor, or cause Lessor
to be provided, with outdoor parking facilities for the Aircraft for a period up
to 30 days, commencing on the date of such return, and upon request of Lessor to
Lessee made at least 10 days prior to the end of such initial 30 day period, for
an additional 120 day period commencing upon expiration of such initial period,
at such storage facility in the 48 contiguous states of the United States on
Lessee's route system for Similar Aircraft as Lessor may select as the site for
such return of the Aircraft. Such storage shall be at Lessor's risk, and Lessor
shall pay all applicable storage fees, except that Lessee shall pay the parking
fees for the initial 30 day storage period; PROVIDED that Lessee's obligation to
<PAGE>
provide parking shall be subject to Lessor entering into an agreement prior to
the commencement of the storage period with the storage facility providing,
among other things, that Lessor shall bear all maintenance charges and other
costs (other than parking fees for the initial 30 day period) incurred.
5.3 RETURN OF OTHER ENGINES
In the event that any Engine owned by Lessor shall not be installed on
the Airframe at the time of return hereunder, Lessee shall be required to return
the Airframe hereunder with a Replacement Engine meeting the requirements of,
and in accordance with, Section 10 hereof and Annex B hereto. Thereupon, Lessor
will transfer to Lessee the Engine constituting part of such Aircraft but not
installed on such Airframe at the time of the return of the Airframe.
SECTION 6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine or any Part, title to any of the foregoing or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens with respect to any Participant, Lessor or
Mortgagee; (c) the rights of others under agreements or arrangements to the
extent permitted by the terms of Sections 7.2 and 7.3; (d) Liens for Taxes of
Lessee (and its U.S. federal tax law consolidated group), or Liens for Taxes of
any Tax Indemnitee (and its U.S. federal tax law consolidated group) for which
Lessee is obligated to indemnify such Tax Indemnitee under any of the Lessee
Operative Agreements, in any such case either not yet due or being contested in
good faith by appropriate proceedings so long as such Liens and such proceedings
do not involve any material danger of the sale, forfeiture or loss of the
Aircraft, the Airframe, any Engine or any Part thereof; (e) materialmen's,
mechanics', workers', repairers', employees' or other like Liens arising in the
ordinary course of business for amounts the payment of which is either not yet
delinquent for more than 35 days or is being contested in good faith by
appropriate proceedings, so long as such Liens and such proceedings do not
involve any material danger of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or any Part thereof; and (f) Liens arising out of any
judgment or award against Lessee (or against any Permitted Sublessee), so long
as such judgment shall, within 30 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
<PAGE>
been discharged, vacated or reversed within 30 days after the expiration of such
stay, and so long as during any such 30-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 Aircraft, the Airframe or any Engine. Lessee shall promptly (and in
any case, by the end of the Term), at its own expense, take (or cause to be
taken) such action as may be necessary to duly discharge (by bonding or
otherwise) any Lien not excepted above if the same shall at any time arise in
respect of the Aircraft, the Airframe, any Engine or any Part during the Term.
SECTION 7. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to the compliance by Lessor and Owner Participant with their
respective obligations under Section 13 of the Participation Agreement, Lessee
shall cause the Aircraft to be, and at all times during the Term to remain, duly
registered with the FAA under the Act or with such other country of registry as
shall be permitted under Section 7.1.2 below, in the name of Lessor as owner and
lessor (except to the extent that such registration under the Act cannot be
effected with the FAA because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Act). Lessor shall execute and all such documents as Lessee (or any
Permitted Sublessee) may reasonably request for the purpose of effecting and
continuing such registration. Unless Mortgagee has given Lessee notice that the
Trust Indenture has been discharged, Lessee shall also cause the Trust Indenture
to be duly recorded and at all times maintained of record as a first-priority
perfected mortgage (subject to Permitted Liens) on the Aircraft, the Airframe
and each of the Engines (except to the extent that such perfection or priority
cannot be maintained as a result of the failure by Lessor or Mortgagee to
execute and deliver any necessary documents).
7.1.2 REREGISTRATION
So long as no Lease Event of Default shall have occurred and be
continuing, Lessee may, by written notice to Lessor, request to change the
country of registration of the Aircraft. Any such change in registration shall
be effected only in compliance with, and subject to all of the conditions set
forth in, Section 7.6.11 of the Participation Agreement.
<PAGE>
7.1.3 MARKINGS
If permitted by Applicable Law, on or reasonably promptly after the
Closing, Lessee will cause to be affixed to, and maintained in, the cockpit of
the Airframe and on each Engine, in each case, in a clearly visible location (it
being understood that the location of such placards, as identified to the Owner
Participant prior to the Closing, shall be deemed to be in compliance with this
requirement), a placard of a reasonable size and shape bearing the legend, in
English, set forth in Schedule 6. Such placards may be removed temporarily, if
necessary, in the course of maintenance of the Airframe or Engines. If any such
placard is damaged or becomes illegible, Lessee shall promptly replace it with a
placard complying with the requirements of this Section 7.1.3.
7.1.4 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other person to, operate,
use, maintain, service, repair or overhaul the Aircraft (a) in violation of any
Law binding on or applicable to the Aircraft, the Airframe or any Engine, or (b)
in violation of any airworthiness certificate, license or registration of any
Government Entity relating to Lessee or the Aircraft, the Airframe or any
Engine, except (1) immaterial or non-recurring violations with respect to which
corrective measures are taken promptly by Lessee or a Permitted Sublessee, as
the case may be, upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license or registration in good
faith in any reasonable manner that does not involve a material danger of the
sale, forfeiture or loss of the Aircraft, the Airframe, or any Engine, any risk
of criminal liability or a greater than de minimis risk of material civil
penalties being imposed against Lessor, Mortgagee or any Participant or impair
the Lien of the Trust Indenture.
7.1.5 OPERATION
Lessee agrees not to operate, use or locate the Aircraft, the Airframe
or any Engine, or allow the Aircraft, the Airframe or any Engine to be operated,
used or located (a) in any area excluded from coverage by any insurance required
by the terms of Section 11, except in the case of a requisition by the U.S.
Government where Lessee obtains an indemnity in lieu of such insurance from the
U.S. Government, or insurance from the U.S. Government, covering such area, in
accordance with Section 11.3 or (b) in any recognized area of hostilities unless
fully covered in accordance with Annex D by war-risk insurance as required by
the terms of Section 11 (including, without limitation, Section 11.3), unless in
<PAGE>
any case referred to in this Section 7.1.5 the Aircraft is only temporarily
operated, used or located in such area as a result of an emergency, equipment
malfunction, navigational error, hijacking, weather condition or other similar
unforeseen circumstances, so long as Lessee diligently and in good faith
proceeds to remove the Aircraft from such area.
7.2 POSSESSION
Lessee will not, without the prior written consent of Lessor and Owner
Participant (which consent shall not be unreasonably withheld), sublease or
otherwise in any manner deliver, transfer or relinquish possession of the
Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine
to be installed, on any airframe other than the Airframe; PROVIDED, HOWEVER,
subject to the provisions of Section 7.3, Lessee may, without such prior written
consent:
7.2.1 INTERCHANGE AND POOLING
Subject or permit any Permitted Sublessee to subject any Engine to
normal interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial airline industry and entered into by Lessee or
such Permitted Sublessee, as the case may be, in the ordinary course of
business; PROVIDED, HOWEVER, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with, Section
10.
7.2.2 TESTING AND SERVICE
Deliver or permit any Permitted Sublessee to deliver possession of the
Aircraft, Airframe, any Engine or any Part (i) to the manufacturer thereof or to
any third-party maintenance provider, for testing, service, repair, maintenance
or overhaul work on the Aircraft, Airframe, any Engine or any Part, or, to the
extent required or permitted by the terms of Annex C, for alterations or
modifications in or additions to the Aircraft, Airframe or any Engine or (ii) to
any Person for the purpose of transport to a Person referred to in the preceding
clause (i).
7.2.3 TRANSFER TO U.S. GOVERNMENT
Transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, Airframe or any Engine to the U.S. Government, in which event
Lessee shall promptly notify Lessor and Mortgagee in writing of any such
transfer of possession and, in the case of any transfer pursuant to CRAF, in
<PAGE>
such notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under CRAF.
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT
Install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, as the case may be, free
and clear of all Liens, except (a) Permitted Liens and those that do not apply
to the Engines and (b) the rights of third parties under normal interchange or
pooling agreements and arrangements of the type that would be permitted under
Section 7.2.1.
7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
Install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased by Lessee or
such Permitted Sublessee subject to a mortgage, security agreement, conditional
sale or other secured financing arrangement, but only if (a) such airframe is
free and clear of all Liens, except (i) the rights of the parties to such lease,
or any such secured financing arrangement, covering such airframe and (ii) Liens
of the type permitted by clauses (a) and (b) of Section 7.2.4 and (b) Lessee or
Permitted Sublessee, as the case may be, shall have received from the lessor,
mortgagee, secured party or conditional seller, in respect of such airframe, a
written agreement (which may be a copy of the lease, mortgage, security
agreement, conditional sale or other agreement covering such airframe), whereby
such Person agrees that it will not acquire or claim any right, title or
interest in, or Lien on, such Engine by reason of such Engine being installed on
such airframe at any time while such Engine is subject to this Lease or is owned
by Lessor.
7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT
So long as no Payment Default, Bankruptcy Default or Lease Event of
Default shall have occurred and be continuing, install or permit any Permitted
Sublessee to install an Engine on an airframe owned by Lessee or such Permitted
Sublessee, leased to Lessee or such Permitted Sublessee, or purchased by Lessee
or such Permitted Sublessee subject to a conditional sale or other security
agreement under circumstances where neither Section 7.2.4 or 7.2.5 is
applicable; PROVIDED, HOWEVER, that any such installation shall be deemed an
<PAGE>
Event of Loss with respect to such Engine, and Lessee shall comply with Section
10.2 hereof in respect thereof.
7.2.7 SUBLEASING
With respect to the Aircraft, Airframe or any Engine, so long as no
Payment Default, Bankruptcy Default or Lease Event of Default has occurred and
is continuing, enter into a sublease with any Permitted Air Carrier, but only
if:
(a) Lessee shall provide written notice to Lessor of Lessee's intent
to enter into a Permitted Sublease (except if the Permitted Sublessee is
Express), such notice in the event of a sublease to a U.S. Air Carrier to be
given promptly after entering into any such sublease or, in the case of a
sublease to any other Permitted Air Carrier, 20 days in advance of entering into
such sublease;
(b) At the time that Lessee enters into such Permitted Sublease, such
Permitted Sublessee shall not be subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding, shall not be
seeking any reorganization or any readjustment of its debts and shall not be,
shall not have substantially all of its property, in the possession of any
liquidator, trustee, receiver or similar person and, if such Permitted Sublessee
is a Permitted Foreign Air Carrier, the United States then maintains normal
diplomatic relations with the country in which such Permitted Sublessee has its
principal executive offices;
(c) Any such Permitted Sublease (i) shall include provisions for the
maintenance, operation, possession, inspection and insurance of the Aircraft
that are the same in all material respects as the applicable provisions of this
Lease, (ii) shall provide that, except if any subsidiary of Lessee is the
Permitted Sublessee, such Permitted Sublessee may not further sublease or
transfer its interests (except transfers of the type permitted in Sections 7.2.1
through 7.2.6, inclusive) in the Aircraft, Airframe or Engines, (iii) shall not
extend beyond the end of the Term and (iv) shall be expressly subject and
subordinate to all the terms of this Agreement and to the rights, powers and
remedies of Lessor hereunder;
(d) In connection with a sublease to a Permitted Foreign Air Carrier,
Lessee shall have furnished Lessor an opinion of counsel, reasonably
satisfactory to Lessor, in the country of domicile of such Permitted Foreign Air
Carrier, that (i) the terms of such sublease are the legal, valid and binding
obligations of the parties thereto enforceable under the laws of such
<PAGE>
jurisdiction, (ii) it is not necessary for Owner Participant, Lessor or
Mortgagee to register or qualify to do business in such jurisdiction, if not
already so registered or qualified, as a result, in whole or in part, of the
proposed sublease, (iii) Lessor's title to, and Mortgagee's Lien in respect of,
the Aircraft, Airframe and Engines will be recognized in such jurisdiction, (iv)
the Laws of such jurisdiction of domicile require fair compensation by the
government of such jurisdiction, payable in a currency freely convertible into
Dollars, for the loss of title to the Aircraft, Airframe or Engines in the event
of the requisition by such government of such title (unless Lessee shall provide
insurance in the amounts required with respect to hull insurance under Section
11 covering the requisition of title to the Aircraft, Airframe or Engines by the
government of such jurisdiction so long as the Aircraft, Airframe or Engines are
subject to such sublease), (v) the agreement of such Permitted Air Carrier that
its rights under the sublease are subject and subordinate to all the terms of
this Lease is enforceable against such Permitted Air Carrier under applicable
law, and (vi) there is no tort liability of the owner or Lessor of an aircraft
not in possession thereof under the laws of such country (it being agreed 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 is provided to cover such risk);
(e) No such sublease shall be made to a "tax exempt entity" as defined
in Section 168(h)(2) of the Code (including any Permitted Foreign Air Carrier)
prior to the close of the Tax Attribute Period, unless Lessee prepays on a
lump-sum basis any liability due under the Tax Indemnity Agreement as a result
of such sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease, PROVIDED, that notwithstanding
the foregoing, such sublease may be made without requiring such prepayment
during the taxable year in which the seventh anniversary of the Closing Date
occurs so long as the Aircraft is not "used predominantly outside the United
States" within the meaning of Section 168(g) of the Code during such taxable
year;
(f) Lessee shall furnish to Lessor and Mortgagee evidence reasonably
satisfactory to Lessor that the insurance required by Section 11 remains in
effect;
(g) All necessary documents shall have been duly filed, registered or
recorded in such public offices as may be required fully to preserve the title
of Lessor, and the first priority security interest (subject to Permitted Liens)
of Mortgagee, in the Aircraft, Airframe and Engines;
<PAGE>
(h) Except for the initial sublease to Express, Lessee shall reimburse
Lessor for all of its reasonable out-of-pocket fees and expenses, including,
without limitation, reasonable fees and disbursements of counsel, incurred by
Lessor in connection with any such sublease; and
(i) For all purposes of this Section 7.2.7, the term "sublease" shall
be deemed to include interchange agreements with respect to the Aircraft or
Airframe.
7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF POSSESSION
Notwithstanding anything to the contrary in Section 7.2:
(a) The rights of any person that receives possession of the Aircraft
in accordance with Section 7.2 shall be subject and subordinate to all the terms
of this Lease, and to Lessor's rights, powers and remedies hereunder, including,
without limitation (i) Lessor's right to repossess the Aircraft pursuant to
Section 15, (ii) Lessor's right to terminate and avoid such sublease, delivery,
transfer or relinquishment of possession upon the occurrence of a Lease Event of
Default and (iii) the right to require such person to forthwith deliver the
Aircraft, the Airframe and Engines subject to such transfer upon the occurrence
of a Lease Event of Default;
(b) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer had not
occurred, and no transfer of possession of the Aircraft, the Airframe, any
Engine or any Part shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or under any Operative Agreement;
(c) Lessee shall ensure that no sublease, delivery, transfer or
relinquishment permitted under Section 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the provisions
of Section 7.1.2.
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under paragraph (c), (d), or (e) of the definition
of such term (as set forth in Annex A) shall not be deemed to violate the
provisions of Section 7.2; and
(e) Any Wet Lease shall not constitute a delivery, transfer or
relinquishment of possession for purposes of Section 7.2 and shall not be
prohibited by the terms hereof.
<PAGE>
SECTION 8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS; OTHER LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS AND ADDITIONS
At all times during the Term, Lessee shall comply with, or cause to be
complied with, each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 INFORMATION, CERTIFICATES, NOTICES AND REPORTS
8.2.1 FINANCIAL INFORMATION
Lessee will furnish to Lessor:
(a) Within 90 days after the end of each of the first three fiscal
quarters in each fiscal year of Lessee, a consolidated balance sheet of Lessee
as of the end of such quarter and related statements of income and cash flows
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal year,
prepared in accordance with GAAP; PROVIDED THAT so long as Lessee is subject to
the reporting requirements of the Securities Exchange Act of 1934, a copy of
Lessee's report on Form 10-Q for such fiscal quarter (excluding exhibits) will
satisfy this paragraph (a).
(b) Within 120 days after the end of each fiscal year of Lessee, a
consolidated balance sheet of Lessee as of the end of such fiscal year and
related statements of income and cash flows of Lessee for such fiscal year, in
comparative form with the preceding fiscal year, prepared in accordance with
GAAP, together with a report of Lessee's independent certified public
accountants with respect to their audit of such financial statements; PROVIDED
THAT so long as Lessee is subject to the reporting requirements of the
Securities Exchange Act of 1934, a copy of Lessee's report on Form 10-K for such
fiscal year (excluding exhibits) will satisfy this paragraph (b).
8.2.2 ANNUAL CERTIFICATE
Within 120 days after the close of each fiscal year of Lessee, Lessee
shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee to the
effect that such officer is familiar with or has reviewed or caused to be
<PAGE>
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements and that such officer does not have knowledge of the existence as at
the date of such certificate of any Lease Default or Lease Event of Default.
8.2.3 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor timely to file any reports required to be filed by it
as lessor under the Lease or to enable Owner Participant to timely file any
reports required to be filed by it, as the beneficiary of the Trust Estate, in
either case, with any Government Entity because of, or in connection with, the
interest of Owner Participant or Lessor in the Aircraft, Airframe or Engines,
this Lease or any other part of the Trust Estate; provided, however, that with
respect to any such information which Lessee reasonably deems commercially
sensitive or confidential, Owner Participant or Lessor, as the case may be,
shall afford Lessee a reasonable opportunity to seek from any such Government
Entity a waiver of the obligation of Owner Participant or Lessor to file any
such information, or shall consent to the filing of such information directly by
Lessee in lieu of filing by Owner Participant or Lessor, and if any such waiver
or consent is evidenced to the reasonable satisfaction of Owner Participant or
Lessor, as the case may be, then Lessee shall not be required to furnish such
information to Owner Participant or Lessor.
SECTION 9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) Unless a Lease Event of Default, Payment Default or Bankruptcy
Default shall have occurred and be continuing, Lessee shall have the right at
its option to terminate this Lease during the Base Lease Term, effective only on
a Termination Date occurring after the end of the Tax Attribute Period, if:
(i) Lessee makes a good faith determination that the Aircraft
either has become economically obsolete or is surplus to Lessee's
requirements and the Chief Financial Officer or Treasurer of Lessee so
certifies in writing to Lessor; and
<PAGE>
(ii) written notice of Lessee's exercise of its option to
terminate this Agreement shall be given to Lessor not less than 90 days
prior to the proposed Termination Date specified in such notice.
(b) Lessor shall notify Lessee and Mortgagee of Lessor's intention to
sell or retain the Aircraft, as provided in this Section 9, no later than 45
days after Lessee gives Lessor written notice pursuant to Section 9.1(a)(ii).
Any failure by Lessor to give such notice of its election shall be deemed to be
an election to sell the Aircraft, as provided in this Section 9.
(c) Any termination pursuant to this Section 9 shall become effective
on the date of the sale, if any, pursuant to Section 9.2 or upon the date of
termination and payment by Lessee and Lessor in accordance with Section 9.3 if
Lessor elects to retain the Aircraft.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has given Lessee notice of Lessor's election to retain
the Aircraft, Lessee, as agent for Lessor, shall, until the date ten Business
Days prior to the proposed Termination Date, use commercially reasonable efforts
to obtain bids for a cash purchase of the Aircraft and Lessor may, if it desires
to do so, also seek to obtain such bids. In the event Lessee receives any bid,
Lessee shall promptly, and in any event at least ten Business Days prior to the
proposed date of sale, certify to Lessor in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person (who
shall not be Lessee or any Affiliate of Lessee or any person with whom Lessee or
any such Affiliate has an arrangement for the future use of the Aircraft by
Lessee or any such Affiliate) submitting such bid. In the event Lessor receives
any bid on or prior to the date ten Business Days prior to the proposed
Termination Date, Lessor shall, at least ten Business Days prior to the proposed
date of sale, certify to Lessee in writing the amount and terms of such bid, the
proposed date of such sale and the name and address of the person submitting
such bid.
9.2.2 CLOSING OF SALE
(a) On the proposed Termination Date (i) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder,
if any, which shall have submitted the highest cash bid (net of applicable
brokerage commissions) on or before the date ten Business Days prior to such
<PAGE>
Termination Date, in the same manner as if delivery were made to Lessor pursuant
to Section 5 and Annex B and in full compliance with the terms thereof, and
shall duly transfer to Lessor title to any such engines not owned by Lessor, all
in accordance with the terms of Section 5 and Annex B, and (ii) Lessor shall
simultaneously therewith transfer the Airframe and Engines or engines to such
bidder, in the manner described in Section 4.5, against cash paid to Lessor in
the amount of such highest bid (net of applicable brokerage commissions and all
reasonable out-of-pocket fees and expenses incurred by Lessor, Mortgagee and
Owner Participant in connection with such sale and the related termination of
this Lease (collectively, the "Expenses of Sale") and in the manner and in funds
of the type specified in Section 3.3.
(b) All proceeds of any sale described in Section 9.2.2(a), net of
Expenses of Sale, shall be paid to and retained by Lessor and, on such
Termination Date, and as a condition precedent to such sale and the delivery of
the Aircraft and Engines or engines to such bidder, Lessee shall pay to Lessor,
in the manner and in funds of the type specified in Section 3.3:
(i) all unpaid Basic Rent due at any time prior to such
Termination Date; plus
(ii) an amount equal to the excess, if any, of the Termination
Value for the Aircraft, computed as of such Termination Date, over the
proceeds of such sale, net of Expenses of Sale; plus
(iii) as provided in Section 3.2.2, interest on the amounts
specified in the foregoing clause (i) at the Payment Due Rate from and
including the date on which any such amount was due to the date of payment
of such amount in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent due by Lessee to Lessor, Mortgagee or the
Participants under this Lease (including, without limitation, (A) Supplemental
Rent in respect of Make-Whole Amount, if any, payable pursuant to Section
2.10(b) of the Trust Indenture in connection with a prepayment of the Equipment
Notes upon such sale, (B) all interest charges provided for hereunder or under
any other Lessee Operative Agreement with respect to the late payment of any
amounts so payable, (C) the Expenses of Sale).
(c) Upon and subject to any such sale and receipt of proceeds by
Lessor, and full and final payment of all amounts described in Section 9.2.2(b),
and compliance by Lessee with all the other provisions of this Section 9.2,
<PAGE>
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) the obligation of Lessee to pay Basic Rent, on or after the
Payment Date with reference to which Termination Value is computed, shall
cease, and the Term for the Aircraft shall end effective as of the date of
such sale.
(d) A sale of the Aircraft pursuant to this Section 9.2.2 shall take
place only on a Termination Date. Subject to Section 9.3, if no sale shall have
occurred on or as of the proposed Termination Date, this Agreement shall
continue in full force and effect, and all of Lessee's obligations shall
continue, including, without limitation, its obligation to pay Rent, in each
case, as if the notice under Section 9.1 shall not have been given and, subject
to Section 9.2.3(b), Lessee may give another notice pursuant to Section 9.1.
9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) Lessee may withdraw any notice given pursuant to Section 9.1 at
any time on or before the date 20 days prior to the proposed Termination Date,
whereupon this Agreement shall continue in full force and effect and all of
Lessee's obligations shall continue, including, without limitation, its
obligation to pay Rent, in each case, as if the notice under Section 9.1 shall
not have been given and Lessee may give another notice pursuant to Section 9.1;
PROVIDED that Lessee shall not be entitled to give more than three notices
pursuant to Section 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and expenses of
Lessor, Mortgagee and Owner Participant in connection with any notice of
termination withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor shall elect to retain the Aircraft in accordance with
Section 9.1, on the proposed Termination Date:
(i) Lessor shall pay, or cause to be paid, in the manner and in
funds of the type specified in Section 3.3, to the Mortgagee an amount
sufficient to prepay all outstanding Equipment Notes pursuant to Section
2.10(b) of the Trust Indenture;
<PAGE>
(ii) subject to receipt by Mortgagee of the funds described in
paragraph (i) above, Lessee shall deliver the Airframe and Engines or
engines constituting part of the Aircraft to Lessor pursuant to Section 5
and Annex B and in full compliance with the terms thereof, and shall duly
transfer to Lessor title to any such engines not owned by Lessor, all in
accordance with the terms of Section 5 and Annex B;
(iii) Lessee shall pay to Lessor, in the manner and in funds of
the type specified in Section 3.3:
(1) all unpaid Basic Rent due at any time prior to such
Termination Date; plus
(2) as provided in Section 3.2.2, interest on the amounts
specified in the foregoing clause (1) at the Payment
Due Rate from and including the date on which any such
amount was due to the date of payment of such amount
in full; and
(iv) Lessee shall also pay all Supplemental Rent due and payable
by Lessee to Lessor, Mortgagee or the Participants under this Lease
(including without limitation (A) Supplemental Rent in respect of
Make-Whole Amount, if any, payable pursuant to Section 2.10(b) of the Trust
Indenture in connection with a prepayment of the Equipment Notes, (B) all
interest charges provided for hereunder or under any other Lessee Operative
Agreement with respect to the late payment of any amounts so payable, and
(C) the reasonable out-of-pocket fees and expenses incurred by Lessor and
Owner Participant in connection with such termination and sale).
(b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,
(i) Lessor will transfer to Lessee, in accordance with Section
4.5, any Engines constituting part of the Aircraft but which were not then
installed on the Airframe and sold therewith; and
(ii) The obligation of Lessee to pay Basic Rent otherwise due on
or after the Termination Date shall cease, and the Term for the Aircraft
shall end effective as of such Termination Date.
<PAGE>
SECTION 10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS WITH RESPECT TO AIRCRAFT
10.1.1 NOTICE
Upon the occurrence of an Event of Loss with respect to the Airframe,
and any Engine or Engines installed thereon at the time of such Event of Loss,
Lessee shall promptly (and in any event within 10 Business Days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss. For
purposes of Section 10.1, an Event of Loss with respect to the Airframe shall be
deemed to constitute an Event of Loss with respect to the Aircraft.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If an Event of Loss with respect to the Aircraft occurs, then
Lessee shall pay, in the manner and in funds of the type specified in Section
3.3, the following amounts:
(i) on the Stipulated Loss Value Date next following the earlier
of (x) the 120th day following the date of the occurrence of such Event of
Loss, and (y) the twentieth day following the receipt of insurance proceeds
with respect to such occurrence, Lessee shall pay to Lessor:
(1) all unpaid Basic Rent or Renewal Rent, as the case may
be, due at any time prior to such Stipulated Loss
Value Date; plus
(2) the Stipulated Loss Value of the Aircraft computed as
of such Stipulated Loss Value Date; plus
(3) as provided in Section 3.2.2, interest on the amount
specified in the foregoing clause (1) at the Payment
Due Rate from and including the date on which any such
amount was due to the date of payment of such amount
in full;
PROVIDED, that if such Stipulated Loss Value Date is a Payment Date, Lessee
shall not be obligated to pay the Basic Rent or Renewal Rent otherwise
required to be paid on such date.
(ii) on or before the date required for payment of the amounts
specified in paragraph (i) above, Lessee shall also pay to Lessor,
Mortgagee and the Participants all other amounts due and payable by Lessee
<PAGE>
to Lessor, Mortgagee and the Participants under this Lease, the
Participation Agreement or any other Lessee Operative Agreement.
(b) Upon payment in full of all amounts described in the foregoing
paragraph (a),(i) the obligation of Lessee to pay Basic Rent or Renewal Rent
hereunder with respect to the Aircraft shall terminate, (ii) the Term for the
Aircraft shall end and (iii) Lessor will transfer the Aircraft to Lessee, as-is
and where-is, and subject to any insurer's salvage rights, but otherwise in the
manner described in Section 4.5.
10.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE
10.2.1 NOTICE
Upon the occurrence of an Event of Loss with respect to an Engine
under circumstances in which an Event of Loss with respect to the Airframe has
not occurred, Lessee shall promptly (and in any event within 10 Business Days
after such occurrence) give Lessor written notice of such Event of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 90 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Engine with respect to
which any Event of Loss occurred, title to a Replacement Engine free and clear
of all Liens other than Permitted Liens. Such Replacement Engine shall be an
engine manufactured by Engine Manufacturer that is the same model as the Engine
to be replaced thereby, or an improved model, and that is suitable for
installation and use on the Airframe, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 ENGINE EXCHANGE
Unless a Payment Default, Bankruptcy Default or Lease Event of Default
shall have occurred and be continuing, upon not less than five (5) Business
Days' prior written notice to Lessor, Lessee may replace any Engine leased
hereunder with another engine (the "Exchanged Engine") meeting the requirements
of Section 10.2.2. Such Exchanged Engine shall be deemed to be a "Replacement
Engine" and Lessor and Lessee shall comply with the provisions of Section 10.3
with regard to the Exchanged Engine and the Engine so replaced.
<PAGE>
10.3 CONDITIONS TO ANY REPLACEMENT OF ENGINE
10.3.1 DOCUMENTS
Prior to or at the time of conveyance of title to any Replacement
Engine to Lessor, Lessee shall take each of the following actions:
(a) furnish Lessor with a full warranty bill of sale duly conveying to
Lessor such Replacement Engine in form and substance reasonably satisfactory to
Lessor;
(b) cause (i) a Lease Supplement subjecting such Replacement Engine to
this Lease, duly executed by Lessee, to be delivered to Lessor for execution
and, upon such execution, to be filed for recordation with the FAA pursuant to
the Act, (ii) a Trust Indenture Supplement, subjecting such Replacement Engine
to the Trust Indenture, to be delivered to Lessor for execution and, upon
execution, to be filed for recordation with the FAA pursuant to the Act and
(iii) such Financing Statements and other filings, as Lessor or Mortgagee may
reasonably request, duly executed by Lessee and, to the extent applicable,
Lessor and Mortgagee (and Lessor and Mortgagee shall execute and deliver the
same), to be filed in such locations as any such party may reasonably request;
(c) furnish such evidence of compliance with the insurance provisions
of Section 11 with respect to such Replacement Engine as Lessor may reasonably
request;
(d) furnish an opinion or opinions of Lessee's counsel (which may be
Lessee's legal department) reasonably satisfactory to Lessor and addressed to
Lessor and Mortgagee to the effect that such full warranty bill of sale
constitutes an effective instrument for the conveyance of title to such
Replacement Engine;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Lessor and addressed to Lessor and Mortgagee as to the due
filing for recordation of each Lease Supplement and Trust Indenture Supplement
with respect to such Replacement Engine under the Act; and
(f) furnish a certificate of a qualified aircraft engineer (who may be
an employee of Lessee) certifying that such Replacement Engine complies with the
value, utility and remaining useful life requirements set forth in Section
10.2.2.
Lessor and Lessee understand and agree that if at the time of any
replacement of any Engine, as contemplated in this Section 10, the Airframe was
registered in a jurisdiction other than the United States, then the requirements
<PAGE>
set forth above in this Section 10.3.1 relating to compliance with the
requirements of the Act or the FAA, shall be deemed to refer to the comparable
applicable Law of, and the Aviation Authority of, such other jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor shall, in all events, be entitled to the benefits of
Section 1110 with respect to any Replacement Engine and Lessee and Lessor shall
cooperate and take such action as the other may reasonably request so as to
ensure that Lessor shall be entitled to such benefits.
(b) No Event of Loss with respect to an Engine shall result in, or
otherwise allow or permit, any reduction, deferral, discharge or other change in
the timing or amount of any Rent payable by Lessee hereunder, and Lessee shall
pay all such Rent and other amounts as though such Event of Loss had not
occurred.
10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of Sections 10.2
and 10.3.1, Lessor will transfer to Lessee the Engine with respect to which such
Event of Loss occurred, in accordance with Section 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of damage or
loss not constituting an Event of Loss (the application of which is provided for
in Section 11), received at any time by Lessor, Lessee or any Permitted
Sublessee from any Government Entity or any other Person in respect of any Event
of Loss will be applied as follows:
10.5.1 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other than an
Engine installed on the Airframe at the time such Airframe suffers an Event of
Loss), upon compliance by Lessee with the applicable terms of Section 10.2.2
with respect to the Event of Loss for which such amounts are received, such
amounts shall be paid over to, or retained by, Lessee.
10.5.2 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with respect to the
Airframe, such amounts shall be applied as follows:
<PAGE>
(a) FIRST, if the sum described in Section 10.1.2 has not then been
paid in full by Lessee, such amounts shall be paid to Lessor (or to Mortgagee so
long as Mortgagee has not given notice to Lessee that the Trust Indenture has
been duly discharged, except with respect to Excluded Payments) to the extent
necessary to pay in full such sum;
(b) SECOND, the remainder, if any, shall be paid to Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity shall requisition for use the Airframe and
the Engines or engines installed thereon, and if the same does not constitute an
Event of Loss, Lessee shall promptly notify Lessor and Mortgagee of such
requisition and all of Lessee's obligations under this Agreement shall continue
to the same extent as if such requisition had not occurred; PROVIDED, HOWEVER,
that if the Airframe and Engines or engines installed thereon are not returned
to Lessor by Lessee at the end of the Term, unless Lessor shall have elected,
upon notice given not less than 30 days nor more than 120 days before the end of
the Term, not to treat such event as constituting an Event of Loss with respect
to the Aircraft, Lessee shall be obligated to pay the Stipulated Loss Value and
all other amounts payable pursuant to Section 10.1.2 with respect to the
Aircraft. If Lessor shall have elected not to treat such event as an Event of
Loss, Lessee shall be obligated to return the Airframe and Engines or engines to
Lessor pursuant to, and in all other respects to comply with the provisions of,
Section 5 promptly upon their return by such Government Entity, and Lessee shall
pay to Lessor upon such return an amount equal to the average daily Basic Rent
payable by Lessee during the Term for each day after the end of the Term to but
excluding the day of such return, up to a maximum of 30 days.
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity shall requisition for use any Engine but not
the Airframe, Lessee will replace such Engine by complying with the applicable
terms of Sections 10.2 and 10.3 to the same extent as if an Event of Loss had
occurred with respect to such Engine, and any payments received by Lessor or
Lessee from such Government Entity with respect to such requisition shall be
paid or retained in accordance with Section 10.5.1.
10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted Sublessee,
from any Government Entity for the use of the Airframe and Engines or engines
installed thereon during the Term shall be paid over to, or retained by, Lessee
<PAGE>
and all payments received by Lessor or Lessee from any Government Entity for the
use of the Airframe and Engines or engines installed thereon after the Term
shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, then all such payments shall be paid
over to Lessor (or to Mortgagee so long as Mortgagee has not given notice to
Lessee that the Trust Indenture has been duly discharged), and held as provided
in Section 10.5.
10.9 APPLICATION OF PAYMENTS DURING EXISTENCE OF A LEASE EVENT OF DEFAULT
Any amount described in this Section 10 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Payment Default or Bankruptcy Default shall have occurred and be continuing, but
shall instead be held by or paid over to Lessor (or to Mortgagee so long as
Mortgagee has not given notice to Lessee that the Trust Indenture has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until Lessor shall have demanded liquidated damages pursuant
to Section 15.1.3 or 15.1.4 and such amount is applied, at the option of Lessor,
or upon the written request of Lessee to Lessor, from time to time during the
continuance of a Lease Event of Default, to Lessee's obligations under this
Lease as and when due, it being understood that any such application shall be
made to such obligations of Lessee as Lessor may determine in its sole
discretion. At such time as there shall not be continuing any Payment Default or
Bankruptcy Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 10.9.
SECTION 11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in Section 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurance required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Equity Guarantor, Mortgagee or
Owner Participant from obtaining insurance for its own account (and any proceeds
payable under such separate insurance shall be payable as provided in the policy
<PAGE>
relating thereto); PROVIDED, HOWEVER, that no insurance may be obtained or
maintained that would limit or otherwise adversely affect the coverage of any
insurance required to be obtained or maintained by Lessee pursuant to this
Section 11 and Annex D.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
Lessor agrees to accept, in lieu of insurance against any risk with
respect to the Aircraft described in Annex D, indemnification from, or insurance
provided by, the U.S. Government, or upon the written consent of Lessor, other
Government Entity, against such risk in an amount that, when added to the amount
of insurance (including permitted self-insurance), if any, against such risk
that Lessee (or any Permitted Sublessee) may continue to maintain, in accordance
with this Section 11, during the period of such requisition or transfer, shall
be at least equal to the amount of insurance against such risk otherwise
required by this Section 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss with respect to the Aircraft or any
Engine under policies required to be maintained by Lessee pursuant to this
Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect to the Aircraft, Airframe or any Engine will be
applied in payment (or to reimburse Lessee) for repairs or for replacement
property, and any balance remaining after such repairs or replacement with
respect to such damage or loss shall be paid over to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING EXISTENCE OF DEFAULT
Any amount described in this Section 11 that is payable or creditable
to, or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if at the time such payment, credit or retention would otherwise occur a
Lease Event of Default shall have occurred and be continuing, but shall instead
be held by or paid over to Lessor (or to Mortgagee so long as Mortgagee has not
given notice to Lessee that the Trust Indenture has been duly discharged) as
security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4.4 hereof unless and until Lessor shall have demanded
liquidated damages pursuant to Section 15.1.3 or 15.1.4 and such amount is
applied, at the option of Lessor, or upon the written request of Lessee to
Lessor, from time to time during the continuance of a Lease Event of Default, to
<PAGE>
Lessee's obligations under this Lease and the other Lessee Operative Agreements
as and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Lease Event of Default, such
amount shall be paid to Lessee to the extent not previously applied in
accordance with this Section 11.5.
SECTION 12. INSPECTION
(a) Lessor, Mortgagee or their respective authorized representatives
(the "Inspecting Parties") may, upon reasonable notice to Lessee, inspect the
Aircraft, Airframe and Engines (including, without limitation, the Aircraft
Documents) and Lessee shall cooperate, and shall cause any Permitted Sublessee
to cooperate, with the Inspecting Parties in connection with any such inspection
(including, without limitation, permitting any such Inspecting Party to make
copies of such Aircraft Documents not reasonably deemed confidential by Lessee
or such Permitted Sublessee).
(b) Except during the continuance of any Lease Event of Default while
the Section 1110 Period shall not be in effect, any inspection of the Aircraft
hereunder shall be limited to a visual, walk-around inspection and shall not
include the opening of any panels, bays or other components of the Aircraft,
Airframe or Engines. Any inspection permitted hereunder, including any
inspection conducted during the continuance of a Lease Event of Default, shall
be conducted in a manner which does not interfere with Lessee's or a Permitted
Sublessee's operation, use and maintenance of such Aircraft, which determination
of interference shall be made by Lessee in its reasonable sole discretion.
(c) With respect to such rights of inspection, neither Lessor nor
Mortgagee shall have any duty or liability to make, or any duty or liability by
reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with Section 12(a)); PROVIDED, that if a Lease Event of Default shall have
occurred and be continuing, Lessee shall bear all such reasonable expenses,
except, in the case of a Chapter 11 reorganization, during the Section 1110
Period.
<PAGE>
(e) If requested by Lessor, Lessee shall promptly advise, or shall
cause any Permitted Sublessee to advise, Lessor of the date upon which the
Aircraft, Airframe or any Engine undergoes its next scheduled maintenance visit
or next major check, and with respect to any Engine, the next off-the-wing
maintenance, and shall advise Lessor of the name and location of the relevant
maintenance performer. Lessor shall have the opportunity to attend such
scheduled maintenance visit or major check, subject to the other provisions of
this Section 12.
SECTION 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE
13.1 IN GENERAL
This Lease and the other Lessee Operative Agreements shall be binding
upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease. Except as otherwise provided herein (including, without
limitation, under the provisions of Section 15 hereof), Lessor and Mortgagee may
not assign or convey any of its right, title and interest in and to this Lease
or the Aircraft without the prior written consent of Lessee, such consent not to
be unreasonably withheld.
13.2 MERGER OF LESSEE
13.2.1 IN GENERAL
Lessee shall not consolidate with or merge into any other person under
circumstances in which Lessee is not the surviving corporation, or convey,
transfer or lease in one or more transactions all or substantially all of its
assets to any other person, unless:
(a) such person is organized, existing and in good standing under the
Laws of the United States, any State of the United States or the District
Columbia and, upon consummation of such transaction, such person will be a U.S.
Air Carrier;
(b) such person executes and delivers to Lessor and Mortgagee a duly
authorized, legal, valid, binding and enforceable agreement, reasonably
satisfactory in form and substance to Lessor, containing an effective assumption
by such person of the due and punctual performance and observance of each
covenant, agreement and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;
<PAGE>
(c) such person makes such filings and recordings with the FAA
pursuant to the Act as shall be necessary to evidence such consolidation or
merger; and
(d) immediately after giving effect to such consolidation or merger no
Lease Event of Default shall have occurred and be continuing.
13.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this Section 13.2, such Person will
succeed to, and be substituted for, and may exercise every right and power of,
Lessee under the Lessee Operative Agreements with the same effect as if such
person had been named as "Lessee" therein. No such consolidation or merger, or
conveyance, transfer or lease, shall have the effect of releasing Lessee or such
Person from any of the obligations, liabilities, covenants or undertakings of
Lessee under the Lease.
13.3 ASSIGNMENT SECURITY FOR LESSOR'S OBLIGATIONS
In order to secure the indebtedness evidenced by the Equipment Notes,
Lessor has agreed in the Trust Indenture, among other things, to assign to
Mortgagee this Lease and to mortgage the Aircraft, Airframe and Engines in favor
of Mortgagee, subject to the reservations and conditions therein set forth.
Lessee hereby accepts and consents to the assignment of all Lessor's right,
title and interest in and to this Lease pursuant to the terms of the Trust
Indenture. In accordance with Section 3.3(c), Lessee agrees to pay directly to
Mortgagee (or, after receipt by Lessee of notice from Mortgagee 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 Mortgagee and Lessee
agrees that Mortgagee's right to such payments hereunder shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, the circumstances set forth in Section 16 hereof. Notwithstanding
the foregoing assignment of this Lease, the obligations of Lessee to Lessor to
perform the terms and conditions of this Lease shall remain in full force and
effect.
13.4 SUCCESSOR OWNER TRUSTEE
Lessee agrees that in the case of the appointment of any successor
Owner Trustee pursuant to the terms of the Participation Agreement and the Trust
Agreement, such successor Owner Trustee shall, upon written notice by such
successor Owner Trustee to Lessee, succeed to all the rights, powers and title
<PAGE>
of Lessor hereunder and shall be deemed to be Lessor and the owner of the
Aircraft and the other assets of the Trust Estate for all purposes hereof
without the necessity of any consent or approval by Lessee and without in any
way altering the terms of this Lease or Lessee's obligations hereunder. An
appointment and designation of a successor Owner Trustee shall not exhaust the
right to appoint and designate further successor or additional Owner Trustees
pursuant to the Participation Agreement and the Trust Agreement, and such right
may be exercised repeatedly as long as this Lease shall be in effect.
SECTION 14. LEASE EVENTS OF DEFAULT
The occurrence of any one or more of the following circumstances,
conditions, acts or events, for any reason whatsoever and whether any such
circumstance, condition, act or 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, order, rule or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:
14.1 PAYMENTS
Lessee shall fail to pay any amount of Basic Rent, Renewal Rent,
Stipulated Loss Value or Termination Value within five (5) Business Days after
the same shall have become due; or Lessee shall fail to pay any Supplemental
Rent (other than Stipulated Loss Value or Termination Value) when due and such
failure shall continue for a period in excess of ten (10) Business Days from and
after the date of any written notice to Lessee from Lessor, Mortgagee or Owner
Participant of the failure to make such payment when due; provided that any such
failure to pay any Excluded Payment shall not constitute a Lease Event of
Default until written notice is given by the Owner Participant to Lessee and
Mortgagee that such failure constitutes a Lease Event of Default and such
failure shall have continued for a period in excess of ten (10) Business Days
after such notice.
14.2 INSURANCE
Lessee shall fail to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft, Airframe and Engines in
accordance with the provisions of Section 11.
<PAGE>
14.3 OTHER COVENANTS
Lessee shall fail to observe or perform (or caused to be observed and
performed) in any material respect any other covenant, agreement or obligation
set forth herein or in any other Lessee Operative Agreement (other than the
covenants, agreements and obligations set forth in the Tax Indemnity Agreement),
and such failure shall continue unremedied for a period of 30 days from and
after the date of written notice thereof to Lessee from Lessor, Owner
Participant or Mortgagee, unless such failure is capable of being corrected and
Lessee shall be diligently proceeding to correct such failure, in which case
there shall be no Lease Event of Default unless and until such failure shall
continue unremedied for a period of 90 days after receipt of such notice.
14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, (c) and the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor, Owner Participant or Mortgagee to Lessee (except
that this clause (c) shall be inapplicable in the case of Section 6.1.7 of the
Participation Agreement).
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee shall consent to the appointment of or the taking of
possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit of creditors, or
Lessee shall file a voluntary petition in bankruptcy or a voluntary petition or
an answer seeking reorganization, liquidation or other relief in a case under
any bankruptcy Laws or other insolvency Laws (as in effect at such time), or
Lessee shall seek relief by voluntary petition, answer or consent, under the
provisions of any other bankruptcy or other similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time) or
Lessee's board of directors shall adopt a resolution authorizing any of the
foregoing; or
<PAGE>
(b) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of Lessee, a receiver,
trustee or liquidator of Lessee or of substantially all of its property, or
substantially all of the property of Lessee shall be sequestered, and any such
order, judgment or decree of appointment or sequestration shall remain in force
undismissed, unstayed and unvacated for a period of 90 days after the date of
entry thereof; or
(c) a petition against Lessee in a case under any bankruptcy Laws or
other insolvency Laws (as in effect at such time) is filed and not withdrawn or
dismissed within 90 days thereafter, or if, under the provisions of any Law
providing for reorganization or winding-up of corporations which may apply to
Lessee, any court of competent jurisdiction assumes jurisdiction, custody or
control of Lessee or of substantially all of its property and such jurisdiction,
custody or control remains in force unrelinquished, unstayed and unterminated
for a period of 90 days.
SECTION 15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Lease Event of Default shall occur and be continuing, Lessor
may, at its option and at any time and from time to time, exercise any one or
more of the following remedies as Lessor in its sole discretion shall elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines 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 the Airframe or Engine were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise, and Lessee expressly waives any right it may
have to a hearing prior to repossession of the Aircraft.
<PAGE>
15.1.2 SALE AND USE
Lessor may sell the Airframe and/or any Engine at public or private
sale, at such times and places, and to such Persons (including Lessor, Mortgagee
or any Participant), as Lessor may determine; or Lessor may otherwise dispose
of, hold, use, operate, lease to others or keep idle the Airframe and/or any
Engine, as Lessor, in its sole discretion, may determine, all free and clear of
any rights of Lessee and without any duty to account to Lessee with respect to
such action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this Section 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give Lessee at least 15 days prior written notice of the date fixed
for any public sale of the Airframe and/or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under Section 15.1.1 or 15.1.2 with respect to
the Airframe and/or any Engine, or any Part thereof, Lessor, by written notice
to Lessee specifying a payment date (which shall be the Stipulated Loss Value
Date next occurring not less than 10 days after the date of such notice), may
demand Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the payment
date so specified and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date specified for payment
in such notice), the following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date specified in such notice; plus
(b) an amount equal to the excess, if any, of the Stipulated Loss
Value for the Aircraft, computed as of the Stipulated Loss Value Date specified
in such notice, over the Fair Market Sales Value of the Aircraft, as of the
Stipulated Loss Value Date specified in such notice; plus
(c) interest on the amounts specified in the foregoing clause (a) at
<PAGE>
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause (b) at
the Payment Due Rate from and including the Stipulated Loss Value Date specified
in such notice to the date of payment of such amount.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If Lessor, pursuant to Section 15.1.2 or applicable Law, shall have
sold the Aircraft, Lessor, in lieu of exercising its rights under Section 15.1.3
with respect to the Aircraft, may, if Lessor shall so elect, upon giving written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of the Basic Rent or Renewal Rent, as the case may be, for the Aircraft
in respect of all periods commencing on or after the date of such sale), the
following amounts:
(a) all unpaid Basic Rent or Renewal Rent, as the case may be, due at
any time prior to the Stipulated Loss Value Date on or immediately preceding the
date of such sale; plus
(b) an amount equal to the excess, if any, of (i) the Stipulated Loss
Value of the Aircraft, computed as of the Stipulated Loss Value Date used in the
foregoing clause (a) for the computation of unpaid Rent, over (ii) the proceeds
of such sale, minus all reasonable costs of Lessor in connection with the sale;
plus
(c) if the date of such sale is not a Stipulated Loss Value Date, an
amount equal to interest on the outstanding principal amount of the Equipment
Notes at the rate per annum borne thereby from and including the Stipulated Loss
Value Date used in the foregoing clause (a) for the computation of unpaid Rent
to the date of such sale; plus
(d) interest on the amounts specified in the foregoing clause (a) at
the Payment Due Rate from and including the date on which any such amount was
due to the date of payment of such amount; plus
(e) interest on the sum of the amounts specified in the foregoing
clause (b) at the Payment Due Rate from and including the date of such sale to
the date of payment of such amounts.
<PAGE>
15.1.5 RESCISSION
Lessor may (i) at its option, rescind or terminate this Lease as to
the Aircraft, Airframe or any Engine, or any Part thereof, or (ii) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof, including without limitation Lessee's agreement
to lease the Aircraft for the Term and to pay Rent.
15.1.6 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication of
amounts otherwise paid under this Section 15), Lessee shall be liable for any
and all unpaid Rent due hereunder before, during or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, including,
without limitation, interest on overdue Rent at the rate as herein provided,
incurred by reason of the occurrence of any Lease Event of Default or the
exercise of Lessor's remedies with respect thereto, including all reasonable
costs and expenses of Lessor incurred in connection with the return of the
Airframe or any Engine, in accordance with the terms of Section 5 or in placing
the Airframe or any Engine, in the condition and airworthiness required by
Section 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of Section 15.1, during any period that
the Aircraft, Airframe or any Engine is subject to CRAF in accordance with the
provisions of Section 7.2.3 and in the possession of the U.S. Government, Lessor
shall not, as a result of any Lease Event of Default, exercise its remedies
hereunder in such manner as to limit Lessee's control under this Lease (or any
Permitted Sublessee's control under any Permitted Sublease) of the Aircraft,
Airframe or such Engine, unless at least 30 days' (or such other period as may
then be applicable under CRAF) written notice of default hereunder shall have
been given by Lessor or Mortgagee by registered or certified mail to Lessee (and
any Permitted Sublessee) with a copy to the Contracting Officer Representative
or Representatives for the Military Airlift Command of the United States Air
Force to whom notices must be given under the contract governing Lessee's (or
any Permitted Sublessee's) participation in CRAF with respect to the Aircraft,
Airframe or any Engine.
<PAGE>
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (i) fails to make any payment of Rent required to be made by
it hereunder or (ii) fails to perform or comply with any of its agreements
contained herein and such failure continues for a period of thirty days after
written notice thereof is given by Lessor, Mortgagee or Owner Participant to
Lessee, Lessor may (but shall not be obligated to) make such payment or perform
or comply with such agreement, and the amount of such payment and the amount of
the expenses of Lessor or Mortgagee 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 Payment Due Rate, shall be deemed
Supplemental Rent, payable by Lessee upon demand by Lessor or Mortgagee,
whichever is entitled thereto. No such payment, performance or compliance shall
be deemed to cure any Lease Default or Lease Event of Default or otherwise
relieve Lessee of its obligations with respect thereto.
15.4 DETERMINATION OF FAIR MARKET SALES VALUE
For the purpose of this Section 15, the "Fair Market Sales Value" of
the Aircraft shall be determined on an "as is, where is" basis and shall take
into account customary brokerage and other out-of-pocket fees and expenses which
typically would be incurred in connection with a sale of the Aircraft. Any such
determination shall be made by an Appraiser selected by Lessor and the costs and
expenses associated therewith shall be borne by Lessee, unless Lessor does not
obtain possession of the Aircraft, Airframe and Engines pursuant to this Section
15, in which case an Appraiser shall not be appointed and Fair Market Sales
Value for purposes of this Section 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in any way
any right, power, remedy or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy and privilege hereby given to, or retained by, Lessor
in this Lease shall be in addition to and not in limitation of every other
right, power, remedy and privilege given under the Operative Agreements or now
or hereafter existing at law or in equity. Each and every right, power, remedy
and privilege of Lessor under this Lease and any other Operative Agreement may
be exercised from time to time or simultaneously and as often and in such order
as may be deemed expedient by Lessor. All such rights, powers, remedies and
<PAGE>
privileges shall be cumulative and not mutually exclusive, and the exercise of
one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
SECTION 16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) Lessee's obligation to pay Rent hereunder shall be absolute and
unconditional, and shall not be affected by any event or circumstance,
including, without limitation: (i) any setoff, counterclaim, recoupment, defense
or other right that Lessee may have against Lessor, Mortgagee, any Participant,
any Note Holder, or any other Person for any reason whatsoever; (ii) any defect
in the title, airworthiness, condition, design, operation or fitness for use of,
or any damage to or loss or destruction of, the Aircraft, Airframe or any
Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (iii) any insolvency, bankruptcy,
reorganization or similar proceedings by or against Lessee or any other Person;
or (iv) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
(b) If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Agreement not been terminated in whole or in
part. Lessee hereby waives, to the extent permitted by applicable law, any and
all rights that it may now have or that at any time hereafter may be conferred
upon it, by statute or otherwise, to terminate, cancel, quit or surrender this
Agreement, except in accordance with the express terms hereof.
(c) Nothing set forth in this Section 16 shall be construed to
prohibit Lessee from separately pursuing any claim that it may have from time to
time against Lessor or any other Person with respect to any matter (other than
the absolute and unconditional nature of Lessee's obligations hereunder to pay
Rent, and other than the matters specified in paragraphs (a) and (b) above).
Without limiting the foregoing, nothing in this Section 16 shall be construed as
a waiver by Lessee, or otherwise limit Lessee in pursuing any claim by Lessee,
of any breach by Lessor, Owner Participant or any other Person of any covenant
or obligation contained in any Operative Agreement.
<PAGE>
SECTION 17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) At least 225 days but not more than 375 days prior to the
Scheduled Expiration Date or, if a Renewal Lease Term is then in effect, prior
to the Scheduled Renewal Term Expiration Date of such Renewal Lease Term, Lessee
may provide notice to Lessor that Lessee may exercise either the option to
extend the leasing of the Aircraft for a Renewal Lease Term pursuant to Section
17.2 or the option to purchase the Aircraft on the Scheduled Expiration Date or
Scheduled Renewal Term Expiration Date of such Renewal Lease Term, as the case
may be, pursuant to Section 17.3 (a "Preliminary Notice").
(b) If any such Preliminary Notice is given by Lessee, then Lessee may
provide a further notice specifying which option it intends to elect, with
respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1, as the
case may be.
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as specified in Section
17.1, and subject to the terms and conditions of this Section 17.2, Lessee may
exercise its option to extend the leasing of the Aircraft hereunder on two
occasions, in each case until the next Scheduled Renewal Term Expiration Date,
on the same terms, provisions and conditions (except as contemplated by this
Section 17) set forth herein and in the other Lessee Operative Agreements with
respect to the Base Lease Term, by delivery of a notice (a "Renewal Notice") to
Lessor not less than 180 days but not more than 375 days prior to (i) if the
Base Lease Term is then in effect, the Scheduled Expiration Date, or (ii) if a
Renewal Lease Term is then in effect, the Scheduled Renewal Term Expiration Date
for such Renewal Lease Term.
(b) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) No Preliminary Notice or Renewal Notice shall be binding on
Lessor or oblige Lessor to extend the leasing of the Aircraft hereunder for
a Renewal Lease Term if any Payment Default, Bankruptcy Default or Lease
Event of Default shall have occurred and be continuing on and as of the
date that such Renewal Lease Term would otherwise commence.
<PAGE>
(ii) Any Renewal Notice shall be revocable by Lessee until 10
Business Days after the Renewal Rent is determined in accordance with
Sections 17.2.2 and unless revoked by written notice by Lessee to Lessor
shall thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to extend the leasing of the Aircraft hereunder for
the Renewal Lease Term to which such Renewal Notice relates.
(iii) Lessee shall not be entitled to give any Renewal Notice if
it has (x) not delivered a Preliminary Notice or (y) delivered a Purchase
Notice to Lessor.
17.2.2 RENEWAL RENT
(a) During the Renewal Lease Term, Lessee shall pay to Lessor on each
Payment Date, in the manner and in the funds of the type specified in Section
3.3, Renewal Rent in advance.
(b) The Renewal Rent payable by Lessee on each Payment Date during any
Renewal Lease Term shall be the Fair Market Rental Value of the Aircraft for
such Renewal Lease Term. Any such Fair Market Rental Value shall be determined
not more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) For any Renewal Lease Term, Stipulated Loss Value Dates and
Termination Value dates shall be extended throughout such Renewal Lease Term on
the same days and for the same months as during the Base Lease Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Lease Term shall be determined at the same time
that the Renewal Rent for such Renewal Lease Term is determined under Section
17.2.2. Stipulated Loss Values and Termination Values for any such Renewal Lease
Term shall, commencing on the first day of such Renewal Lease Term, be equal to
the Fair Market Sales Value of the Aircraft, computed as of the first day of
such Renewal Lease Term, and shall decline ratably on a monthly basis to the
Fair Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.
(c) Any Fair Market Sales Value of the Aircraft, for purposes of
calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined by mutual agreement of
<PAGE>
Lessor and Lessee or, if they shall be unable to agree, by an appraisal in
accordance with Section 17.4.
17.3 PURCHASE OPTION
17.3.1 PURCHASE NOTICE
(a) Subject to Section 17.1 and the terms and conditions of this
Section 17.3, Lessee may elect to purchase the Aircraft, on any Purchase Date,
at a purchase price equal to the lesser of (i) 61.35% of Lessor's Cost and (ii)
the Fair Market Sales Value of the Aircraft computed as of the Purchase Date.
(b) Lessee may exercise such option to purchase the Aircraft, by
delivery of a notice (a "Purchase Notice") to Lessor not less than 180 and not
more than 375 days prior to the Purchase Date specified in such Purchase Notice.
(c) Notwithstanding anything to the contrary in this Agreement or any
other Operative Agreement:
(i) Any Purchase Notice (whether delivered or deemed to have been
delivered) shall be revocable until 10 Business Days after the
determination of the Fair Market Sales Value in accordance with Section
17.3.2 and unless revoked by written notice by Lessee to Lessor shall
thereafter become irrevocable and shall constitute an unconditional
obligation of Lessee to purchase the Aircraft under this Section 17.3.
(ii) No Preliminary Notice or Purchase Notice shall be binding on
Lessor or oblige Lessor to sell the Aircraft hereunder if any Payment
Default, Bankruptcy Default or Lease Event of Default shall have occurred
and be continuing on and as of such Purchase Date.
(iii) Lessee shall not be entitled to give any Purchase Notice in
respect of any Purchase Date if it has (x) not delivered a Preliminary
Notice or (y) delivered a Renewal Notice for a Renewal Lease Term that
would commence immediately following such Purchase Date.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be determined not
more than 10 Business Days after Lessee gives a Preliminary Notice by mutual
agreement of Lessor and Lessee or, if they shall be unable to agree, by an
appraisal in accordance with Section 17.4.
<PAGE>
17.3.3 TITLE
Upon full and final payment by Lessee of (a) the applicable purchase
price of the Aircraft, (b) all unpaid Rent due and payable through and including
the Purchase Date and (c) all other amounts due and payable by Lessee under this
Agreement, Lessor will transfer to Lessee title to the Aircraft in accordance
with Section 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this Section 17,
Lessee and Lessor shall appoint a mutually satisfactory Appraiser to conduct
such appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser
then each shall promptly appoint a separate Appraiser and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor fails to so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within 7 days after the appointment of the
latter of such two Appraisers, they cannot agree upon such amount, such two
Appraisers shall, within 8 days after such latter appointment, appoint a third
Appraiser and such amount shall be determined by such three Appraisers, who
shall make their separate appraisals within 7 days following the appointment of
the third Appraiser, and any determination so made shall be conclusive and
binding upon Lessor and Lessee. If no such third Appraiser is appointed within
such 8-day period, either Lessor or Lessee may apply to the American Arbitration
Association to make such appointment, and both parties shall be bound by such
appointment. The foregoing appraisal procedure shall in any event be completed
no less than 190 days before the end of the Base Lease Term or the current
Renewal Lease Term, as the case may be. If three Appraisers are appointed and
the difference between the determination which is farther from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such farther
determination shall be excluded, the remaining two determinations shall be
averaged and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor, PROVIDED that
if Lessee elects not to renew this Lease or purchase the Aircraft following the
conclusion of such appraisal, Lessee shall pay all expenses of such appraisal.
<PAGE>
SECTION 18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by Lessor and Lessee with the written
consent of the Mortgagee if required by the Trust Indenture. Each such
amendment, supplement, waiver, modification, discharge, termination or variance
shall be effective only in the specific instance and for the specific purpose
for which it is given. No provision of this Agreement shall be varied or
contradicted by oral communication, course of dealing or performance or other
manner not set forth in an agreement, document or instrument in writing and
signed by Lessor and Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction and (b) such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of such provision in any
other jurisdiction. If, however, any Law pursuant to which such provisions are
held invalid, illegal or unenforceable may be waived, such Law is hereby waived
by the parties hereto to the full extent permitted, to the end that this
Agreement shall be deemed to be a valid and binding agreement in all respects,
enforceable in accordance with its terms.
18.3 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than Mortgagee, the Participants and the Persons
referred to in Section 4.6, with respect to matters expressly for their benefit
in this Lease) with any rights of any nature whatsoever against either of the
parties hereto, and no person not a party hereto (other than Mortgagee, the
Participants and the Persons referred to in Section 4.6, with respect to matters
expressly for their benefit in this Lease) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.
<PAGE>
18.4 REPRODUCTION OF DOCUMENTS
This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by such party in the regular course of business) and any enlargement, facsimile
or further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile or
telecommunication transmission (which in either case provides written
confirmation to the sender of its delivery), sent by registered mail or
certified mail, return receipt requested, postage prepaid, or sent by overnight
courier service, in each case to the respective address or facsimile number set
forth for such party in Schedule 1 to the Participation Agreement, or to such
other address or number as either party hereto may hereafter specify by notice
to the other party hereto. Each such notice, request, demand, authorization,
direction, consent, waiver or other communication shall be effective when
<PAGE>
received or, if made, given, furnished or filed (a) by facsimile or
telecommunication transmission, when confirmed, or (b) by registered or
certified mail, three Business Days after being deposited, properly addressed,
with the U.S. Postal Service.
18.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO SECTION 18.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS
SECTION 18.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH
PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS
TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT
IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED
IN ANY ACTION OR PROCEEDING BASED THEREON.
(D) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by Lessor
in exercising, any of its rights, powers, remedies or privileges under this
Agreement or provided at Law, in equity or otherwise shall impair, prejudice or
constitute a wavier of any such right, power, remedy or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
by Lessor or the exercise of any other right, power, remedy or privilege by
Lessor. No notice to or demand on Lessee in any case shall, unless otherwise
required under this Agreement, entitle Lessee to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
Lessor to any other further action in any circumstances without notice or
demand.
18.9 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and
as of the date hereof constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, between the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC., as Lessee
By:_____________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Agreement
is hereby acknowledged on this ___ day of _____________, _____.
WILMINGTON TRUST COMPANY, as Mortgagee
By:_____________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Agreement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC., as Lessee
By:_____________________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided,
a reference to:
(i) each of "Lessee," "Lessor," "Loan Participant," "Owner
Trustee," "Owner Participant," "Mortgagee," "Note Holder" or any other
person includes, without prejudice to the provisions of any Operative
Agreement, any successor in interest to it and any permitted transferee,
permitted purchaser or permitted assignee of it;
(ii) words importing the plural include the singular and words
importing the singular include the plural;
(iii) any agreement, instrument or document, or any annex,
schedule or exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Agreement, that agreement,
instrument or document, or annex, schedule or exhibit, or part,
respectively, as amended, modified or supplemented from time to time in
accordance with its terms and in accordance with the Operative Agreements,
and any agreement, instrument or document entered into in substitution or
replacement therefor;
(iv) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued or reenacted prior
to the Closing Date, and thereafter from time to time;
(v) the words "Agreement," "this Agreement," "hereby," "herein,"
"hereto," "hereof" and "hereunder" and words of similar import when used in
any Operative Agreement refer to such Operative Agreement as a whole and
not to any particular provision of such Operative Agreement;
(vi) the words "including," "including, without limitation,"
"including, but not limited to," and terms or phrases of similar import
when used in any Operative Agreement, with respect to any matter or thing,
mean including, without limitation, such matter or thing; and
<PAGE>
(vii) a "Section," an "Exhibit," an "Annex" or a "Schedule" in
any Operative Agreement, or in any annex thereto, is a reference to a
section of, or an exhibit, an annex or a schedule to, such Operative
Agreement or such annex, respectively.
(b) Each exhibit, annex and schedule to each Operative Agreement is
incorporated in, and shall be deemed to be a part of, such Operative Agreement.
(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the occurrence and
continuance of a Lease Default or Lease Event of Default referred to in Section
14.5 shall not be deemed to prohibit the Lessee from taking any action or
exercising any right that is conditioned on no Lease Event of Default,
Bankruptcy Default or Lease Default having occurred and be continuing if a
Section 1110 Event shall have occurred and is then continuing.
DEFINED TERMS
"ACT" means part A of subtitle VII of title 49, United States Code.
"ACTUAL KNOWLEDGE" means (a) as it applies to Owner Trustee or
Mortgagee, as the case may be, actual knowledge of a responsible officer in the
Corporate Trust Department or the Corporate Trust Office, respectively, and (b)
as it applies to Owner Participant, Lessee, Existing Lessor, Existing Mortgagee
and Airframe Manufacturer, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee, respectively, or any other officer of
Owner Participant or Lessee, respectively, having responsibility for the
transactions contemplated by the Operative Agreements; PROVIDED that each of
Lessee, Owner Participant, Owner Trustee, Mortgagee, Existing Lessor, Existing
Mortgagee and Airframe Manufacturer shall be deemed to have "Actual Knowledge"
of any matter as to which it has received notice from Lessee, Owner Participant,
any Note Holder, Owner Trustee or Mortgagee, such notice having been given
pursuant to Section 15.7 of the Participation Agreement.
<PAGE>
"ADDITIONAL INSURED" is defined in Section D of Annex D to the Lease.
"AFFILIATE" means, with respect to any person, any other person
directly or indirectly controlling, controlled by or under common control with
such person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.
"AIRCRAFT" means, collectively, the Airframe and Engines.
"AIRCRAFT BILL OF SALE" means the full warranty bill of sale covering
the Aircraft delivered by Existing Lessor to Owner Trustee on the Closing Date.
"AIRCRAFT DOCUMENTS" means all technical data, manuals and log books,
and all inspection, modification and overhaul records and other service, repair,
maintenance and technical records that are required by the FAA (or the relevant
Aviation Authority) to be maintained with respect to the Aircraft, Airframe,
Engines or Parts; and such term shall include all additions, renewals, revisions
and replacements of any such materials from time to time made, or required to be
made, by the FAA (or other Aviation Authority) regulations, and in each case in
whatever form and by whatever means or medium (including, without limitation,
microfiche, microfilm, paper or computer disk) such materials may be maintained
or retained by or on behalf of Lessee (PROVIDED, that all such materials shall
be maintained in the English language).
"AIRFRAME" means (a) the aircraft (excluding Engines or engines from
time to time installed thereon) manufactured by Airframe Manufacturer and
identified by Airframe Manufacturer's model number, United States registration
number and Airframe Manufacturer's serial number set forth in Lease Supplement
No. 1 and (b) any and all Parts incorporated or installed in or attached or
appurtenant to such airframe, and any and all Parts removed from such airframe,
unless title to such Parts shall not be vested in Lessor in accordance with
Section 8.1 and Annex C of the Lease.
"AIRFRAME MANUFACTURER" means Embraer-Empresa Brasileira de
Aeronautica S.A., a Brazilian corporation.
"AIRFRAME MANUFACTURER AGREEMENTS" means, collectively, the
Participation Agreement, the Purchase Agreement and the Consent and Agreement.
<PAGE>
"AMORTIZATION AMOUNT" means, with respect to any Equipment Note, as of
any Payment Date, the amount determined by multiplying the percentage set forth
opposite such Date on the Amortization Schedule by the Original Amount of such
Equipment Note.
"AMORTIZATION SCHEDULE" means, with respect to each Equipment Note,
the amortization schedule for such Equipment Note delivered pursuant to Section
2.02 of the Trust Indenture.
"APPRAISAL" is defined in Section 5.1.2(xv) of the Participation
Agreement.
"APPRAISER" means a firm of internationally recognized, independent
aircraft appraisers.
"AVERAGE LIFE DATE" for any Equipment Note shall be the date which
follows the time of determination by a period equal to the Remaining Weighted
Average Life of such Equipment Note. "Remaining Weighted Average Life" on a
given date with respect to any Equipment Note shall be the number of days equal
to the quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining scheduled payment
of principal of such Equipment Note by (ii) the number of days from and
including such determination date to but excluding the date on which such
payment of principal is scheduled to be made, by (b) the then outstanding
principal amount of such Equipment Note.
"AVIATION AUTHORITY" means the FAA or, if the Aircraft is permitted to
be, and is, registered with any other Government Entity under and in accordance
with Section 7.1.2 of the Lease, such other Government Entity.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
ss. 101 ET SEQ.
"BANKRUPTCY DEFAULT" means a Lease Event of Default under Section 14.5
of the Lease.
"BASE LEASE TERM" means the period beginning on and including the
Closing Date and ending on the Scheduled Expiration Date, or such earlier date
on which the Term terminates in accordance with the provisions of the Lease.
"BASIC PASS THROUGH TRUST AGREEMENT" means the Pass Through Trust
Agreement, dated the Issuance Date, between Lessee and Pass Through Trustee, as
such agreement may be supplemented, amended or modified, but does not include
any Trust Supplement.
<PAGE>
"BASIC RENT" means the rent payable for the Aircraft pursuant to
Section 3.2.1 of the Lease.
"BENEFICIAL OWNER" when used in relation to an Equipment Note means a
Person that, by reason of direct ownership, contract, share ownership or
otherwise, has the right to receive or participate in receiving, directly or
indirectly, payments of principal, interest or Make-Whole Amount in respect of
such Equipment Note; provided that a Person shall not be deemed to be a
Beneficial Owner of an Equipment Note solely because another Person in which
such a Person owns common stock or other equity securities is a registered
holder or Beneficial Owner of such Equipment Note unless such Person is an
Affiliate of such other Person.
"BILLS OF SALE" means the FAA Bill of Sale and the Aircraft Bill of
Sale.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required by law to close in New
York, New York, Houston, Texas, Wilmington, Delaware, or Salt Lake City, Utah.
"CASH EQUIVALENTS" means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee or any bank, trust company
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $500,000,000 and having a rate of "C" or better
from the Thomson BankWatch Service; or (d) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
Rating Services or Moody's Investors Service, Inc. equal to A1 or higher.
"CITIZEN OF THE UNITED STATES" is defined in Section 40102(a)(15) of
the Act and in the FAA Regulations.
"CHANGE IN TAX LAW" means any change or proposed change in the Code or
the regulations promulgated thereunder or any change in the interpretation of
the Code or such regulations in a decision by the United States Supreme Court,
the United States Tax Court, the United States Claims Court or any of the United
States Courts of Appeal or District Courts, or any issuance of an Internal
<PAGE>
Revenue Ruling, Revenue Procedure or administrative pronouncement by the
Internal Revenue Service or the Department of the Treasury.
"CLOSING" means the occurrence of the following concurrent events: (i)
sale of the Aircraft to the Owner Trustee and the filing of the FAA Bill of Sale
with the FAA in connection therewith; (ii) payment of Lessor's Cost by Owner
Trustee to Existing Lessor; (iii) lease of the Aircraft by Owner Trustee to
Lessee pursuant to the Lease; and (iv) completion of the other events
contemplated by the Participation Agreement to occur at the Closing.
"CLOSING DATE" means the Business Day specified in Lease Supplement
No. 1 as the Closing Date, which shall be the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as amended; PROVIDED,
that when used in relation to a Plan, "Code" shall mean the Internal Revenue
Code of 1986 and any regulations and rulings issued thereunder, all as amended
and in effect from time to time.
"COMMITMENT" means, for any Participant, the amount of its
participation in the payment of Lessor's Cost.
"COMMITMENT TERMINATION DATE" is defined in Schedule 3 to the
Participation Agreement.
"CONSENT AND AGREEMENT" means the Manufacturer Consent and Agreement
___, dated as of even date with the Participation Agreement, of Airframe
Manufacturer.
"CONTINUOUS STAY PERIOD" is defined in Section 4.04(a) of the Trust
Indenture.
"CORPORATE TRUST DEPARTMENT" or "TRUST OFFICE" means the principal
corporate trust office of Owner Trustee located from time to time at Owner
Trustee's address for notices under the Participation Agreement or such other
office at which Owner Trustee's corporate trust business shall be administered
which Owner Trustee shall have specified by notice in writing to Lessee,
Mortgagee and each Note Holder.
"CORPORATE TRUST OFFICE" means the principal office of Mortgagee
located at Mortgagee's address for notices under the Participation Agreement or
such other office at which Mortgagee's corporate trust business shall be
administered which Mortgagee shall have specified by notice in writing to
Lessee, Owner Trustee and each Note Holder.
<PAGE>
"CRAF" means the Civil Reserve Air Fleet Program established pursuant
to 10 U.S.C.ss. 9511-13 or any similar substitute program.
"DEBT" means any liability for borrowed money, or any liability for
the payment of money in connection with any letter of credit transaction or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes or
other similar instruments.
"DEBT RATE" means, with respect to (i) any Series, the rate per annum
specified for such Series under the heading "Interest Rate" in Schedule I to the
Trust Indenture and (ii) any other purpose, with respect to any period, the
weighted average interest rate per annum during such period borne by the
outstanding Equipment Notes, excluding any interest payable at the Payment Due
Rate.
"DEFAULT" means any event or condition that with the giving of notice
or the lapse of time or both would become an Event of Default.
"DELAYED CLOSING DATE" means a delayed Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.3 of the Participation Agreement, which
delayed Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"DELIVERY DATE" means the date on which the Aircraft was leased to
Lessee by Corcim, Inc., as lessor, under the Existing Lease.
"DOLLARS," "UNITED STATES DOLLARS" or "$" means the lawful currency of
the United States.
"DOT" means the Department of Transportation of the United States or
any Government Entity succeeding to the functions of such Department of
Transportation.
"ENFORCEMENT DATE" is defined in Section 4.03 of the Trust Indenture.
"ENGINE" means (a) each of the engines manufactured by Engine
Manufacturer and identified by Engine Manufacturer's model number and Engine
Manufacturer's serial number set forth in Lease Supplement No. 1 and originally
installed on the Airframe on delivery thereof pursuant to the Lease, and any
Replacement Engine, in any case whether or not from time to time installed on
such Airframe or installed on any other airframe or aircraft, and (b) any and
all Parts incorporated or installed in or attached or appurtenant to such
engine, and any and all Parts removed from such engine, unless title to such
<PAGE>
Parts shall not be vested in Lessor in accordance with Section 8.1 and Annex C
of the Lease. Upon substitution of a Replacement Engine under and in accordance
with the Lease, such Replacement Engine shall become subject to the Lease and
shall be an "Engine" for all purposes of the Lease and the other Operative
Agreements and thereupon the Engine for which the substitution is made shall no
longer be subject to the Lease, and such replaced Engine shall cease to be an
"Engine."
"ENGINE MANUFACTURER" means Allison Engine Company, Inc., a Delaware
corporation.
"EQUIPMENT NOTE REGISTER" is defined in Section 2.07 of the Trust
Indenture.
"EQUIPMENT NOTES" means and includes any equipment notes issued under
the Trust Indenture in the form specified in Section 2.01 thereof (as such form
may be varied pursuant to the terms of the Trust Indenture) and any Equipment
Note issued under the Trust Indenture in exchange for or replacement of any
Equipment Note.
"EQUITY ADVISOR" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EQUITY GUARANTOR" means Rolls-Royce plc, a corporation organized
under the laws of England.
"EQUITY GUARANTY" means the Equity Guaranty ___ issued by the Equity
Guarantor dated of even date with the Participation Agreement, including the
side letter dated of even date with the Participation Agreement between the
Equity Guarantor and the Owner Participant.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
any regulations and rulings issued thereunder all as amended and in effect from
time to time.
"EVENT OF DEFAULT" is defined in Section 4.02 of the Trust Indenture.
"EVENT OF LOSS" means, with respect to the Aircraft, Airframe or any
Engine, any of the following circumstances, conditions or events with respect to
such property, for any reason whatsoever:
(a) the destruction of such property, damage to such property beyond
economic repair or rendition of such property permanently unfit
for normal use by Lessee;
(b) the actual or constructive total loss of such property or any
damage to such property, or requisition of title or use of such
property, which results in an insurance settlement with respect
<PAGE>
to such property on the basis of a total loss or constructive or
compromised total loss;
(c) any theft, hijacking or disappearance of such property for a
period of 180 consecutive days or more or, if earlier, the end of
the Term;
(d) any seizure, condemnation, confiscation, taking or requisition
(including loss of title) of such property by any Government or
purported Government Entity (other than a requisition of use by
the U.S. Government) for a period exceeding 180 consecutive days
or, if earlier, at the end of the Term;
(e) any seizure, condemnation, confiscation, taking or requisition of
use of such property by the U.S. Government that continues until
the last day of the Term, PROVIDED that no such Event of Loss
shall exist if Lessor shall have elected not to treat such event
as an Event of Loss pursuant to Section 10.6 of the Lease; and
(f) as a result of any law, rule, regulation, order or other action
by the Aviation Authority or by any Government Entity of the
government of registry of the Aircraft or by any Government
Entity otherwise having jurisdiction over the operation or use of
the Aircraft, the use of such property in the normal course of
Lessee's business of passenger air transportation is prohibited
for a period of 180 consecutive days, unless Lessee, prior to the
expiration of such 180 day period, shall have undertaken and
shall be diligently carrying forward such steps as may be
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 720 days, provided that no Event of
Loss shall be deemed to have occurred if such prohibition has
been applicable to Lessee's (or a Permitted Sublessee's) entire
U.S. fleet of such property and Lessee (or a Permitted
Sublessee), prior to the expiration of such 720-day period, shall
have conformed at least one unit of such property 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 and shall be diligently carrying forward, in a
manner which does not discriminate against such property in so
conforming such property, 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
three years or such use shall be prohibited at the expiration of
the Term.
<PAGE>
"EXCLUDED PAYMENTS" means (i) indemnity payments paid or payable by
Lessee to or in respect of Owner Participant, or Owner Trustee in its individual
capacity, their respective Affiliates, successors and permitted assigns and
their directors, officers, employees, servants and agents pursuant to Section 9
of the Participation Agreement or any corresponding payments under the Lease,
(ii) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Trustee in its individual
capacity or by Owner Participant, that are payable directly to Owner Trustee in
its individual capacity, or Owner Participant, respectively, for their own
account, (iii) proceeds of insurance maintained with respect to the Aircraft by
Owner Participant or any Affiliate thereof for its or their own account or
benefit (whether directly or through Owner Trustee) and permitted under Section
11.2 of the Lease, (iv) all payments required to be made under the Tax Indemnity
Agreement by Lessee whether or not denominated as Supplemental Rent, (v) all
payments of guaranty fees pursuant to Section 7.6.14 of the Participation
Agreement, (vi) any amount payable to the Owner Participant by any transferee as
the purchase price of the Owner Participant's interest in the Trust Estate,
(vii) all rights of the Owner Participant or the Owner Trustee in and to the
Equity Guaranty and any amounts payable thereunder, (viii) any interest that
pursuant to the Operative Agreements may from time to time accrue in respect of
any of the amounts described in clauses (i) through (vii) above, (ix) proceeds
of any right to enforce the payment of any amount described in clauses (i)
through (viii) above (PROVIDED, that the rights referred to in this clause (ix)
shall not be deemed to include the exercise of any remedies provided for in the
Lease other than the right to sue for specific performance of any covenant to
make such payment or to sue for damages in respect of the breach of any such
covenant) and (x) any right to exercise any election or option or 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, any Excluded Payments.
"EXISTING LEASE" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXISTING LESSOR" means Corcim, Inc., a Delaware corporation.
"EXISTING LESSOR AGREEMENTS" means the Participation Agreement, the
Purchase Agreement Assignment, the Bills of Sale and the Termination Agreement
with respect to the Existing Lease.
"EXISTING MORTGAGE" has the meaning provided in Schedule 3 to the
Participation Agreement.
<PAGE>
"EXISTING MORTGAGEE" means Rolls-Royce plc, a corporation organized
under the laws of England.
"EXISTING MORTGAGEE AGREEMENTS" means the Participation Agreement, the
Equity Guaranty and the Termination Agreement with respect to the Existing
Mortgage.
"EXISTING PARTICIPATION AGREEMENT" has the meaning provided in
Schedule 3 to the Participation Agreement.
"EXISTING SUBLEASE" means the Aircraft Sublease Agreement, dated the
date of the Existing Participation Agreement, between Lessee and Express
relating to the Aircraft.
"EXPENSE LIMIT" has the meaning provided in Schedule 3 to the
Participation Agreement.
"EXPENSES" means any and all liabilities, obligations, losses,
damages, settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"EXPRESS" means Continental Express, Inc., a wholly owned subsidiary
of Lessee.
"EXPRESS SUBLEASE" means the Permitted Sublease, dated as of the date
of the Participation Agreement, between Lessee and Express relating to the
Aircraft.
"FAA" means the Federal Aviation Administration of the United States
or any Government Entity succeeding to the functions of such Federal Aviation
Administration.
"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) delivered to Owner
Trustee on the Closing Date by Existing Lessor.
"FAA FILED DOCUMENTS" means the Lease, Lease Supplement No. 1, the
Express Sublease, the Trust Indenture, the Trust Agreement, the Trust Indenture
Supplement, the FAA Bill of Sale, an application for registration of the
Aircraft with the FAA in the name of Owner Trustee and the Termination
Agreements.
"FAA REGULATIONS" means the Federal Aviation Regulations issued or
promulgated pursuant to the Act from time to time.
"FAIR MARKET RENTAL VALUE" means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's-length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
<PAGE>
willing lessor under no compulsion to lease, the Aircraft, for the applicable
Renewal Lease Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made quarterly, and (c) the Aircraft would be leased during any
such Renewal Term on the same terms and conditions as are set forth in the Lease
with respect to the Base Lease Term.
"FAIR MARKET SALES VALUE" means the fair market sales value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing buyer under no compulsion to buy, and an informed and
willing seller under no compulsion to sell, the Aircraft, in a transaction that
would close on or about the relevant time of determination, assuming (except as
otherwise provided in Section 15.4 of the Lease) that (a) the Aircraft has been
maintained in accordance with, and is in the condition required by, the Lease
and (b) the Aircraft would be delivered to such informed and willing buyer in
the return condition required by the Lease.
"FINANCING STATEMENTS" means, collectively, (a) UCC-1 financing
statements (i) covering the Trust Indenture Estate, by Owner Trustee, as debtor,
showing Mortgagee as secured party, for filing in Utah and each other
jurisdiction that, in the opinion of Mortgagee, is necessary to perfect its Lien
on the Trust Indenture Estate and (ii) covering the Lease and the Aircraft, as a
precautionary matter, by Lessee, as lessee, showing Owner Trustee as lessor and
Mortgagee as assignee of Owner Trustee, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (b) UCC-3 financing statements (i) evidencing the termination of
the Existing Lease and the Existing Sublease, for filing in Texas and each other
jurisdiction that, in the opinion of Owner Trustee and Mortgagee, is reasonably
desirable and (ii) evidencing the release of the Aircraft, Aircraft Documents
and other collateral from the Lien of the Existing Mortgage for filing in
Delaware and each other jurisdiction that, in the opinion of Owner Trustee and
Mortgagee, is reasonably desirable.
"FIRST SECURITY" means First Security Bank, National Association, a
national banking association, not in its capacity as Owner Trustee under the
Trust Agreement, but in its individual capacity.
"GAAP" means generally accepted accounting principles as set forth in
the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be varied
<PAGE>
by any applicable financial accounting rules or regulations issued by the SEC
and, with respect to any person, shall mean such principles applied on a basis
consistent with prior periods except as may be disclosed in such person's
financial statements.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or
similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"INDEMNITEE" means (i) First Security and Owner Trustee, (ii) WTC and
Mortgagee, (iii) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (iv) each Participant, (v) Owner
Participant Parent, (vi) the Trust Estate and the Trust Indenture Estate, (vii)
the Subordination Agent, (viii) the Liquidity Providers, (ix) the Pass Through
Trustees, (x) each Affiliate of the persons described in clauses (i) through
(v), inclusive, (xi) each Affiliate of the persons described in clauses (vi),
(vii), (viii) and (ix), (xii) the respective directors, officers, employees,
agents and servants of each of the persons described in clauses (i) through (v)
inclusive and in clause (x), (xiii) the respective directors, officers,
employees, agents and servants of each of the persons described in clauses
(vii), (viii), (ix) and (xi), (xiv) the successors and permitted assigns of the
persons described in clauses (i) through (v), inclusive, and in clauses (x) and
(xii), and (xv) the successors and permitted assigns of the persons described in
clauses (vii), (viii), (ix), (xi) and (xiii); PROVIDED THAT the persons
described in clauses (vii), (viii), (ix), (xi), (xiii) and (xv) are Indemnitees
only for purposes of Section 9.1 of the Participation Agreement. If any
Indemnitee is Airframe Manufacturer or Engine Manufacturer or any subcontractor
or supplier of either thereof, such Person shall be an Indemnitee only in its
capacity as Owner Participant, Loan Participant or Note Holder.
"INDENTURE AGREEMENTS" means the Participation Agreement, the Lease,
the Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Bills of Sale and any other contract, agreement or instrument
from time to time assigned or pledged under the Trust Indenture.
<PAGE>
"INDENTURE DEFAULT" means any condition, circumstance, act or event
that, with the giving of notice, the lapse of time or both, would constitute an
Indenture Event of Default.
"INDENTURE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 4.02 of the Trust Indenture.
"INDENTURE INDEMNITEE" means (i) WTC and the Mortgagee, (ii) each
separate or additional trustee appointed pursuant to the Trust Indenture, (iii)
the Subordination Agent, (iv) each Liquidity Provider, (v) each Pass Through
Trustee and (vi) each of the respective directors, officers, employees, agents
and servants of each of the persons described in clauses (i) through (v)
inclusive above.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement
among the Pass Through Trustees, the Liquidity Providers and the Subordination
Agent, dated as of the Issuance Date, PROVIDED that, for purposes of any
obligation of Lessee, no amendment, modification or supplement to, or
substitution or replacement of, such Intercreditor Agreement shall be effective
unless consented to by Lessee.
"IRS" means the Internal Revenue Service of the United States or any
Government Entity succeeding to the functions of such Internal Revenue Service.
"ISSUANCE DATE" means September 25, 1997.
"LAW" means (a) any constitution, treaty, statute, law, decree,
regulation, order, rule or directive of any Government Entity, and (b) any
judicial or administrative interpretation or application of, or decision under,
any of the foregoing.
"LEASE" or "LEASE AGREEMENT" means the Lease Agreement ___, dated as
of even date with the Participation Agreement, between Owner Trustee and Lessee.
"LEASE DEFAULT" means any condition, circumstance, act or event that,
with the giving of notice, the lapse of time or both, would constitute a Lease
Event of Default.
"LEASE EVENT OF DEFAULT" means any one or more of the conditions,
circumstances, acts or events set forth in Section 14 of the Lease.
"LEASE SUPPLEMENT" means a supplement to the Lease, in the form of
Exhibit A to the Lease.
<PAGE>
"LEASE SUPPLEMENT NO. 1" means the initial Lease Supplement, dated the
Closing Date.
"LESSEE" means Continental Airlines, Inc., a Delaware corporation.
"LESSEE OPERATIVE AGREEMENTS" means the Participation Agreement, the
Lease, Lease Supplement No. 1, the Express Sublease, the Termination Agreement
with respect to the Existing Sublease and the Tax Indemnity Agreement.
"LESSEE PERSON" means Lessee, any sublessee, assignee, successor or
other user or person in possession of the Aircraft, Airframe or an Engine with
or without color of right, or any Affiliate of any of the foregoing (excluding
any Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any
person using or claiming any rights with respect to the Aircraft, Airframe or an
Engine directly by or through any of the persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
"LESSOR" means Owner Trustee in its capacity as lessor under the
Lease.
"LESSOR LIEN" means, with respect to any person and in respect of any
property (including, without limitation, the Trust Estate, the Trust Indenture
Estate, the Aircraft, Airframe, Engines, Parts or Aircraft Documents) or any
payments, any Lien on such property or payments which (a) arises from claims
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) not related to any of the transactions
contemplated by the Operative Agreements, (b) results from acts or omissions of
such person (if such person is a trustee, whether in its individual capacity or
in its capacity as a trustee) in violation of such person's obligations under
any of the terms of the Operative Agreements, or not related to the transactions
contemplated by the Operative Agreements, (c) is imposed as a result of Taxes
against such person (if such person is a trustee, whether in its individual
capacity or in its capacity as a trustee) or any of its Affiliates not required
to be indemnified by Lessee under the Participation Agreement, or (d) claims
against such person arising out of any transfer by such person of its interest
in the Aircraft, the Trust Estate or the Operative Agreements, other than a
Transfer permitted by the terms of the Operative Agreements or pursuant to the
exercise of remedies set forth in Section 15 of the Lease.
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"LESSOR RENT" means, with respect to any Payment Date, the amount set
forth in Schedule 4 to the Participation Agreement with respect to such Payment
Date.
"LESSOR'S COST" means the amount paid by Owner Trustee to Existing
Lessor to purchase the Aircraft pursuant to the Participation Agreement, and is
designated by Dollar amount in Schedule 3 to the Participation Agreement.
"LETTER AGREEMENT" means the Letter Agreement, dated the date of the
Participation Agreement, between Lessee and Owner Participant, which includes a
statement that it is the Letter Agreement for purposes of this Annex A.
"LIEN" means any mortgage, pledge, lien, charge, claim, encumbrance,
lease or security interest affecting the title to or any interest in property.
"LIQUIDITY FACILITIES" means the three Revolving Credit Agreements
(consisting of a separate Revolving Credit Agreement with the Liquidity Provider
with respect to each Pass Through Trust) between the Subordination Agent, as
borrower, and a Liquidity Provider, each dated as of the Issuance Date, PROVIDED
that, for purposes of any obligation of Lessee, no amendment, modification or
supplement to, or substitution or replacement of, any such Liquidity Facility
shall be effective unless consented to by Lessee.
"LIQUIDITY PROVIDER" means ABN AMRO Bank N.V., Chicago Branch, as a
Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity
Provider (as such terms are defined in the Intercreditor Agreement) under the
respective Liquidity Facilities, or any successor thereto.
"LOAN PARTICIPANTS" mean, until the Closing shall have been
consummated, the Pass Through Trustees, and after the Closing shall have been
consummated, each Note Holder.
"LOSS PAYMENT DATE" means the date on which payment is due pursuant to
Section 10.1.2(a)(i) of the Lease.
"MAINTENANCE PROGRAM" is defined in Annex C to the Lease.
"MAJORITY IN INTEREST OF NOTE HOLDERS" means as of a particular date
of determination, the holders of a majority in aggregate unpaid Original Amount
of all Equipment Notes outstanding as of such date (excluding any Equipment
Notes held by Owner Trustee, Lessee, or Owner Participant or any Affiliate of
any such party or any interests of Owner Trustee or Owner Participant therein by
reason of subrogation pursuant to Section 4.03 of the Trust Indenture (unless
all Equipment Notes then outstanding shall be held by Owner Trustee, Lessee,
<PAGE>
Owner Participant or any Affiliate of any thereof)); PROVIDED that for the
purposes of directing any action or casting any vote or giving any consent,
waiver or instruction hereunder any Note Holder of an Equipment Note or
Equipment Notes may allocate, in such Note Holder's sole discretion, any
fractional portion of the principal amount of such Equipment Note or Equipment
Notes in favor of or in opposition to any such action, vote, consent, waiver or
instruction.
"MAKE-WHOLE AMOUNT" means, with respect to any Equipment Note, an
amount (as determined by an independent investment banker of national standing)
equal to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a quarterly basis on each Payment Date (assuming
a 360-day year of twelve 30-day months) using a discount rate equal to the
Treasury Yield over (b) the outstanding principal amount of such Equipment Note
plus accrued interest to the date of determination. For purposes of determining
the Make-Whole Amount, "Treasury Yield" means, at the date of determination with
respect to any Equipment Note, the interest rate (expressed as a quarterly
equivalent and as a decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield) determined to be the per annum rate equal
to the semi-annual yield to maturity for United States Treasury securities
maturing on the Average Life Date of such Equipment Note and trading in the
public securities markets either as determined by interpolation between the most
recent weekly average yield to maturity for two series of United States Treasury
securities, trading in the public securities markets, (A) one maturing as close
as possible to, but earlier than, the Average Life Date of such Equipment Note
and (B) the other maturing as close as possible to, but later than, the Average
Life Date of such Equipment Note, in each case as published in the most recent
H.15(519) or, if a weekly average yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note is reported
on the most recent H.15(519), such weekly average yield to maturity as published
in such H.15(519) "H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of Governors of the
Federal Reserve System. The date of determination of a Make-Whole Amount shall
be the third Business Day prior to the applicable payment or redemption date and
the "most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or redemption
date.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any
event, condition or circumstance that materially and adversely affects such
<PAGE>
person's business or consolidated financial condition, or its ability to observe
or perform its obligations, liabilities and agreements under the Operative
Agreements.
"MORTGAGED PROPERTY" is defined in Section 3.03 of the Trust
Indenture.
"MORTGAGEE" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as loan trustee under the
Trust Indenture.
"MORTGAGEE AGREEMENTS" means, collectively, the Participation
Agreement and the Trust Indenture.
"MORTGAGEE EVENT" means (i) in the event of a reorganization
proceeding involving the Lessee under Chapter 11 of the Bankruptcy Code, (A) the
trustee in such proceeding or the Lessee not assuming or agreeing to perform its
obligations under the Lease, as contemplated under Section 1110, during the
60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer
period as may apply under Section 1110(b) of the Bankruptcy Code) or (B) at any
time after agreeing to perform or assume such obligations, such trustee or the
Lessee ceasing to perform or assuming such obligations with the result that the
Continuous Stay Period comes to an end or (ii) either the Equipment Notes shall
have become due and payable pursuant to Section 4.04(b) of the Trust Indenture
or Mortgagee has taken action or notified Owner Trustee that it intends to take
action to foreclose the Lien of the Trust Indenture or otherwise commence the
exercise of any significant remedy in accordance with Section 4.04(a) of the
Trust Indenture.
"NET ECONOMIC RETURN" means the Owner Participant's net after-tax
yield utilizing the multiple investment sinking fund method of analysis and
aggregate net after-tax cash flow, computed on the basis of the same methodology
and assumptions as were utilized by the initial Owner Participant in determining
Lessor Rent, Stipulated Loss Value percentages and Termination Value
percentages, as of the Closing Date.
"NET WORTH" means, for any person, the excess of its total assets over
its total liabilities in accordance with GAAP.
"NON-U.S. PERSON" means any Person other than a United States person,
as defined in Section 7701(a)(30) of the Code.
"NOTE HOLDER" means at any time each registered holder of one or more
Equipment Notes.
<PAGE>
"OFFICER'S CERTIFICATE" means, in respect of any party to the
Participation Agreement, a certificate signed by the Chairman, the President,
any Vice President (including those with varying ranks such as Executive,
Senior, Assistant or Staff Vice President), the Treasurer or the Secretary of
such party.
"OPERATIVE AGREEMENTS" means, collectively, the Participation
Agreement, the Trust Agreement, the Purchase Agreement Assignment, the Consent
and Agreement, the Lease, Lease Supplement No. 1, the Trust Indenture, the
initial Trust Indenture Supplement, the Bills of Sale, the Tax Indemnity
Agreement, the Owner Participant Guaranty, the Equipment Notes, the Letter
Agreement and the Termination Agreements.
"OPERATIVE INDENTURES" means each of the indentures under which notes
have been issued and purchased by the Pass Through Trustees.
"OP JURISDICTION" is defined in Schedule 3 to the Participation
Agreement.
"ORIGINAL AMOUNT," with respect to an Equipment Note, means the stated
original principal amount of such Equipment Note and, with respect to all
Equipment Notes, means the aggregate stated original principal amounts of all
Equipment Notes.
"OWNER PARTICIPANT" means the person executing the Participation
Agreement as "Owner Participant" or, if a second person becomes an "Owner
Participant" pursuant to Section 10.1.1 of the Participation Agreement, both of
such persons; PROVIDED that if an Owner Participant Transfers 100% of its
interest to a successor Owner Participant, such transferring Owner Participant
shall thereafter no longer be considered an "Owner Participant."
"OWNER PARTICIPANT AGREEMENTS" means, collectively, the Participation
Agreement, the Tax Indemnity Agreement and the Trust Agreement.
"OWNER PARTICIPANT GUARANTY" means the Guaranty by Corporate Affiliate
of Owner Participant dated the Delivery Date from Owner Participant Parent to
the beneficiaries named therein.
"OWNER PARTICIPANT PARENT" means the person executing the Owner
Participant Guaranty.
"OWNER PARTICIPANT'S PERCENTAGE" means the percentage of Lessor's Cost
allocated to the Owner Participant in Schedule 2 to the Participation Agreement.
"OWNER TRUSTEE" means First Security Bank, National Association, a
national banking association, not in its individual capacity, except as
<PAGE>
expressly provided in any Operative Agreement, but solely as Owner Trustee under
the Trust Agreement.
"OWNER TRUSTEE AGREEMENTS" means, collectively, the Participation
Agreement, the Lease, Lease Supplement No. 1, the Trust Agreement, the Trust
Indenture, the initial Trust Indenture Supplement, the Equipment Notes and the
Purchase Agreement Assignment.
"PARTICIPANTS" means, collectively, Owner Participant and each Loan
Participant and "Participant" means Owner Participant or a Loan Participant,
individually.
"PARTICIPATION AGREEMENT" means the Participation Agreement ___ dated
as of September 25, 1997 among Lessee, Owner Participant, Owner Trustee, the
Pass Through Trustees, Subordination Agent, Mortgagee, the Existing Lessor, the
Existing Mortgagee and Airframe Manufacturer.
"PARTS" means all appliances, parts, components, avionics, landing
gear, instruments, appurtenances, accessories, furnishings, seats and other
equipment of whatever nature (other than (a) Engines or engines, and (b) any
items leased by Lessee from a third party other than Lessor)), that may from
time to time be installed or incorporated in or attached or appurtenant to the
Airframe or any Engine.
"PASS THROUGH AGREEMENTS" means the Pass Through Trust Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letter (as defined
in the Intercreditor Agreement), provided, that no amendment, modification or
supplement to, or substitution or replacement of, any such Fee Letter shall be
effective for purposes of any obligation of Lessee, unless consented to by
Lessee.
"PASS THROUGH CERTIFICATES" means the pass through certificates issued
by the Pass Through Trusts (and any other pass through certificates for which
such pass through certificates may be exchanged).
"PASS THROUGH TRUST" means each of the three separate pass through
trusts created under the Pass Through Trust Agreements.
"PASS THROUGH TRUST AGREEMENT" means each of the three separate Trust
Supplements, together in each case with the Basic Pass Through Trust Agreement,
each dated as of the Issuance Date, by and between the Lessee and Pass Through
Trustee.
<PAGE>
"PASS THROUGH TRUSTEE" means Wilmington Trust Company, a Delaware
banking corporation, in its capacity as trustee under each Pass Through Trust
Agreement.
"PASS THROUGH TRUSTEE AGREEMENTS" means the Participation Agreement,
the Pass Through Trust Agreements, and the Intercreditor Agreement.
"PAYMENT DATE" means the Closing Date and each March 24, June 24,
September 24 and December 24 during the Term, commencing with the first such
date to occur after the Closing Date.
"PAYMENT DEFAULT" means the failure by Lessee to pay any amount of
Basic Rent, Renewal Rent, Stipulated Loss Value or Termination Value when due.
"PAYMENT DUE RATE" is defined in Schedule 1 to the Lease.
"PAYMENT PERIOD" means each of the consecutive quarterly periods
during the Term ending on a Payment Date, the first such period commencing on
and including the Closing Date.
"PERMITTED AIR CARRIER" means (i) any Permitted Foreign Air Carrier,
(ii) any person approved in writing by Lessor or (iii) any U.S. Air Carrier.
"PERMITTED COUNTRY" means any country listed on Schedule 5 to the
Lease.
"PERMITTED FOREIGN AIR CARRIER" means any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
"PERMITTED GOVERNMENT ENTITY" means (i) the U.S. Government or (ii)
any Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
"PERMITTED INSTITUTION" means any bank, trust company, insurance
company, financial institution or corporation (other than, without Lessee's
consent, a commercial air carrier, a commercial aircraft operator, a freight
forwarder or Affiliate of any of the foregoing), in each case with a combined
capital and surplus or net worth of at least $25,000,000.
"PERMITTED LIEN" means any Lien described in clauses (a) through (f),
inclusive, of Section 6 of the Lease.
"PERMITTED SUBLEASE" means a sublease permitted under Section 7.2.7 of
the Lease.
<PAGE>
"PERMITTED SUBLESSEE" means the sublessee under a Permitted Sublease.
"PERSONS" or "PERSONS" means individuals, firms, partnerships, joint
ventures, trusts, trustees, Government Entities, organizations, associations,
corporations, government agencies, committees, departments, authorities and
other bodies, corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.
"PLAN" means any employee benefit plan within the meaning of Section
3(3) of ERISA, or any plan within the meaning of Section 4975(e)(1) of the Code.
"PRELIMINARY NOTICE" is defined in Section 17.1 of the Lease.
"PREMIUM TERMINATION DATE" means August 22, 2008 in the case of the
Series A Equipment Notes, April 30, 2004 in the case of the Series B Equipment
Notes and February 16, 2002 in the case of the Series C Equipment Notes.
"PTT PERCENTAGE" means, with respect to each Pass Through Trustee, the
percentage of Lessor's Cost allocated to such Pass Through Trustee in Schedule 2
to the Participation Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement GPJ-003/96 between
Airframe Manufacturer and Express (including all exhibits thereto, together with
all letter agreements entered into that by their terms constitute part of such
Purchase Agreement), to the extent assigned pursuant to the Purchase Agreement
Assignment.
"PURCHASE AGREEMENT ASSIGNMENT" means the Purchase Agreement
Assignment ___, dated as of even date with the Participation Agreement, between
Existing Lessor and Owner Trustee.
"PURCHASE DATE" means the last Business Day of the Base Lease Term or
any Renewal Lease Term, as specified in any Purchase Notice.
"PURCHASE NOTICE" is defined in Section 17.3.1 of the Lease.
"QIB" is defined in Section 2.08 of the Trust Indenture.
"RENEWAL LEASE TERM" means each two year term for which the Lease is
extended by Lessee, if any, pursuant to the first or second such extensions in
accordance with Section 17 of the Lease.
"RENEWAL NOTICE" is defined in Section 17.2.1 of the Lease.
<PAGE>
"RENEWAL RENT" for the Aircraft means the rent payable therefor in
respect of a Renewal Lease Term determined pursuant to Section 17.2.2 of the
Lease.
"RENT" means, collectively, Basic Rent, Renewal Rent and Supplemental
Rent.
"REPLACEMENT ENGINE" means an engine substituted for an Engine
pursuant to the Lease.
"RETURN ACCEPTANCE SUPPLEMENT" means a Return Acceptance Supplement,
dated as of the date the Aircraft is returned to Lessor pursuant to Section 5 of
the Lease, by Lessor and Lessee substantially in the form of Exhibit B to the
Lease.
"SCHEDULED CLOSING DATE" means the expected Closing Date notified to
Lessee, Existing Lessor, each Participant, Owner Trustee and Mortgagee by
Existing Mortgagee pursuant to Section 4.1 of the Participation Agreement, which
expected Closing Date shall be a Business Day not later than the Commitment
Termination Date.
"SCHEDULED EXPIRATION DATE" is defined in Schedule 1 to the Lease.
"SCHEDULED RENEWAL TERM EXPIRATION DATE" means, in the case of the
first Renewal Lease Term, the second anniversary of the Scheduled Expiration
Date, and in the case of the second Renewal Lease Term, the fourth anniversary
of the Scheduled Expiration Date.
"SEC" means the Securities and Exchange Commission of the United
States, or any Government Entity succeeding to the functions of such Securities
and Exchange Commission.
"SECTION 1110" means 11 U.S.C. ss. 1110 of the Bankruptcy Code or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
"SECTION 1110 EVENT" means the institution of reorganization
proceedings with respect to Lessee under Chapter 11 of the Bankruptcy Code and
the trustee or debtor-in-possession in such proceedings (i) having agreed to
perform its obligations under the Lease with the approval of the applicable
court and thereafter having continued to perform such obligations in accordance
with Section 1110 or (ii) having assumed the Lease with the approval of the
relevant court and thereafter having continued to perform its obligations under
the Lease.
"SECTION 1110 PERIOD" means the continuous period of 60 days, or such
other period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy
<PAGE>
Code, plus an additional period, if any, resulting from the trustee or
debtor-in-possession in such proceeding assuming, or agreeing to perform its
obligations under, the Lease with the approval of the applicable court.
"SECURED OBLIGATIONS" is defined in Section 2.06 of the Trust
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY" means a "security" as defined in Section 2(1) of the
Securities Act.
"SENIOR HOLDER" is defined in Section 2.14(c) of the Trust Indenture.
"SERIES" means any of Series A, Series B or Series C.
"SERIES A" or "SERIES A EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series A" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series A."
"SERIES B" or "SERIES B EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series B" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series B."
"SERIES C" or "SERIES C EQUIPMENT NOTES" means Equipment Notes issued
under the Trust Indenture and designated as "Series C" thereunder, in the
Original Amount and maturities and bearing interest as specified in Schedule I
to the Trust Indenture under the heading "Series C."
"SIMILAR AIRCRAFT" is defined in Schedule 1 to the Lease.
"SLV RATE" is defined in Schedule 1 to the Lease.
"STIPULATED LOSS VALUE" means, with respect to the Aircraft, (a)
during the Base Lease Term, the amount determined by multiplying (i) the
percentage set forth in Schedule 3 to the Lease (as adjusted from time to time
in accordance with Section 3.2.3 of the Lease) opposite the Stipulated Loss
Value Date by (ii) Lessor's Cost and (b) during any Renewal Term, the amount
determined pursuant to Section 17.2.3 of the Lease. Notwithstanding anything to
the contrary in any Operative Agreement, Stipulated Loss Value shall always be
sufficient to pay in full, as of the date of payment thereof (assuming timely
<PAGE>
payment of the Equipment Notes prior to such date), the aggregate unpaid
principal amount of all Equipment Notes outstanding as of such date, together
with accrued and unpaid interest on all such Equipment Notes as of such date.
"STIPULATED LOSS VALUE DATE" means, for any month, the day in such
month specified in Schedule 3 to the Lease or, if such day is not a Business
Day, the immediately succeeding Business Day.
"SUBORDINATION AGENT" means Wilmington Trust Company, as subordination
agent under the Intercreditor Agreement.
"SUBORDINATION AGENT AGREEMENTS" means the Participation Agreement,
the Liquidity Facilities and the Intercreditor Agreement.
"SUPPLEMENTAL RENT" means, without duplication (a) all amounts,
liabilities, indemnities and obligations (other than Basic Rent or Renewal Rent
but including Make-Whole Amount, if any) that Lessee assumes or becomes
obligated to or agrees to pay under any Lessee Operative Agreement to or on
behalf of Lessor or any other person, including, without limitation, payments of
Stipulated Loss Value, Termination Value and payments of indemnities under
Section 9 of the Participation Agreement, (b) any amount payable by Owner
Trustee pursuant to Section 2.15 of the Trust Indenture, to the extent not paid
when due by the Existing Mortgagee pursuant to the Fee Letter (as defined in the
Intercreditor Agreement), PROVIDED that, in calculating any such amount that is
determined based on interest payable on any "Advance" pursuant to any Liquidity
Facility, the interest rate utilized in determining the amount payable by Lessee
hereunder shall be 0.4% per annum less than the interest rate applicable thereto
pursuant to the terms of such Liquidity Facility, and PROVIDED, FURTHER, that
Lessee shall have no obligation to pay any commitment fee payable under any
Liquidity Facility to extent calculated at a rate of 0.4% per annum or less, (c)
Lessee's pro rata share of all compensation and reimbursement of expenses,
disbursements and advances payable by Lessee under the Pass Through Trust
Agreements, and (d) Lessee's pro rata share of all compensation and
reimbursement of expenses and disbursements payable to the Subordination Agent
under the Intercreditor Agreement except with respect to any income or franchise
taxes incurred by the Subordination Agent in connection with the transactions
contemplated by the Intercreditor Agreement. As used herein, "Lessee's pro rata
share" means as of any time a fraction, the numerator of which is the principal
balance then outstanding of Equipment Notes and the denominator of which is the
aggregate principal balance then outstanding of all "Equipment Notes" (as such
term is defined in each of the Operative Indentures).
<PAGE>
"TAX ATTRIBUTE PERIOD" is defined in Section 1(e) of the Tax Indemnity
Agreement.
"TAX INDEMNITEE" means (a) First Security and Owner Trustee, (b) WTC
and Mortgagee, (c) each separate or additional trustee appointed pursuant to the
Trust Agreement or the Trust Indenture, (d) each Participant, (e) the Trust
Estate and the Trust Indenture Estate and (f) the respective successors,
assigns, agents and servants of the foregoing. For purposes of this definition,
the term "Owner Participant" shall include any member of an affiliated group
(within the meaning of Section 1504 of the Code) of which Owner Participant is,
or may become, a member if consolidated, joint or combined returns are filed for
such affiliated group for federal, state or local income tax purposes.
"TAX INDEMNITY AGREEMENT" means the Tax Indemnity Agreement, dated as
of even date with the Participation Agreement, between Lessee and Owner
Participant.
"TAXES" means all license, recording, documentary, registration and
other similar fees and all taxes, levies, imposts, duties, charges, assessments
or withholdings of any nature whatsoever imposed by any Taxing Authority,
together with any penalties, additions to tax, fines or interest thereon or
additions thereto.
"TAXING AUTHORITY" means any federal, state or local government or
other taxing authority in the United States, any foreign government or any
political subdivision or taxing authority thereof, any international taxing
authority or any territory or possession of the United States or any taxing
authority thereof.
"TERM" means the term, commencing on the Closing Date, for which the
Aircraft is leased pursuant to Section 3 of the Lease, and shall include the
Base Lease Term and, if applicable, any Renewal Lease Term; PROVIDED that if at
the scheduled end of the Term the Aircraft or Airframe is being used, or was
within six (6) months prior thereto being used, by the U.S. Government pursuant
to CRAF, the Term shall be deemed extended for the period necessary to
accommodate usage of the Aircraft or Airframe pursuant to CRAF plus six months
thereafter, and Lessee shall be obligated to pay Basic Rent with respect to any
such period of extension at a rate equal to the Basic Rent paid during the Base
Lease Term or the applicable Renewal Lease Term, whichever shall have ended
immediately prior to such extension.
<PAGE>
"TERMINATION AGREEMENTS" means, collectively, the termination
agreement with respect to the Existing Lease, the termination agreement with
respect to the Existing Sublease and the release from the Lien of the Existing
Mortgage, in each case delivered pursuant to Section 5.1.2(xiii) of the
Participation Agreement.
"TERMINATION DATE" means any Payment Date occurring after the end of
the Tax Attribute Period on which the Lease shall terminate in accordance with
Section 9 of the Lease.
"TERMINATION VALUE" means, with respect to the Aircraft, the amount
determined by multiplying (a) the percentage set forth in Schedule 4 to the
Lease (as adjusted from time to time in accordance with Section 3.2.3 of the
Lease) opposite the applicable Payment Date by (b) Lessor's Cost.
Notwithstanding anything to the contrary in any Operative Agreement, Termination
Value shall always be sufficient to pay in full, as of the date of payment
thereof (assuming timely payment of the Equipment Notes prior to such date), the
aggregate unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date.
"THRESHOLD AMOUNT" is defined in Schedule 1 to the Lease.
"TRANSACTIONS" means the transactions contemplated by the
Participation Agreement and the other Operative Agreements to occur on the
Closing Date.
"TRANSACTION EXPENSES" means (a) all costs and expenses incurred by
Existing Mortgagee, Owner Participant, the Pass Through Trustees, the
Subordination Agent, Owner Trustee and Mortgagee in connection with the
preparation, execution and delivery of the Operative Agreements and, in the case
of the Owner Participant and the Equity Guaranty (including, without limitation,
the reasonable fees and expenses of counsel for such parties), (b) all costs and
expenses for the recording or filing of any documents, certificates or
instruments in accordance with any Operative Agreement, including, without
limitation, the FAA Filed Documents and the Financing Statements, (c) one ninth
of (i) the underwriting fees and expenses attributable to the offering and sale
of the Pass Through Certificates and (ii) all costs and expenses incurred by
Existing Mortgagee, the Pass Through Trustees, the Subordination Agent, Owner
Trustee and Mortgagee in connection with the preparation, execution and delivery
of the Pass Through Agreements and the Equity Guaranty (including, without
limitation, the reasonable fees and expenses of counsel for such parties), (d)
the equity placement fee and expenses of Equity Advisor attributable to the
Aircraft, (e) the reasonable fees and disbursements of special counsel in
<PAGE>
Oklahoma City, Oklahoma, in connection with the Closing, (f) all initial and
ongoing fees, disbursements and expenses of Owner Trustee and Mortgagee, and (g)
the fees and expenses of the Appraiser contemplated by Section 5.1.2(xv) of the
Participation Agreement.
"TRANSFER" means the transfer, sale, assignment or other conveyance of
all or any interest in any property, right or interest.
"TRANSFEREE" means a person to which any Owner Participant, Owner
Trustee or any Loan Participant or Note Holder purports or intends to Transfer
any or all of its right, title or interest in the Trust Estate or in its
Equipment Note and the Trust Indenture Estate, respectively, as described in
Section 10.1.1(a), 10.1.2 or 10.1.3 (but excluding participants in any
participation referred to in Section 10.1.3), respectively, of the Participation
Agreement.
"TRUST" means the trust created by the Trust Agreement.
"TRUST AGREEMENT" means the Trust Agreement ___, dated as of even date
with the Participation Agreement, between Owner Participant and Owner Trustee.
"TRUST ESTATE" means all estate, right, title and interest of Owner
Trustee in and to the Aircraft, the Lease, any Lease Supplement and the Purchase
Agreement 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 Owner Participant, Note
Holders or WTC) and requisition, indemnity or other payments of any kind for of
with respect to the Aircraft (except amounts owing to Owner Participant, Note
Holders or WTC, or to any of their respective directors, officers, employees,
servants and agents, pursuant to Section 10 of the Participation Agreement).
Notwithstanding the foregoing, "Trust Estate" shall not include any Excluded
Payment.
"TRUST INDENTURE" means the Trust Indenture and Mortgage ___, dated as
of even date with the Participation Agreement, between Owner Trustee and
Mortgagee.
"TRUST INDENTURE ESTATE" is defined in the "Granting Clause" of the
Trust Indenture.
"TRUST INDENTURE SUPPLEMENT" means a Trust Indenture and Mortgage ___
Supplement, substantially in the form of Exhibit A to the Trust Indenture, with
appropriate modifications to reflect the purpose for which it is being used.
<PAGE>
"TRUST SUPPLEMENT" means an agreement supplemental to the Basic Pass
Through Trust Agreement pursuant to which (i) a separate trust is created for
the benefit of the holders of the Pass Through Certificates of a series, (ii)
the issuance of the Pass Through Certificates of such series representing
fractional undivided interests in such trust is authorized and (iii) the terms
of the Pass Through Certificates of such series are established.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNITED STATES" or "U.S." means the United States of America;
PROVIDED, that for geographic purposes, "United States" means, in aggregate, the
50 states and the District of Columbia of the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is 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 10 or more individuals or
6000 pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations, or
which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"U.S. GOVERNMENT" means the federal government of the United States,
or any instrumentality or agency thereof the obligations of which are guaranteed
by the full faith and credit of the federal government of the United States.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, with respect to any
specified Debt, at the time of the determination thereof the number of years
obtained by dividing the then Remaining Dollar-years of such Debt by the then
outstanding principal amount of such Debt. The term "Remaining Dollar-years"
shall mean the amount obtained by (1) multiplying the amount of each
then-remaining principal payment on such Debt by the number of years (calculated
at the nearest one-twelfth) that will elapse between the date of determination
of the Weighted Average Life to Maturity of such Debt and the date of that
required payment and (2) totaling all the products obtained in clause (1) above.
"WET LEASE" means any arrangement whereby Lessee or a Permitted
Sublessee agrees to furnish the Aircraft, Airframe or any Engine to a third
party pursuant to which the Aircraft, Airframe or Engine shall at all times be
<PAGE>
in the operational control of Lessee or a Permitted Sublessee, provided that
Lessee's obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
"WTC" means Wilmington Trust Company, a Delaware banking corporation,
not in its capacity as Mortgagee under the Trust Indenture, but in its
individual capacity.
<PAGE>
[ANNEXES B, C AND D HAVE BEEN OMITTED FROM THIS DOCUMENT AS
CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
EXHIBIT A - LEASE SUPPLEMENT
LEASE AGREEMENT ___
LEASE SUPPLEMENT NO.__
LEASE SUPPLEMENT No. __, dated ________, 199_, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ___,
dated as of September 25, 1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ___, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 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 of this Lease Supplement 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 to which this Lease Supplement is attached and of which
this Lease Supplement is a part, is being filed for recordation on the date
hereof with the Federal Aviation Administration as one document.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. Lessee has been duly authorized by Lessor to accept, and does
hereby irrevocably accept on behalf of Lessor delivery of the Aircraft from
Airframe Manufacturer under, and for all purposes of, the Aircraft Bill of Sale,
the Participation Agreement and the Purchase Agreement Assignment.
2. Lessor hereby delivers and leases to Lessee under the Lease and
Lessee hereby accepts and leases from Lessor under the Lease the following
described Embraer EMB-145 aircraft (the "Aircraft"), which Aircraft as of the
date hereof consists of the following components:
(i) Airframe: U.S. Registration No. ___________; manufacturer's
serial no. ___________; and
(ii) Engines: two (2) Allison AE3007A engines bearing,
respectively, manufacturer's serial nos. ___________ and ____________(each
of which engines has 750 or more rated takeoff horsepower or the equivalent
of such horsepower).
<PAGE>
3. The Closing Date for the Aircraft is the date of this Lease
Supplement set forth in the opening paragraph hereof.
4. Lessee hereby confirms to Lessor that Lessee has duly and
irrevocably accepted the Aircraft under and for all purposes hereof, of the
Lease and of the other Lessee Operative Agreements.
5. All of the terms and provisions of this Lease Supplement are hereby
incorporated by reference in the Lease to the same extent as if fully set forth
therein.
6. This Lease Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
7. To the extent, if any, that this Lease Supplement constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as in
effect in any applicable jurisdiction), no security interest in this Lease
Supplement may be created through the transfer or possession of any counterpart
other than the original executed counterpart, which shall be identified as the
counterpart containing the receipt therefor executed by the Mortgagee on the
signature page thereof.
[This space intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC., as Lessee
By:_____________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease
Supplement to be duly executed as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC., as Lessee
By:_____________________________________
Name:
Title:
Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged on this ____ day of _________, __________.
WILMINGTON TRUST COMPANY, as Mortgagee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT B - LEASE SUPPLEMENT
LEASE AGREEMENT ___
RETURN ACCEPTANCE SUPPLEMENT
RETURN ACCEPTANCE SUPPLEMENT dated ________, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity, but solely as Owner Trustee under the Trust Agreement ___,
dated as of September 25, 1997, with the Owner Participant named therein (such
Owner Trustee, in its capacity as such Owner Trustee being herein called
"Lessor"), and CONTINENTAL AIRLINES, INC., a Delaware corporation, as Lessee
("Lessee").
Lessor and Lessee have heretofore entered into that certain Lease
Agreement ___, dated as of September 25, 1997, relating to one Embraer Model
EMB-145 aircraft (herein called the "Lease" and the defined terms therein being
hereinafter used with the same meanings). The Lease relates to the Airframe and
Engines described below.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. This Return Acceptance Supplement is executed by Lessor and Lessee
to confirm that on the date hereof the following described Airframe and Engines
were returned by Lessor to Lessee:
(i) Airframe: U.S. Registration No. ______________;
manufacturer's serial no. __________________; and
(ii) Engines: two (2) Allison AE3007A engines bearing,
respectively, manufacturer's serial nos. ____________________________ and
_________________________.
2. This Return Acceptance Supplement is intended to be delivered in
_____________________.
3. Lessor and Lessee agree that the return of the Aircraft is in
compliance with Section 5 and Annex B of the Lease, except as set forth below:
4. Lessor and Lessee agree that the Lease is terminated, except for
the provisions thereof that expressly survive termination.
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have each caused this Return
Acceptance Supplement to be duly executed as of the day and year first above
written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Lessor, not in its
individual capacity, except as expressly
provided herein, but solely as Owner
Trustee under the Trust Agreement
By:_____________________________________
Name:
Title:
CONTINENTAL AIRLINES, INC., as Lessee
By:_____________________________________
Name:
Title:
<PAGE>
SCHEDULE 4 - TERMINATION VALUE
LEASE AGREEMENT ___
[SCHEDULES 1-4 HAVE BEEN OMITTED FROM THIS DOCUMENT AS
CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
<PAGE>
SCHEDULE 5 - PERMITTED COUNTRIES
LEASE AGREEMENT ___
PERMITTED COUNTRIES
<TABLE>
<S> <C>
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile People's Republic of China
Denmark Philippines
Ecuador Portugal
Egypt Republic of China (Taiwan)
Finland Singapore
France South Africa
Germany South Korea
Greece Spain
Hungary Sweden
Iceland Switzerland
India Thailand
Indonesia Tobago
Ireland Trinidad
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
</TABLE>
<PAGE>
ANNEX D - INSURANCE
LEASE AGREEMENT ___
PLACARDS
Leased from
First Security Bank, National Association,
not in its individual capacity but solely as
Owner Trustee, Owner and Lessor
and
Mortgaged to
Wilmington Trust Company,
not in its individual capacity but solely as Mortgagee
================================================================================
TRUST INDENTURE AND MORTGAGE 925
Dated as of September 25, 1997
Between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity,
except as expressly stated herein,
but solely as Owner Trustee,
Owner Trustee
and
WILMINGTON TRUST COMPANY,
not in its individual capacity,
except as expressly stated herein,
but solely as Mortgagee,
Mortgagee
================================================================================
EQUIPMENT NOTES COVERING
ONE EMBRAER EMB-145 AIRCRAFT
BEARING U.S. REGISTRATION MARK N14925
LEASED BY CONTINENTAL AIRLINES, INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C>
GRANTING CLAUSE ...............................................................1
ARTICLE I
DEFINITIONS
ARTICLE II
THE EQUIPMENT NOTES
SECTION 2.01. Form of Equipment Notes.........................................7
SECTION 2.02. Issuance and Terms of Equipment Notes..........................12
SECTION 2.03. Payments from Trust Indenture Estate Only......................13
SECTION 2.04. Method of Payment..............................................15
SECTION 2.05. Application of Payments........................................17
SECTION 2.06. Termination of Interest in Trust Indenture Estate..............17
SECTION 2.07. Registration Transfer and Exchange of Equipment Notes..........17
SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes...........19
SECTION 2.09. Payment of Expenses on Transfer; Cancellation..................19
SECTION 2.10. Mandatory Redemptions of Equipment Notes.......................19
SECTION 2.11. [Reserved].....................................................20
SECTION 2.12. Redemptions; Notice of Redemption..............................20
SECTION 2.13. Option to Purchase Equipment Notes.............................21
SECTION 2.14. Subordination..................................................22
SECTION 2.15. Liquidity Provider Fees and Expenses...........................22
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE
SECTION 3.01. Basic Rent Distribution........................................23
SECTION 3.02. Event of Loss; Replacement; Voluntary Termination; Optional
Redemption.....................................................24
SECTION 3.03. Payments After Event of Default................................25
SECTION 3.04. Certain Payments...............................................27
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
SECTION 3.05. Other Payments.................................................28
SECTION 3.06. Payments to Owner Trustee......................................28
ARTICLE IV
COVENANTS OF OWNER TRUSTEE; EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE
SECTION 4.01. Covenants of Owner Trustee.....................................29
SECTION 4.02. Event of Default...............................................30
SECTION 4.03. Certain Rights.................................................32
SECTION 4.04. Remedies.......................................................33
SECTION 4.05. Return of Aircraft, Etc........................................36
SECTION 4.06. Remedies Cumulative............................................37
SECTION 4.07. Discontinuance of Proceedings..................................37
SECTION 4.08. Waiver of Past Defaults........................................38
SECTION 4.09. Appointment of Receiver........................................38
SECTION 4.10. Mortgagee Authorized to Execute Bills of Sale, Etc.............38
SECTION 4.11. Rights of Note Holders to Receive Payment......................38
ARTICLE V
DUTIES OF THE MORTGAGEE
SECTION 5.01. Notice of Event of Default.....................................39
SECTION 5.02. Action upon Instructions; Certain Rights and Limitations.......39
SECTION 5.03. Indemnification................................................42
SECTION 5.04. No Duties Except as Specified in Trust Indenture or
Instruction....................................................42
SECTION 5.05. No Action Except Under Lease, Trust Indenture or
Instructions...................................................43
SECTION 5.06. Replacement Engines............................................43
SECTION 5.07. Indenture Supplements for Replacements.........................43
SECTION 5.08. Effect of Replacement..........................................43
SECTION 5.09. Investment of Amounts Held by Mortgagee........................43
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
ARTICLE VI
THE OWNER TRUSTEE AND THE MORTGAGEE
SECTION 6.01. Acceptance of Trusts and Duties................................44
SECTION 6.02. Absence of Duties..............................................44
SECTION 6.03. No Representations or Warranties as to Aircraft or Documents...45
SECTION 6.04. No Segregation of Monies; No Interest..........................45
SECTION 6.05. Reliance; Agreements; Advice of Counsel........................46
SECTION 6.06. Capacity in Which Acting.......................................46
SECTION 6.07. Compensation...................................................47
SECTION 6.08. Instructions from Note Holders.................................47
ARTICLE VII
INDEMNIFICATION OF MORTGAGEE BY OWNER TRUSTEE
SECTION 7.01. Scope of Indemnification.......................................47
ARTICLE VIII
SUCCESSOR AND SEPARATE TRUSTEES
SECTION 8.01. Notice of Successor Owner Trustee..............................48
SECTION 8.02. Resignation of Mortgagee; Appointment of Successor.............48
SECTION 8.03. Appointment of Additional and Separate Trustees................49
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS TO TRUST INDENTURE AND OTHER DOCUMENTS
SECTION 9.01. Instructions of Majority; Limitations..........................51
SECTION 9.02. Trustees Protected.............................................53
SECTION 9.03. Documents Mailed to Note Holders...............................53
SECTION 9.04. No Request Necessary for Lease Supplement or Trust Indenture
Supplement.....................................................53
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Termination of Trust Indenture.................................54
<PAGE>
TABLE OF CONTENTS
(Continued)
PAGE
----
SECTION 10.02. No Legal Title to Trust Indenture Estate in Note Holders.......54
SECTION 10.03. Sale of Aircraft by Mortgagee Is Binding.......................54
SECTION 10.04. Trust Indenture for Benefit of Owner Trustee, Mortgagee,
Owner Participant, Note Holders and the Other Indenture
Indemnitees....................................................55
SECTION 10.05. Notices........................................................55
SECTION 10.06. Severability...................................................55
SECTION 10.07. No Oral Modification or Continuing Waivers.....................55
SECTION 10.08. Successors and Assigns.........................................56
SECTION 10.09. Headings.......................................................56
SECTION 10.10. Normal Commercial Relations....................................56
SECTION 10.11. Governing Law; Counterpart Form................................56
SECTION 10.12. Voting by Note Holders.........................................56
SECTION 10.13. Bankruptcy.....................................................57
EXHIBIT A Form of Trust Indenture and Mortgage Supplement
SCHEDULE I Equipment Notes Amortization and Interest Rates
</TABLE>
<PAGE>
TRUST INDENTURE AND MORTGAGE 925
TRUST INDENTURE AND MORTGAGE 925, dated as of September 25, 1997
("Trust Indenture"), between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, except as
expressly stated herein, but solely as Owner Trustee under the Trust Agreement
referred to below (together with its successors under the Trust Agreement, the
"Owner Trustee"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation,
not in its individual capacity, except as expressly stated herein, but solely as
Mortgagee hereunder (together with its successors hereunder, the "Mortgagee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, all capitalized terms used herein shall have the respective
meanings set forth or referred to in Article I hereof;
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 Trust Indenture Estate created
pursuant hereto for the use and benefit of, and with the priority of payment to,
the holders of Equipment Notes issued hereunder, and (ii) the Owner Trustee has
been authorized and directed to execute and deliver this Agreement;
WHEREAS, the parties hereto desire by this Trust Indenture, among
other things, (i) to provide for the issuance by the Owner Trustee of the
Equipment Notes and (ii) to provide for the assignment, mortgage and pledge by
the Owner Trustee to the Mortgagee, as part of the Trust Indenture Estate
hereunder, among other things, of all of the Owner Trustee's right, title and
interest in and to the Aircraft and, except as hereinafter expressly provided,
all of the Owner Trustee's right, title and interest in, to and under the Lease
and the Participation Agreement and all payments and other amounts received
hereunder or thereunder in accordance with the terms hereof or thereof, as
security for, among other things, the Owner Trustee's and the Lessee's
obligations to the Note Holders and the Indenture Indemnitees;
WHEREAS, all things have been done to make the Equipment Notes, when
executed by the Owner Trustee and authenticated and delivered by the Mortgagee
hereunder, the valid, binding and enforceable obligations of the Owner Trustee;
and
WHEREAS, all things necessary to make this Trust Indenture the valid,
binding and legal obligation of the Owner 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 Original Amount of, interest on, Make-Whole
<PAGE>
Amount, if any, and all other amounts due with respect to, all Equipment Notes
from time to time outstanding hereunder according to their tenor and effect and
to secure the performance and observance by the Owner Trustee of all the
agreements, covenants and provisions contained herein and in the Participation
Agreement and the Equipment Notes, for the benefit of the Note Holders, the Loan
Participants and each of the Indenture Indemnitees and the prompt payment of all
amounts from time to time owing hereunder, under the Participation Agreement and
the Lease to the Loan Participants, the Note Holders or any Indenture Indemnitee
by the Owner Trustee or the Lessee 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 Equipment Notes by the
holders thereof, and for 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 Mortgagee, its successors in trust and
assigns, for the security and benefit of the Loan Participants, the Note Holders
and each of the Indenture Indemnitees, a first priority security interest in and
mortgage lien on all right, title and interest of the Owner Trustee in, to and
under the following described property, rights and privileges, whether now or
hereafter acquired, other than Excluded Payments (which, collectively, excluding
Excluded Payments but including all property hereafter specifically subject to
the Lien of this Trust Indenture by the terms hereof or any supplement hereto,
are included within, and are referred to as, the "Trust Indenture Estate"), to
wit:
(1) The Airframe which is one EMBRAER EMB-145 aircraft with the FAA
Registration number of N14925 and the manufacturer's serial number of 145.004
and the Engines with the manufacturer's serial numbers of CAE310005 and
CAE310004, each of which is an Allison engine and is of 750 or more rated
takeoff horsepower or the equivalent of such horsepower (such Airframe and
Engines more particularly described in the Trust Indenture Supplement executed
and delivered as provided herein) as the same is now and will hereafter be
constituted, whether now owned by the Owner Trustee or hereafter acquired,
leased or intended to be leased under the Lease, and in the case of such
Engines, whether or not any such Engine shall be installed in or attached to the
Airframe or any other airframe, together with (a) all Parts of whatever nature,
which are from time to time included within the definitions of "Airframe" or
"Engines", whether now owned or hereafter acquired, including all substitutions,
renewals and replacements of and additions, improvements, accessions and
accumulations to the Airframe and Engines (other than additions, improvements,
accessions and accumulations which constitute appliances, parts, instruments,
appurtenances, accessories, furnishings or other equipment excluded from the
definition of Parts) and (b) all Aircraft Documents;
(2) All right, title, interest, claims and demands of the Owner
Trustee, as Lessor, in, to and under the Lease, together with all rights,
powers, privileges, options and other benefits of the Owner Trustee as lessor
under the Lease, including the immediate and continuing right to receive and
collect all Rent, income, revenues, issues, profits, insurance proceeds,
condemnation awards and other payments, tenders and security now or hereafter
payable to or receivable by the Lessor under the Lease pursuant thereto, and,
subject to Section 5.02 hereof, the right to make all waivers and agreements, to
<PAGE>
give and receive copies of all notices and other instruments or communications,
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 as
Lessor under the Lease, to take such action upon the occurrence of a Lease Event
of Default thereunder, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted by the Lease
or by Law, and to do any and all other things whatsoever which the Owner Trustee
or any lessor is or may be entitled to do under or in respect of the Lease and
any right to restitution from the Lessee or any other Person in respect of any
determination of invalidity of the Lease;
(3) All right, title, interest, claims and demands of the Owner
Trustee in, to and under:
(a) the Purchase Agreement;
(b) the Purchase Agreement Assignment, with the Consent and Agreement
attached thereto;
(c) the Bills of Sale; and
(d) any and all other contracts, agreements and instruments relating
to the Airframe and Engines or any rights or interests therein to which the
Owner Trustee is now or may hereafter be a party;
together with all rights, powers, privileges, licenses, easements, options and
other benefits of the Owner Trustee under each contract, agreement and
instrument referred to in this clause (3), including the right to receive and
collect all payments to the Owner Trustee thereunder now or hereafter payable to
or receivable by the Owner Trustee pursuant thereto and, subject to Section 5.02
hereof, the right to make all waivers and agreements, to give and receive
notices and other instruments or communications, or to take any other action
under or in respect of any thereof or to take such action upon the occurrence of
a default thereunder, including the commencement, conduct and consummation of
legal, administrative or other proceedings, as shall be permitted thereby or by
Law, and to do any and all other things which the Owner Trustee is or may be
entitled to do thereunder and any right to restitution from the Lessee, the
Owner Participant or any other Person in respect of any determination of
invalidity of any thereof;
(4) All rents, issues, profits, revenues and other income of the
property subjected or required to be subjected to the Lien of this Trust
Indenture, including all payments or proceeds payable to the Owner Trustee after
termination of the Lease with respect to the Aircraft as the result of the sale,
lease or other disposition thereof, and all estate, right, title and interest of
every nature whatsoever of the Owner Trustee in and to the same;
(5) Without limiting the generality of the foregoing, all insurance
and requisition proceeds with respect to the Aircraft or any part thereof,
including the insurance required under Section 11 of the Lease;
<PAGE>
(6) Without limiting the generality of the foregoing, all rights of
the Owner Trustee to amounts paid or payable by Lessee to the Owner Trustee
under the Participation Agreement and all rights of the Owner Trustee to enforce
payments of any such amounts thereunder;
(7) Without limiting the generality of the foregoing, all monies and
securities from time to time deposited or required to be deposited with the
Mortgagee pursuant to any terms of this Trust Indenture or the Lease or required
hereby or by the Lease to be held by the Mortgagee hereunder as security for the
obligations of the Lessee under the Lease or of the Owner Trustee hereunder; and
(8) All proceeds of the foregoing;
excluding, however, in all events from each of foregoing clauses (1) through (8)
inclusive all Excluded Payments and the right to specifically enforce the same
or to sue for damages for the breach thereof as provided in Section 5.02 hereof.
Concurrently with the delivery of this Trust Indenture, the Owner
Trustee will deliver to the Mortgagee the original executed counterpart of the
Lease and the Lease Supplement No. 1 (to each of which a chattel paper receipt
is attached), and executed copies of the Participation Agreement and the
Purchase Agreement (to the extent assigned by the Purchase Agreement
Assignment), the Purchase Agreement Assignment, with the Consent and Agreement
attached thereto.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Mortgagee, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the Loan Participants, the Note Holders
and the Indenture Indemnitees, except as provided in Section 2.14 and Article
III hereof without any preference, distinction or priority of any one Equipment
Note over any other by reason of priority of time of issue, sale, negotiation,
date of maturity thereof or otherwise for any reason whatsoever, and for the
uses and purposes and in all cases and as to all property specified in
paragraphs (1) through (8) inclusive above, subject to the terms and provisions
set forth in this Trust Indenture.
It is expressly agreed that anything herein contained to the contrary
notwithstanding, the Owner Trustee shall remain liable under the Indenture
Agreements, to perform all of the obligations assumed by it thereunder, except
to the extent prohibited or excluded from doing so pursuant to the terms and
provisions thereof, and the Mortgagee, the Loan Participants, the Note Holders
and the Indenture Indemnitees shall have no obligation or liability under the
Indenture Agreements, by reason of or arising out of the assignment hereunder,
nor shall the Mortgagee, the Loan Participants, the Note Holders or the
Indenture Indemnitees be required or obligated in any manner to perform or
fulfill any obligations of the Owner Trustee under or pursuant to the Indenture
Agreements, 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.
<PAGE>
The Owner Trustee does hereby constitute the Mortgagee the true and
lawful attorney of the Owner Trustee, irrevocably, granted for good and valuable
consideration and coupled with an interest and with full power of substitution,
and with full power (in the name of the Owner Trustee or otherwise) to ask for,
require, demand, receive, compound and give acquittance for any and all monies
and claims for monies (in each case including insurance and requisition proceeds
but in all cases excluding Excluded Payments) due and to become due under or
arising out of the Indenture Agreements, and all other property which now or
hereafter constitutes part of the Trust Indenture Estate, to endorse any checks
or other instruments or orders in connection therewith and to file any claims or
to take any action or to institute any proceedings which the Mortgagee may deem
to be necessary or advisable in the premises. Without limiting the generality of
the foregoing, but subject to the rights of the Owner Trustee and the Owner
Participant under Sections 2.13, 4.03 and 4.04(a) hereof, during the continuance
of any Event of Default under this Trust Indenture, the Mortgagee shall have the
right under such power of attorney to accept any offer in connection with the
exercise of remedies as set forth herein of any purchaser to purchase the
Airframe and Engines and upon such purchase to execute and deliver in the name
of and on behalf of the Owner Trustee an appropriate bill of sale and other
instruments of transfer relating to the Airframe and Engines, when purchased by
such purchaser, and to perform all other necessary or appropriate acts with
respect to any such purchase, and in its discretion to file any claim or take
any other action or proceedings, either in its own name or in the name of the
Owner Trustee or otherwise, which the Mortgagee may deem necessary or
appropriate to protect and preserve the right, title and interest of the
Mortgagee in and to such Rents and other sums and the security intended to be
afforded hereby; PROVIDED, HOWEVER, that no action of the Mortgagee pursuant to
this paragraph shall increase the obligations or liabilities of the Owner
Trustee to any Person beyond those obligations and liabilities specifically set
forth in this Trust Indenture and in the other Operative Agreements. Under the
Lease, Lessee is directed, so long as this Trust Indenture shall not have been
fully discharged, to make all payments of Rent (other than Excluded Payments)
and all other amounts which are required to be paid to or deposited with the
Owner Trustee pursuant to the Lease (other than Excluded Payments) directly to,
or as directed by, the Mortgagee at such address or addresses as the Mortgagee
shall specify, for application as provided in this Trust Indenture. The Owner
Trustee agrees that promptly upon receipt thereof, it will transfer to the
Mortgagee any and all monies from time to time received by it constituting part
of the Trust Indenture Estate, for distribution by the Mortgagee pursuant to
this Trust Indenture, except that the Owner Trustee shall accept for
distribution pursuant to the Trust Agreement any amounts distributed to it by
the Mortgagee under this Trust Indenture.
The Owner Trustee agrees that at any time and from time to time, upon
the written request of the Mortgagee, 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 Mortgagee may reasonably deem necessary
or desirable to perfect, preserve or protect the mortgage, security interests
and assignments created or intended to be created hereby or to obtain for the
Mortgagee the full benefits of the assignment hereunder and of the rights and
powers herein granted.
<PAGE>
The Owner Trustee does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants and agrees that it will not assign or
pledge, so long as the assignment hereunder shall remain in effect, and the Lien
hereof shall not have been released pursuant to Section 10.01 hereof, any of its
right, title or interest hereby assigned, to anyone other than the Mortgagee,
and that it will not, except as otherwise provided in this Trust Indenture and
except with respect to Excluded Payments to which it is entitled, (i) accept any
payment from Lessee under any Indenture Agreement, (ii) enter into any agreement
amending or supplementing any Indenture Agreement, (iii) execute any waiver or
modification of, or consent under, the terms of, or exercise any rights, powers
or privileges under, any Indenture Agreement, (iv) settle or compromise any
claim arising under any Indenture Agreement or (v) submit or consent to the
submission of any dispute, difference or other matter arising under or in
respect of any Indenture Agreement to arbitration thereunder.
The Owner Trustee does hereby agree that it will not without the
written consent of the Mortgagee:
(a) receive or collect or agree to the receipt or collection of any
payment (other than Excluded Payments) of Rent, including Basic Rent,
Stipulated Loss Value, Termination Value or any other payment to be made
pursuant to Section 9 or 10 of the Lease prior to the date for the payment
thereof provided for by the Lease or assign, transfer or hypothecate (other
than to the Mortgagee hereunder) any payment of Rent, including Basic Rent,
Stipulated Loss Value, Termination Value or any other payment to be made
pursuant to Section 9 or 10 of the Lease, then due or to accrue in the
future under the Lease in respect of the Airframe and Engines; or
(b) except as contemplated by the Trust Agreement in connection with
the appointment of a successor owner trustee, sell, mortgage, transfer,
assign or hypothecate (other than to the Mortgagee hereunder) its interest
in the Airframe and Engines or any part thereof or in any amount to be
received by it from the use or disposition of the Airframe and Engines,
other than amounts distributed to it pursuant to Article III hereof.
It is hereby further agreed that any and all property described or
referred to in the granting clauses hereof which is hereafter acquired by the
Owner Trustee shall IPSO FACTO, and without any other conveyance, assignment or
act on the part of the Owner Trustee or the Mortgagee, become and be subject to
the Lien herein granted as fully and completely as though specifically described
herein, but nothing contained in this paragraph shall be deemed to modify or
change the obligations of the Owner Trustee contained in the foregoing
paragraphs.
The Owner Trustee does hereby ratify and confirm the Lease and does
hereby agree that it will not violate any covenant or agreement made by it
therein, herein or in any other Owner Trustee Agreement.
Notwithstanding the Granting Clause or any of the preceding
paragraphs, all Excluded Payments are hereby excluded from the foregoing sale,
transfer, assignment, grant, pledge and security interest. Further, nothing in
<PAGE>
the Granting Clause or the preceding paragraphs shall impair any of the rights
of the Owner Trustee or the Owner Participant under Section 2.13, 4.03, 4.04,
4.08, 5.02 or 5.03 hereof.
IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto
as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed in the manner described, in Annex A to the Lease.
ARTICLE II
THE EQUIPMENT NOTES
SECTION 2.01. FORM OF EQUIPMENT NOTES.
The Equipment Notes shall be substantially in the form set forth
below:
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE
SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS EQUIPMENT NOTE MAY
NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH
APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE.
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
AS OWNER TRUSTEE UNDER TRUST AGREEMENT ___
DATED AS OF _______________, 1997.
SERIES [_____] LIMITED RECOURSE EQUIPMENT NOTE DUE [____] ISSUED IN
CONNECTION WITH THE EMBRAER MODEL EMB-145 AIRCRAFT BEARING UNITED
STATES REGISTRATION NUMBER N_____.
No. ____ Date: [__________, ____]
$________________________
INTEREST RATE MATURITY DATE
[___________] ___________ [____________]
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in its individual
capacity but solely as Owner Trustee (herein in such capacity called the "Owner
Trustee") under that certain Trust Agreement ___, dated as of ____________,
1997, between the Owner Participant named therein and First Security Bank,
National Association (herein as such Trust Agreement may be supplemented or
amended from time to time called the "Trust Agreement"), hereby promises to pay
to __________________, or the registered assignee thereof, the principal sum of
$____________ (the "Original Amount"), together with interest on the amount of
the Original Amount remaining unpaid from time to time (calculated on the basis
of a year of 360 days comprised of twelve 30-day months) from the date hereof
until paid in full at a rate per annum equal to the Debt Rate. The Original
Amount of this Equipment Note shall be payable in installments on the dates set
forth in Schedule I hereto equal to the corresponding percentage of the Original
Amount of this Equipment Note set forth in Schedule I hereto. Accrued but unpaid
interest shall be due and payable in quarterly installments commencing on
December 24, 1997, and thereafter on March 24, June 24, September 24 and
December 24 of each year, to and including _______________. Notwithstanding the
foregoing, the final payment made on this Equipment Note shall be in an amount
sufficient to discharge in full the unpaid Original Amount and all accrued and
unpaid interest on, and any other amounts due under, this Equipment Note.
Notwithstanding anything to the contrary contained herein, if any date on which
a payment under this Equipment Note becomes due and payable is not a Business
Day, then such payment shall not be made on such scheduled date but shall be
made on the next succeeding Business Day and if such payment is made on such
next succeeding Business Day, no interest shall accrue on the amount of such
payment during such extension.
For purposes hereof, the term "Trust Indenture" means the Trust
Indenture and Mortgage 925, dated as of September 28, 1997, between the Owner
Trustee and Wilmington Trust Company (the "Mortgagee"), as the same may be
<PAGE>
amended or supplemented from time to time. All other capitalized terms used in
this Equipment Note and not defined herein shall have the respective meanings
assigned in the Trust Indenture.
This Equipment Note shall bear interest, payable on demand, at the
Payment Due Rate (calculated on the basis of a year of 360 days comprised of
twelve 30-day months) on any overdue Original Amount, any overdue Make-Whole
Amount, if any, and (to the extent permitted by applicable Law) any overdue
interest and any other amounts payable hereunder which are overdue, in each case
for the period the same is overdue. Amounts shall be overdue if not paid when
due (whether at stated maturity, by acceleration or otherwise).
All payments of Original Amount, interest, Make-Whole Amount, if any,
and other amounts, if any, to be made by the Owner Trustee hereunder and under
the Trust Indenture or the Participation Agreement shall be payable only from
the income and proceeds from the Trust Estate to the extent included in the
Trust Indenture Estate and only to the extent that the Owner Trustee shall have
sufficient income or proceeds from the Trust Estate to the extent included in
the Trust Indenture Estate to enable the Mortgagee to make such payments in
accordance with the terms of Section 2.03 and Article III of the Trust
Indenture, and each holder hereof, by its acceptance of this Equipment Note,
agrees that it will look solely to the income and proceeds from the Trust
Indenture Estate to the extent available for distribution to the holder hereof
as above provided and that none of the Owner Participant, the Owner Trustee and
the Mortgagee is personally liable or liable in any manner extending to any
assets other than the Trust Indenture Estate to the holder hereof for any
amounts payable or any liability under this Equipment Note or, except as
provided in the Trust Indenture or in the Participation Agreement, for any
liability under the Trust Indenture or the Participation Agreement; PROVIDED,
HOWEVER, that nothing herein contained shall limit, restrict or impair the right
of the Mortgagee, subject always to the terms and provisions of the Trust
Indenture, to accelerate the maturity of this Equipment Note upon occurrence of
an Event of Default under the Trust Indenture in accordance with Section 4.04(b)
of the Trust Indenture, to bring suit and obtain a judgment against the Owner
Trustee on this Equipment Note for purposes of realizing upon the Trust
Indenture Estate and to exercise all rights and remedies provided under the
Trust Indenture or otherwise realize upon the Trust Indenture Estate as provided
under the Trust Indenture.
There shall be maintained an Equipment Note Register for the purpose
of registering transfers and exchanges of Equipment Notes at the Corporate Trust
Office of the Mortgagee or at the office of any successor in the manner provided
in Section 2.07 of the Trust Indenture.
The Original Amount and interest and other amounts due hereunder shall
be payable in Dollars in immediately available funds at the Corporate Trust
Office of the Mortgagee, or as otherwise provided in the Trust Indenture. Each
such payment shall be made on the date such payment is due and without any
presentment or surrender of this Equipment Note, except that in the case of any
final payment with respect to this Equipment Note, the Equipment Note shall be
surrendered promptly thereafter to the Mortgagee for cancellation.
<PAGE>
The holder hereof, by its acceptance of this Equipment Note, agrees
that, except as provided in the Trust Indenture, each payment of the Original
Amount, Make-Whole Amount, if any, and interest received by it hereunder shall
be applied, FIRST, to the payment of accrued interest on this Equipment Note (as
well as any interest on any overdue Original Amount, any overdue Make-Whole
Amount, if any, or, to the extent permitted by Law, any overdue interest and
other amounts hereunder) to the date of such payment, SECOND, to the payment of
the Original Amount of this Equipment Note then due, THIRD, to the payment of
Make-Whole Amount, if any, and any other amount due hereunder or under the Trust
Indenture, and FOURTH, the balance, if any, remaining thereafter, to the payment
of installments of the Original Amount of this Equipment Note remaining unpaid
in the inverse order of their maturity.
This Equipment Note is one of the Equipment Notes referred to in the
Trust Indenture which have been or are to be issued by the Owner Trustee
pursuant to the terms of the Trust Indenture. The Trust Indenture Estate is held
by the Mortgagee as security, in part, for the Equipment Notes. The provisions
of this Equipment Note are subject to the Trust Indenture. Reference is hereby
made to the Trust Indenture for a complete statement of the rights and
obligations of the holder of, and the nature and extent of the security for,
this Equipment Note and the rights and obligations of the holders of, and the
nature and extent of the security for, any other Equipment Notes executed and
delivered under the Trust Indenture, as well as for a statement of the terms and
conditions of the Trust created by the Trust Indenture, to all of which terms
and conditions in the Trust Indenture each holder hereof agrees by its
acceptance of this Equipment Note.
As provided in the Trust Indenture and subject to certain limitations
therein set forth, this Equipment Note is exchangeable for a like aggregate
Original Amount of Equipment Notes of different authorized denominations, as
requested by the holder surrendering the same.
Prior to due presentment for registration of transfer of this
Equipment Note, the Owner Trustee and the Mortgagee shall treat the person in
whose name this Equipment Note is registered as the owner hereof for all
purposes, whether or not this Equipment Note be overdue, and neither the Owner
Trustee nor the Mortgagee shall be affected by notice to the contrary.
This Equipment Note is subject to redemption as provided in Sections
2.10, 2.11 and 2.12 of the Trust Indenture but not otherwise. This Equipment
Note is also subject to exchange and to purchase by the Owner Participant or the
Owner Trustee as provided in Section 2.13 of the Trust Indenture but not
otherwise. In addition, this Equipment Note may be accelerated as provided in
Section 4.04 of the Trust Indenture.
[The indebtedness evidenced by this Equipment Note is, to the extent
and in the manner provided in the Trust Indenture, subordinate and subject in
right of payment to the prior payment in full of the Secured Obligations (as
defined in the Trust Indenture) in respect of [Series A Equipment Notes]<F1>
[Series A and Series B Equipment Notes],<F2> and this Equipment Note is issued
subject to such provisions. The Note Holder of this Equipment Note, by accepting
___________________
<F1> To be inserted in the case of a Series B Equipment Note.
<F2> To be inserted in the case of a Series C Equipment Note.
<PAGE>
the same, (a) agrees to and shall be bound by such provisions, (b) authorizes
and directs the Mortgagee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination as provided in the Trust
Indenture and (c) appoints the Mortgagee his attorney-in-fact for such
purpose.]<F3>
Unless the certificate of authentication hereon has been executed by
or on behalf of the Mortgagee by manual signature, this Equipment Note shall not
be entitled to any benefit under the Trust Indenture or be valid or obligatory
for any purpose.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
* * *
IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Note
to be executed in its corporate name by its officer thereunto duly authorized on
the date hereof.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
By:_____________________________________
Name:
Title:
MORTGAGEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the within-mentioned
Trust Indenture.
WILMINGTON TRUST COMPANY, as Mortgagee
By:_____________________________________
Name:
Title:
___________________
<F3> To be inserted for each Equipment Note other than any Series A
Equipment Note.
<PAGE>
SCHEDULE I
EQUIPMENT NOTE AMORTIZATION
Percentage of
Original Amount
Payment Date to Be Paid
[SEE SCHEDULE I TO TRUST INDENTURE
WHICH IS INSERTED UPON ISSUANCE]
* * *
SECTION 2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES.
The Equipment Notes shall be dated the date of issuance thereof, shall
be issued in three separate series consisting of Series A, Series B and Series C
and in the maturities and principal amounts and shall bear interest as specified
in Schedule I hereto. On the date of the consummation of the Transactions, each
Equipment Note shall be issued to the Subordination Agent on behalf of the Pass
Through Trustees under the Pass Through Trust Agreements. The Equipment Notes
shall be issued in registered form only. The Equipment Notes shall be issued in
denominations of $1,000 and integral multiples thereof, except that one
Equipment Note of each Series may be in an amount that is not an integral
multiple of $1,000.
Each Equipment Note shall bear interest at the Debt Rate (calculated
on the basis of a year of 360 days comprised of twelve 30-day months) on the
unpaid Original Amount thereof from time to time outstanding, payable in arrears
on December 24, 1997, and on each March 24, June 24, September 24 and December
24 thereafter until maturity. The Original Amount of each Equipment Note shall
be payable on the dates and in the installments equal to the corresponding
percentage of the Original Amount as set forth in Schedule I hereto which shall
be attached as Schedule I to the Equipment Notes. Notwithstanding the foregoing,
the final payment made under each Equipment Note shall be in an amount
sufficient to discharge in full the unpaid Original Amount and all accrued and
unpaid interest on, and any other amounts due under, such Equipment Note. Each
Equipment Note shall bear interest at the Payment Due Rate (calculated on the
basis of a year of 360 days comprised of twelve 30-day months) on any part of
the Original Amount, Make-Whole Amount, if any, and, to the extent permitted by
applicable Law, interest and any other amounts payable thereunder not paid when
due for any period during which the same shall be overdue, in each case for the
period the same is overdue. Amounts shall be overdue if not paid when due
(whether at stated maturity, by acceleration or otherwise). Notwithstanding
anything to the contrary contained herein, if any date on which a payment under
any Equipment Note becomes due and payable is not a Business Day then such
payment shall not be made on such scheduled date but shall be made on the next
<PAGE>
succeeding Business Day and if such payment is made on such next succeeding
Business Day, no interest shall accrue on the amount of such payment during such
extension.
The Equipment Notes shall be executed on behalf of the Owner Trustee
by its President or one of its Vice Presidents, Assistant Vice Presidents or
Assistant Secretaries or other authorized officer. Equipment Notes bearing the
signatures of individuals who were at any time the proper officers of the Owner
Trustee shall bind the Owner Trustee, notwithstanding that such individuals or
any of them have ceased to hold such offices prior to the authentication and
delivery of such Equipment Notes or did not hold such offices at the respective
dates of such Equipment Notes. The Owner Trustee may from time to time execute
and deliver Equipment Notes with respect to the Aircraft to the Mortgagee for
authentication upon original issue and such Equipment Notes shall thereupon be
authenticated and delivered by the Mortgagee upon the written request of the
Owner Trustee signed by a Vice President or Assistant Vice President or other
authorized officer of the Owner Trustee; PROVIDED, HOWEVER, that each such
request shall specify the aggregate Original Amount of all Equipment Notes to be
authenticated hereunder on original issue with respect to the Aircraft. No
Equipment Note shall be secured by or entitled to any benefit under this Trust
Indenture or be valid or obligatory for any purposes, unless there appears on
such Equipment Note a certificate of authentication in the form provided for
herein executed by the Mortgagee by the manual signature of one of its
authorized officers and such certificate upon any Equipment Notes be conclusive
evidence, and the only evidence, that such Equipment Note has been duly
authenticated and delivered hereunder.
SECTION 2.03. PAYMENTS FROM TRUST INDENTURE ESTATE ONLY.
(a) Without impairing any of the other rights, powers, remedies,
privileges, liens or security interests of the Note Holders under this
Trust Indenture, each Note Holder, by its acceptance of an Equipment Note,
agrees that as between it and the Owner Trustee, except as expressly
provided in this Trust Indenture, the Participation Agreement or any other
Operative Agreement, (i) the obligation to make all payments of the
Original Amount of, interest on, Make-Whole Amount, if any, and all other
amounts due with respect to the Equipment Notes, and the performance by the
Owner Trustee of every obligation or covenant contained in this Trust
Indenture and in the Participation Agreement or any of the other Operative
Agreements, shall be payable only from the income and proceeds from the
Trust Estate to the extent included in the Trust Indenture Estate and only
to the extent that the Owner Trustee shall have sufficient income or
proceeds from the Trust Estate to the extent included in the Trust
Indenture Estate to enable the Mortgagee to make such payments in
accordance with the terms of Article II hereof, and all of the statements,
representations, covenants and agreements made by the Owner Trustee (when
made in such capacity) contained in this Trust Indenture 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 Trust Indenture or such other agreements to the contrary
notwithstanding (except for any express provisions or representations that
the Owner Trustee is responsible for, or is making, in its individual
<PAGE>
capacity, for which there would be personal liability of the Owner
Trustee), no recourse shall be had with respect to this Trust Indenture 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, and (ii) none of
the Owner Trustee, in its individual capacity, the Owner Participant, the
Mortgagee and any officer, director, trustee, servant, employee, agent or
direct or indirect parent or controlling Person or Persons of any of them
shall have any personal liability for any amounts payable hereunder, under
the Participation Agreement or any of the other Operative Agreements or
under the Equipment Notes except as expressly provided herein, in the Lease
or in the Participation Agreement; PROVIDED, HOWEVER, that nothing
contained in this Section 2.03(a) shall be construed to limit the exercise
and enforcement in accordance with the terms of this Trust Indenture or
such other agreements of rights and remedies against the Trust Indenture
Estate.
(b) If (i) all or any part of the Trust Estate becomes the property
of, or the Owner Trustee or Owner Participant becomes, a debtor subject to
the reorganization provisions of the Bankruptcy Code, (ii) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy
Code, 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 Note Holder or the Mortgagee, directly or indirectly (other than the
recourse liability of the Owner Trustee (in its individual capacity) or the
Owner Participant under the Participation Agreement, the Lease or this
Trust Indenture or by separate agreement), to make payment on account of
any amount payable as Original Amount, Make-Whole Amount, if any, interest
or other amounts on the Equipment Notes and (iii) any Note Holder or the
Mortgagee actually receives any Excess Amount (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 Note Holder or the Mortgagee, as the case may be, shall promptly
refund to the Owner Trustee (in its individual capacity) or the Owner
Participant (whichever shall have made such payment) such Excess Amount.
For purposes of this Section 2.03(b), "Excess Amount" means the amount
by which such payment exceeds the amount that would have been received by a Note
Holder or the Mortgagee 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 2.03(b) shall prevent a
Note Holder or the Mortgagee 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, the Lease
or this Trust Indenture (and any exhibits or annexes hereto or thereto) or from
retaining any amount paid by Owner Participant under Section 2.13 or 4.03
hereof.
<PAGE>
SECTION 2.04. METHOD OF PAYMENT.
(a) The Original Amount of, interest on, Make-Whole Amount, if any,
and other amounts due under each Equipment Note or hereunder will be
payable in Dollars by wire transfer of immediately available funds not
later than 11:30 a.m., New York City time, on the due date of payment to
the Mortgagee at the Corporate Trust Office for distribution among the Note
Holders in the manner provided herein. The Owner Trustee shall not have any
responsibility for the distribution of such payment to any Note Holder.
Notwithstanding the foregoing or any provision in any Equipment Note to the
contrary, the Mortgagee will use reasonable efforts to pay or cause to be
paid, if so directed in writing by any Note Holder (with a copy to the
Owner Trustee), all amounts paid by the Owner Trustee hereunder and under
such holder's Equipment Note or Equipment Notes to such holder or a nominee
therefor (including all amounts distributed pursuant to Article III of this
Trust Indenture) by transferring, or causing to be transferred, by wire
transfer of immediately available funds in Dollars, prior to 2:00 p.m., New
York City time, on the due date of payment, to an account maintained by
such holder with a bank located in the continental United States the amount
to be distributed to such holder, for credit to the account of such holder
maintained at such bank. Any payment made hereunder shall be made without
any presentment or surrender of any Equipment Note, except that, in the
case of the final payment in respect of any Equipment Note, such Equipment
Note shall be surrendered to the Mortgagee for cancellation promptly after
such payment. Notwithstanding any other provision of this Trust Indenture
to the contrary, the Mortgagee shall not be required to make, or cause to
be made, wire transfers as aforesaid prior to the first Business Day on
which it is practicable for the Mortgagee to do so in view of the time of
day when the funds to be so transferred were received by it if such funds
were received after 11:30 a.m., New York City time, at the place of
payment. Prior to the due presentment for registration of transfer of any
Equipment Note, the Owner Trustee and the Mortgagee shall deem and treat
the Person in whose name any Equipment Note is registered on the Equipment
Note Register as the absolute owner and holder of such Equipment Note for
the purpose of receiving payment of all amounts payable with respect to
such Equipment Note and for all other purposes, and none of the Owner
Trustee or the Mortgagee shall be affected by any notice to the contrary.
So long as any signatory to the Participation Agreement or nominee thereof
shall be a registered Note Holder, all payments to it shall be made to the
account of such Note Holder specified in Schedule I thereto and otherwise
in the manner provided in or pursuant to the Participation Agreement unless
it shall have specified some other account or manner of payment by notice
to the Mortgagee consistent with this Section 2.04.
(b) The Mortgagee, as agent for the Owner Trustee, shall exclude and
withhold at the appropriate rate from each payment of Original Amount of,
interest on, Make-Whole Amount, if any, and other amounts due hereunder or
under each Equipment Note (and such exclusion and withholding shall
constitute payment in respect of such Equipment Note) any and all United
States withholding taxes applicable thereto as required by Law. The
Mortgagee agrees to act as such withholding agent and, in connection
therewith, whenever any present or future United States taxes or similar
<PAGE>
charges are required to be withheld with respect to any amounts payable
hereunder or in respect of the Equipment Notes, to withhold such amounts
and timely pay the same to the appropriate authority in the name of and on
behalf of the Note Holders, that it will file any necessary United States
withholding tax returns or statements when due, and that as promptly as
possible after the payment thereof it will deliver to each Note Holder
(with a copy to the Owner Trustee and the Lessee) appropriate receipts
showing the payment thereof, together with such additional documentary
evidence as any such Note Holder may reasonably request from time to time.
If a Note Holder which is a Non-U.S. Person has furnished to the
Mortgagee a properly completed, accurate and currently effective U.S. Internal
Revenue Service Form 1001 or W-8 (or such successor form or forms as may be
required by the United States Treasury Department) during the calendar year in
which the payment hereunder or under the Equipment Note(s) held by such holder
is made (but prior to the making of such payment), or in either of the two
preceding calendar years, and has not notified the Mortgagee of the withdrawal
or inaccuracy of such form prior to the date of such payment (and the Mortgagee
has no reason to believe that any information set forth in such form is
inaccurate), the Mortgagee shall withhold only the amount, if any, required by
Law (after taking into account any applicable exemptions properly claimed by the
Note Holder) to be withheld from payments hereunder or under the Equipment Notes
held by such holder in respect of United States federal income tax. If a Note
Holder (x) which is a Non-U.S. Person has furnished to the Mortgagee a properly
completed, accurate and currently effective U.S. Internal Revenue Service Form
4224 in duplicate (or such successor certificate, form or forms as may be
required by the United States Treasury Department as necessary in order to
properly avoid withholding of United States federal income tax), for each
calendar year in which a payment is made (but prior to the making of any payment
for such year), and has not notified the Mortgagee of the withdrawal or
inaccuracy of such certificate or form prior to the date of such payment (and
the Mortgagee has no reason to believe that any information set forth in such
form is inaccurate) or (y) which is a U.S. Person has furnished to the Mortgagee
a properly completed, accurate and currently effective U.S. Internal Revenue
Service Form W-9, if applicable, prior to a payment hereunder or under the
Equipment Notes held by such holder, no amount shall be withheld from payments
in respect of United States federal income tax. If any Note Holder has notified
the Mortgagee that any of the foregoing forms or certificates is withdrawn or
inaccurate, or if such holder has not filed a form claiming an exemption from
United States withholding tax or if the Code or the regulations thereunder or
the administrative interpretation thereof is at any time after the date hereof
amended to require such withholding of United States federal income taxes from
payments under the Equipment Notes held by such holder, the Mortgagee agrees to
withhold from each payment due to the relevant Note Holder withholding taxes at
the appropriate rate under Law and will, on a timely basis as more fully
provided above, deposit such amounts with an authorized depository and make such
returns, statements, receipts and other documentary evidence in connection
therewith as required by Law.
Neither the Owner Trustee nor the Owner Participant shall have any
liability for the failure of the Mortgagee to withhold taxes in the manner
provided for herein or for any false, inaccurate or untrue evidence provided by
any Note Holder hereunder.
<PAGE>
SECTION 2.05. APPLICATION OF PAYMENTS.
In the case of each Equipment Note, each payment of Original Amount,
Make-Whole Amount, if any, and interest due thereon shall be applied:
First: to the payment of accrued interest on such Equipment Note (as
well as any interest on any overdue Original Amount, any overdue Make-Whole
Amount, if any, and to the extent permitted by Law, any overdue interest and any
other overdue amounts thereunder) to the date of such payment;
Second: to the payment of the Original Amount of such Equipment Note
(or a portion thereof) then due thereunder;
Third: to the payment of Make-Whole Amount, if any, and any other
amount due hereunder or under such Equipment Note; and
Fourth: the balance, if any, remaining thereafter, to the payment of
the Original Amount of such Equipment Note remaining unpaid (provided that such
Equipment Note shall not be subject to redemption except as provided in Sections
2.10, 2.11 and 2.12 hereof).
The amounts paid pursuant to clause "Fourth" above shall be applied to
the installments of Original Amount of such Equipment Note in the inverse order
of their normal maturity.
SECTION 2.06. TERMINATION OF INTEREST IN TRUST INDENTURE ESTATE.
No Note Holder nor any other Indenture Indemnitee shall, as such, have
any further interest in, or other right with respect to, the Trust Indenture
Estate when and if the Original Amount of, Make-Whole Amount, if any, and
interest on and other amounts due under all Equipment Notes held by such Note
Holder and all other sums then due and payable to such Note Holder, such
Indenture Indemnitee or the Mortgagee hereunder (including, without limitation,
under Section 2.15 hereof) and under the other Operative Agreements by the Owner
Trustee and the Lessee (collectively, the "Secured Obligations") shall have been
paid in full.
SECTION 2.07. REGISTRATION TRANSFER AND EXCHANGE OF EQUIPMENT NOTES.
The Mortgagee shall keep a register (the "Equipment Note Register") in
which the Mortgagee shall provide for the registration of Equipment Notes and
the registration of transfers of Equipment Notes. No such transfer shall be
given effect unless and until registration hereunder shall have occurred. The
Equipment Note Register shall be kept at the Corporate Trust Office of the
Mortgagee. The Mortgagee is hereby appointed "Equipment Note Registrar" for the
purpose of registering Equipment Notes and transfers of Equipment Notes as
herein provided. A holder of any Equipment Note intending to exchange such
Equipment Note shall surrender such Equipment Note to the Mortgagee at the
Corporate Trust Office, together with a written request from the registered
holder thereof for the issuance of a new Equipment Note, specifying, in the case
<PAGE>
of a surrender for transfer, the name and address of the new holder or holders.
Upon surrender for registration of transfer of any Equipment Note, the Owner
Trustee shall execute, and the Mortgagee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Equipment
Notes of a like aggregate Original Amount and of the same series. At the option
of the Note Holder, Equipment Notes may be exchanged for other Equipment Notes
of any authorized denominations of a like aggregate Original Amount, upon
surrender of the Equipment Notes to be exchanged to the Mortgagee at the
Corporate Trust Office. Whenever any Equipment Notes are so surrendered for
exchange, the Owner Trustee shall execute, and the Mortgagee shall authenticate
and deliver, the Equipment Notes which the Note Holder making the exchange is
entitled to receive. All Equipment Notes issued upon any registration of
transfer or exchange of Equipment Notes (whether under this Section 2.07 or
under Section 2.08 hereof or otherwise under this Trust Indenture) shall be the
valid obligations of the Owner Trustee evidencing the same respective
obligations, and entitled to the same security and benefits under this Trust
Indenture, as the Equipment Notes surrendered upon such registration of transfer
or exchange. Every Equipment Note presented or surrendered for registration of
transfer, shall (if so required by the Mortgagee) be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Mortgagee duly executed by the Note Holder or such holder's attorney duly
authorized in writing, and the Mortgagee shall require evidence satisfactory to
it as to the compliance of any such transfer with the Securities Act, and the
securities Laws of any applicable state. The Mortgagee shall make a notation on
each new Equipment Note of the amount of all payments of Original Amount
previously made on the old Equipment Note or Equipment Notes with respect to
which such new Equipment Note is issued and the date to which interest on such
old Equipment Note or Equipment Notes has been paid. Interest shall be deemed to
have been paid on such new Equipment Note to the date on which interest shall
have been paid on such old Equipment Note, and all payments of the Original
Amount marked on such new Equipment Note, as provided above, shall be deemed to
have been made thereon. The Owner Trustee shall not be required to exchange any
surrendered Equipment Notes as provided above during the ten-day period
preceding the due date of any payment on such Equipment Note. The Owner Trustee
shall in all cases deem the Person in whose name any Equipment Note shall have
been issued and registered as the absolute owner and holder of such Equipment
Note for the purpose of receiving payment of all amounts payable by the Owner
Trustee with respect to such Equipment Note and for all purposes until a notice
stating otherwise is received from the Mortgagee and such change is reflected on
the Equipment Note Register. The Mortgagee will promptly notify the Owner
Trustee and the Lessee of each registration of a transfer of an Equipment Note.
Any such transferee of an Equipment Note, by its acceptance of an Equipment
Note, agrees to the provisions of the Participation Agreement applicable to Note
Holders, and shall be deemed to have covenanted to the parties to the
Participation Agreement as to the matters covenanted by the original Loan
Participant in the Participation Agreement. Subject to compliance by the Note
Holder and its transferee (if any) of the requirements set forth in this Section
2.07, Mortgagee and Owner Trustee shall use all reasonable efforts to issue new
Equipment Notes upon transfer or exchange within 10 Business Days of the date an
Equipment Note is surrendered for transfer or exchange.
<PAGE>
SECTION 2.08. MUTILATED, DESTROYED, LOST OR STOLEN EQUIPMENT NOTES.
If any Equipment Note shall become mutilated, destroyed, lost or
stolen, the Owner Trustee shall, upon the written request of the holder of such
Equipment Note, execute and the Mortgagee shall authenticate and deliver in
replacement thereof a new Equipment Note, payable in the same Original Amount
dated the same date and captioned as issued in connection with the Aircraft. If
the Equipment Note being replaced has become mutilated, such Equipment Note
shall be surrendered to the Mortgagee and a photocopy thereof shall be furnished
to the Owner Trustee. If the Equipment Note being replaced has been destroyed,
lost or stolen, the holder of such Equipment Note shall furnish to the Owner
Trustee and the Mortgagee such security or indemnity as may be required by them
to save the Owner Trustee and the Mortgagee harmless and evidence satisfactory
to the Owner Trustee and the Mortgagee of the destruction, loss or theft of such
Equipment Note and of the ownership thereof. If a "qualified institutional
buyer" of the type referred to in paragraph (a)(1)(i)(A), (B), (D) or (E) of
Rule 144A under the Securities Act (a "QIB") is the holder of any such
destroyed, lost or stolen Equipment Note, then the written indemnity of such
QIB, signed by an authorized officer thereof, in favor of, delivered to and in
form reasonably satisfactory to Lessee, Owner Trustee and Mortgagee shall be
accepted as satisfactory indemnity and security and no further indemnity or
security shall be required as a condition to the execution and delivery of such
new Equipment Note. Subject to compliance by the Note Holder of the requirements
set forth in this Section 2.08, Mortgagee and Owner Trustee shall use all
reasonable efforts to issue new Equipment Notes within 10 Business Days of the
date of the written request therefor from the Note Holder.
SECTION 2.09. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION.
(a) No service charge shall be made to a Note Holder for any
registration of transfer or exchange of Equipment Notes, but the Mortgagee,
as Equipment Note Registrar, may 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 Equipment
Notes.
(b) The Mortgagee shall cancel all Equipment Notes surrendered for
replacement, redemption, transfer, exchange, payment or cancellation and
shall destroy the canceled Equipment Notes.
SECTION 2.10. MANDATORY REDEMPTIONS OF EQUIPMENT NOTES.
(a) On the date on which Lessee is required pursuant to Section 10.1.2
of the Lease to make payment for an Event of Loss with respect to the
Aircraft, all of the Equipment Notes shall be redeemed in whole at a
redemption price equal to 100% of the unpaid Original Amount thereof,
together with all accrued interest thereon to the date of redemption and
all other Secured Obligations owed or then due and payable to the Note
Holders but without Make-Whole Amount.
(b) If the Lease is terminated with respect to the Aircraft by Lessee
pursuant to Section 9 thereof, on the date the Lease is so terminated, all
<PAGE>
the Equipment Notes shall be redeemed in whole at a redemption price equal
to 100% of the unpaid Original Amount thereof, together with accrued
interest thereon to the date of redemption and all other amounts then due
and payable hereunder and under the Participation Agreement and all other
Operative Agreements to the Note Holders plus, if such redemption is made
prior to the Premium Termination Date, Make-Whole Amount, if any.
SECTION 2.11. [RESERVED.]
SECTION 2.12. REDEMPTIONS; NOTICE OF REDEMPTION.
(a) Neither any redemption of any Equipment Note nor any purchase by
the Owner Trustee of any Equipment Note may be made except to the extent
and in the manner expressly permitted by this Trust Indenture. No purchase
of any Equipment Note may be made by the Mortgagee.
(b) Notice of redemption or purchase with respect to the Equipment
Notes shall be given by the Mortgagee by first-class mail, postage prepaid,
mailed not less than 15 nor more than 60 days prior to the applicable
redemption date, to each Note Holder of such Equipment Notes to be redeemed
or purchased, at such Note Holder's address appearing in the Equipment Note
Register; PROVIDED, HOWEVER, that, in the case of a redemption to be made
pursuant to Section 2.10(b), such notice shall be revocable and shall be
deemed revoked in the event that the Lease does not in fact terminate on
the specified 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 Equipment Note, and that, if any
such Equipment Notes are then outstanding, interest on such Equipment Notes
shall cease to accrue on and after such redemption date, and (4) the place
or places where such Equipment Notes are to be surrendered for payment of
the redemption price.
(c) 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 Equipment Notes to be redeemed or purchased on the
redemption date shall not then be held in the Trust Indenture Estate,
deposit or cause to be deposited with the Mortgagee by 12:00 noon on the
redemption date in immediately available funds the redemption price of the
Equipment Notes to be redeemed or purchased.
(d) Notice of redemption or purchase having been given as aforesaid
(and not deemed revoked as contemplated in the proviso to Section 2.12(b)),
the Equipment Notes to be redeemed or purchased shall, on the redemption
date, become due and payable at the Corporate Trust Office of the Mortgagee
or at any office or agency maintained for such purposes pursuant to Section
2.07, and from and after such redemption date (unless there shall be a
default in the payment of the redemption price) any such Equipment Notes
then outstanding shall cease to bear interest. Upon surrender of any such
Equipment Note for redemption or purchase in accordance with said notice,
such Equipment Note shall be redeemed at the redemption price. If any
Equipment Note called for redemption or purchase shall not be so paid upon
<PAGE>
surrender thereof for redemption, the principal amount thereof shall, until
paid, continue to bear interest from the applicable redemption date at the
interest rate in effect for such Equipment Note as of such redemption date.
SECTION 2.13. OPTION TO PURCHASE EQUIPMENT NOTES.
The Owner Trustee and the Owner Participant may, upon the events and
subject to the terms and conditions and for the price set forth in this Section
2.13, purchase all but not less than all of the Equipment Notes outstanding
hereunder, and each Note Holder agrees that it will, upon such events and
subject to such terms and conditions and upon receipt of such price, sell,
assign, transfer and convey to such purchaser or its nominee (without recourse
or warranty of any kind except against Liens on such Equipment Notes arising by,
through or under such holder), all of the right, title and interest of such Note
Holder in and to the Equipment Notes held by it, and such purchaser or its
nominee shall assume all of such holder's obligations under the Participation
Agreement and hereunder.
Such option to purchase the Equipment Notes may be exercised by the
Owner Trustee or the Owner Participant at any time following the occurrence of
any of the following events, and in any such event the purchase price thereof
shall equal for each Equipment Note, the aggregate unpaid Original Amount
thereof, plus accrued and unpaid interest thereon to, but not including, the
date of purchase and all other Secured Obligations owed, or then due and payable
hereunder, to the holder thereof (including under Section 2.15 hereof). Such
option to purchase the Equipment Notes may be exercised (x) in the event there
shall have occurred and be continuing a Lease Event of Default or (y) upon the
Equipment Notes becoming due and payable pursuant to Section 4.04(b) hereof,
PROVIDED, HOWEVER, that if such option is exercised prior to the Premium
Termination Date pursuant to clause (x) at a time when there shall have occurred
and be continuing for less than 180 days a Lease Event of Default, the purchase
price thereof shall equal the price provided in the preceding sentence plus the
Make-Whole Amount, if any.
Such option to purchase the Equipment Notes may be exercised by the
Owner Trustee or the Owner Participant giving irrevocable written notice of its
election of such option to the Mortgagee, which notice shall specify a date for
such purchase at least 15 days but not more than 20 days from the date of such
notice. The Mortgagee shall not exercise any of the remedies hereunder and,
without the consent of the Owner Trustee or the Owner Participant, under the
Lease, during the period from the date of the giving of such notice until the
date on which such purchase is required to occur pursuant to the terms of the
preceding sentence.
If the Owner Trustee or the Owner Participant on or before the date of
such purchase shall so request, the Note Holders will comply with all the
provisions of Section 2.07 to enable new Equipment Notes to be issued to the
Owner Trustee or the Owner Participant or its nominee in such denominations as
the Owner Trustee or the Owner Participant shall request. All taxes, charges and
expenses required pursuant to Section 2.09 in connection with the issuance of
such new Equipment Note shall be borne by the Owner Participant.
<PAGE>
SECTION 2.14. SUBORDINATION.
(a) The Owner Trustee and, by acceptance of its Equipment Notes of any
Series, each Note Holder of such Series, hereby agree that no payment or
distribution shall be made on or in respect of the Secured Obligations owed
to such Note Holder of such Series, including any payment or distribution
of cash, property or securities after the commencement of a proceeding of
the type referred to in Section 4.02(g) hereof, except as expressly
provided in Article III hereof.
(b) By the acceptance of its Equipment Notes of any Series (other than
Series A), each Note Holder of such Series agrees that in the event that
such Note Holder, in its capacity as a Note Holder, shall receive any
payment or distribution on any Secured Obligations in respect of such
Series which it is not entitled to receive under this Section 2.14 or
Article III hereof, it will hold any amount so received in trust for the
Senior Holder (as defined in Section 2.14(c) hereof) and will forthwith
turn over such payment to the Mortgagee in the form received to be applied
as provided in Article III hereof.
(c) As used in this Section 2.14, the term "SENIOR HOLDER" shall mean
(i) the Note Holders of Series A until the Secured Obligations in respect
of Series A Equipment Notes have been paid in full, (ii) after the Secured
Obligations in respect of Series A Equipment Notes have been paid in full,
the Note Holders of Series B until the Secured Obligations in respect of
Series B Equipment Notes have been paid in full and (iii) after the Secured
Obligations in respect of Series B Equipment Notes have been paid in full,
the Note Holders of Series C until the Secured Obligations in respect of
Series C Equipment Notes have been paid in full.
SECTION 2.15. LIQUIDITY PROVIDER FEES AND EXPENSES.
The Owner Trustee agrees to pay to the Mortgagee for distribution, in
accordance with Section 3.04 hereof, the Owner Trustee's pro rata share of all
amounts owed to each Liquidity Provider by the Subordination Agent under each
Liquidity Facility, net of all Investment Earnings on amounts in any Cash
Collateral Account and other than amounts due as (i) repayments of the principal
of Advances thereunder and (ii) interest on any Unpaid Advance (other than the
portion of any Final Advance from time to time on deposit in any Cash Collateral
Account) or Applied Provider Advance except to the extent included in Net
Interest and Related Charges. As used in this Section 2.15, the Owner Trustee's
pro rata share means as of any time:
(A) with respect to all amounts other than Net Interest and Related
Charges, a fraction the numerator of which is the aggregate principal
balance then outstanding of the Equipment Notes issued under this Indenture
and the denominator of which is the aggregate principal balance of all
"Equipment Notes" issued under the Operative Indentures, plus
(B) with respect to all Net Interest and Related Charges, (x) if there
exists a Payment Default under any Equipment Notes issued under this
Indenture, a fraction, the numerator of which is the aggregate principal
<PAGE>
balance then outstanding of Equipment Notes issued under this Indenture and
the denominator of which is the aggregate principal balance then
outstanding of all "Equipment Notes" issued under the Operative Indentures
under which there exists a Payment Default or (y) at all other times, zero.
As used in this Section 2.15, "Net Interest and Related Charges" means the sum
of (i) the amount, if any, by which interest payable to each Liquidity Provider
on any Unpaid Advance and/or Applied Provider Advance exceeds the sum of (x) the
amount which would be payable if such Advances bore interest at the weighted
average Payment Due Rate applicable to amounts in default on all "Equipment
Notes" issued under the Operative Indentures plus (y) any Investment Earnings
from any Final Advance plus (ii) any amount payable under Section 3.1, Section
3.2, Section 3.3, Section 3.9 or Section 7.7 of each Liquidity Facility (or
similar provisions of any replacement Liquidity Facility), which results from
any Unpaid Advance or Applied Provider Advance. As used in this Section 2.15, a
Payment Default when used in connection with Equipment Notes issued hereunder or
"Equipment Notes" issued under any Operative Indenture means a default in the
payment of Original Amount thereof or interest thereon (which default has not
been cured), other than solely because of acceleration. For purposes of this
Section, the terms "Advance", "Applied Provider Advance", "Final Advance",
"Investment Earnings", and "Unpaid Advance" shall have the meanings specified in
each Liquidity Facility.
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE TRUST INDENTURE ESTATE
SECTION 3.01. BASIC RENT DISTRIBUTION.
Except as otherwise provided in Section 3.03 hereof, each installment
of Basic Rent, any payment of interest on overdue installments of Basic Rent and
any payment received by the Mortgagee pursuant to Section 4.03 hereof shall be
promptly distributed in the following order of priority:
FIRST, (i) so much of such installment or payment as shall be required to pay
in full the aggregate amount of the payment or payments of Original
Amount and interest (as well as any interest on any overdue Original
Amount and, to the extent permitted by Law, on any overdue interest)
then due under all Series A Equipment Notes together with all amounts
due pursuant to Section 2.15 shall be distributed to the Note Holders
of Series A ratably, without priority of one over the other, in the
proportion that the amount of such payment or payments then due under
each Series A Equipment Note bears to the aggregate amount of the
payments then due under all Series A Equipment Notes;
(ii) after giving effect to paragraph (i) above, so much of such
installment or payment remaining as shall be required to pay in full
the aggregate amount of the payment or payments of Original Amount and
interest (as well as any interest on any overdue Original Amount and,
<PAGE>
to the extent permitted by Law, on any overdue interest) then due
under all Series B Equipment Notes shall be distributed to the Note
Holders of Series B ratably, without priority of one over the other,
in the proportion that the amount of such payment or payments then due
under each Series B Equipment Note bears to the aggregate amount of
the payments then due under all Series B Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, so much of such
installment or payment remaining as shall be required to pay in full
the aggregate amount of the payment or payments of Original Amount and
interest (as well as any interest on any overdue Original Amount and,
to the extent permitted by Law, on any overdue interest) then due
under all Series C Equipment Notes shall be distributed to the Note
Holders of Series C ratably, without priority of one over the other,
in the proportion that the amount of such payment or payments then due
under each Series C Equipment Note bears to the aggregate amount of
the payments then due under all Series C Equipment Notes; and
SECOND, the balance, if any, of such installment remaining thereafter shall be
distributed to the Owner Trustee; PROVIDED, HOWEVER, that if an Event
of Default shall have occurred and be continuing, then such balance
shall not be distributed as provided in this clause "Second" but shall
be held by the Mortgagee as part of the Trust Indenture Estate and
invested in accordance with Section 5.09 hereof until whichever of the
following shall first occur: (i) all Events of Default shall have been
cured or waived, in which event such balance shall be distributed as
provided in this clause "Second", (ii) Section 3.03 hereof shall be
applicable, in which event such balance shall be distributed in
accordance with the provisions of such Section 3.03, or (iii) the
120th day after the receipt of such payment in which case such payment
shall be distributed as provided in this clause "Second".
SECTION 3.02. EVENT OF LOSS; REPLACEMENT; VOLUNTARY TERMINATION;
OPTIONAL REDEMPTION.
Except as otherwise provided in Section 3.03 hereof, any payments
received by the Mortgagee (i) with respect to the Airframe or the Airframe and
one or more Engines as the result of an Event of Loss, or (ii) pursuant to a
voluntary termination of the Lease pursuant to Section 9 thereof shall be
applied to redemption of the Equipment Notes and to all other Secured
Obligations by applying such funds in the following order of priority:
FIRST, (a) to reimburse the Mortgagee and the Note Holders for any reasonable
costs or expenses incurred in connection with such redemption for
which they are entitled to reimbursement, or indemnity by Lessee,
under the Operative Agreements and then (b) to pay any other amounts
then due to the Mortgagee, the Note Holders and the other Indenture
Indemnitees under this Trust Indenture, the Participation Agreement or
the Equipment Notes;
<PAGE>
SECOND, (i) to pay the amounts specified in paragraph (i) of clause "Third" of
Section 3.03 hereof plus Make-Whole Amount, if any, then due and
payable in respect of the Series A Equipment Notes;
(ii) after giving effect to paragraph (i) above, to pay the amounts
specified in paragraph (ii) of clause "Third" of Section 3.03 hereof
plus Make-Whole Amount, if any, then due and payable in respect of the
Series B Equipment Notes; and
(iii) after giving effect to paragraph (ii) above, to pay the amounts
specified in paragraph (iii) of clause "Third" of Section 3.03 hereof
plus Make-Whole Amount, if any, then due and payable in respect of the
Series C Equipment Notes; and
THIRD, as provided in clause "Fourth" of Section 3.03 hereof.
SECTION 3.03. PAYMENTS AFTER EVENT OF DEFAULT.
Except as otherwise provided in Section 3.04 hereof, all payments
received and amounts held or realized by the Mortgagee (including any amounts
realized by the Mortgagee from the exercise of any remedies pursuant to Section
15 of the Lease or Article IV hereof) after an Event of Default shall have
occurred and be continuing and after the declaration or other acceleration of
the Equipment Notes specified in Section 4.04(b) hereof, as well as all payments
or amounts then held by the Mortgagee as part of the Trust Indenture Estate,
shall be promptly distributed by the Mortgagee in the following order of
priority:
FIRST, so much of such payments or amounts as shall be required to (i)
reimburse the Mortgagee or WTC for any tax (except to the extent
resulting from a failure of the Mortgagee to withhold taxes pursuant
to Section 2.04(b) hereof), expense or other loss (including, without
limitation, all amounts to be expended at the expense of, or charged
upon the rents, revenues, issues, products and profits of, the
property included in the Trust Indenture Estate (all such property
being herein called the "Mortgaged Property") pursuant to Section
4.05(b) hereof) incurred by the Mortgagee or WTC (to the extent not
previously reimbursed), the expenses of any sale, or other proceeding,
reasonable attorneys' fees and expenses, court costs, and any other
expenditures incurred or expenditures or advances made by the
Mortgagee, WTC or the Note Holders in the protection, exercise or
enforcement of any right, power or remedy or any damages sustained by
the Mortgagee, WTC or any Note Holder, liquidated or otherwise, upon
such Event of Default shall be applied by the Mortgagee as between
itself, WTC and the Note Holders in reimbursement of such expenses and
any other expenses for which the Mortgagee, WTC or the Note Holders
are entitled to reimbursement under any Operative Agreement and (ii)
pay all amounts payable to the other Indenture Indemnitees hereunder
and under the Participation Agreement and the Lease; and in the case
the aggregate amount to be so distributed is insufficient to pay as
aforesaid in clauses (i) and (ii), then ratably, without priority of
one over the other, in proportion to the amounts owed each hereunder;
<PAGE>
SECOND, so much of such payments or amounts remaining as shall be required to
reimburse the then existing or prior Note Holders for payments made
pursuant to Section 5.03 hereof (to the extent not previously
reimbursed) shall be distributed to such then existing or prior Note
Holders ratably, without priority of one over the other, in accordance
with the amount of the payment or payments made by each such then
existing or prior Note Holder pursuant to said Section 5.03 hereof;
THIRD, (i) so much of such payments or amounts remaining as shall be required
to pay in full the aggregate unpaid Original Amount of all Series A
Equipment Notes, and the accrued but unpaid interest and other amounts
due thereon (other than Make-Whole Amount which shall not be due and
payable) and all other Secured Obligations in respect of the Series A
Equipment Notes (other than Make-Whole Amount) to the date of
distribution, shall be distributed to the Note Holders of Series A,
and in case the aggregate amount so to be distributed shall be
insufficient to pay in full as aforesaid, then ratably, without
priority of one over the other, in the proportion that the aggregate
unpaid Original Amount of all Series A Equipment Notes held by each
holder plus the accrued but unpaid interest and other amounts due
hereunder or thereunder (other than Make-Whole Amount, if any) to the
date of distribution, bears to the aggregate unpaid Original Amount of
all Series A Equipment Notes held by all such holders plus the accrued
but unpaid interest and other amounts due thereon (other than
Make-Whole Amount) to the date of distribution;
(ii) after giving effect to paragraph (i) above, so much of such
payments or amounts remaining as shall be required to pay in full the
aggregate unpaid Original Amount of all Series B Equipment Notes, and
the accrued but unpaid interest and other amounts due thereon (other
than Make-Whole Amount which shall not be due and payable) and all
other Secured Obligations in respect of the Series B Equipment Notes
(other than Make-Whole Amount) to the date of distribution, shall be
distributed to the Note Holders of Series B, and in case the aggregate
amount so to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other, in
the proportion that the aggregate unpaid Original Amount of all Series
B Equipment Notes held by each holder plus the accrued but unpaid
interest and other amounts due hereunder or thereunder (other than the
Make-Whole Amount, if any) to the date of distribution, bears to the
aggregate unpaid Original Amount of all Series B Equipment Notes held
by all such holders plus the accrued but unpaid interest and other
amounts due thereon (other than the Make-Whole Amount) to the date of
distribution; and
(iii) after giving effect to paragraph (ii) above, so much of such
payments or amounts remaining as shall be required to pay in full the
aggregate unpaid Original Amount of all Series C Equipment Notes, and
the accrued but unpaid interest and other amounts due thereon (other
than Make-Whole Amount which shall not be due and payable) and all
other Secured Obligations in respect of the Series C Equipment Notes
<PAGE>
(other than Make-Whole Amount) to the date of distribution, shall be
distributed to the Note Holders of Series C, and in case the aggregate
amount so to be distributed shall be insufficient to pay in full as
aforesaid, then ratably, without priority of one over the other, in
the proportion that the aggregate unpaid Original Amount of all Series
C Equipment Notes held by each holder plus the accrued but unpaid
interest and other amounts due hereunder or thereunder (other than the
Make-Whole Amount, if any) to the date of distribution, bears to the
aggregate unpaid Original Amount of all Series C Equipment Notes held
by all such holders plus the accrued but unpaid interest and other
amounts due thereon (other than the Make-Whole Amount) to the date of
distribution; and
FOURTH, the balance, if any, of such payments or amounts remaining thereafter
shall be distributed to the Owner Trustee.
No Make-Whole Amount shall be due and payable on the Equipment Notes
as a consequence of the acceleration of the Equipment Notes as a result of an
Event of Default.
SECTION 3.04. CERTAIN PAYMENTS.
(a) Any payments received by the Mortgagee for which no provision as
to the application thereof is made in this Trust Indenture and for which
such provision is made in the Lease or the Participation Agreement shall be
applied forthwith to the purpose for which such payment was made in
accordance with the terms of the Lease or the Participation Agreement, as
the case may be.
(b) Notwithstanding anything to the contrary contained in this Article
III, the Mortgagee will distribute promptly upon receipt any indemnity
payment received by it from the Owner Trustee or Lessee in respect of the
Mortgagee in its individual capacity, any Note Holder or any other
Indenture Indemnitee, in each case whether pursuant to Section 9 of the
Participation Agreement or as Supplemental Rent, directly to the Person
entitled thereto. Any payment received by the Mortgagee under Section 2.15
shall be distributed to the Subordination Agent to be distributed in
accordance with the terms of the Intercreditor Agreement.
(c) Notwithstanding anything to the contrary contained in this Article
III, any payments received by the Mortgagee which constitute Excluded
Payments shall be distributed promptly upon receipt by the Mortgagee
directly to the Person or Persons entitled thereto.
(d) Notwithstanding any provision of this Trust Indenture to the
contrary, any amounts held by Mortgagee pursuant to the terms of the Lease
shall be held by the Mortgagee as security for the obligations of Lessee
under the Lessee Operative Agreements and, if and when required by the
Lease, paid and/or applied in accordance with the applicable provisions of
the Lease.
<PAGE>
SECTION 3.05. OTHER PAYMENTS.
Any payments received by the Mortgagee for which no provision as to
the application thereof is made in the Lease, the Participation Agreement,
elsewhere in this Trust Indenture or in any other Operative Agreement shall be
distributed by the Mortgagee to the extent received or realized at any time (i)
prior to the payment in full of all Secured Obligations due the Note Holders, in
the order of priority specified in Section 3.01 hereof subject to the proviso
thereto, and (ii) after payment in full of all Secured Obligations, in the
following order of priority:
FIRST, to the extent payments or amounts described in clause "First" of
Section 3.03 hereof are otherwise obligations of Lessee under the
Operative Agreements or for which the Lessee is obligated to indemnify
against thereunder, in the manner provided in clause "First" of
Section 3.03 hereof, and
SECOND, in the manner provided in clause "Fourth" of Section 3.03 hereof.
Further, and except as otherwise provided in Sections 3.02, 3.03 and
3.04 hereof, all payments received and amounts realized by the Mortgagee under
the Lease or otherwise with respect to the Aircraft (including, without
limitation, all amounts realized upon the sale or release of the Aircraft after
the termination of the Lease with respect thereto), to the extent received or
realized at any time after payment in full of all Secured Obligations due the
Note Holders, shall be distributed by the Mortgagee in the order of priority
specified in clause second of the immediately preceding sentence of this Section
3.05.
SECTION 3.06. PAYMENTS TO OWNER TRUSTEE.
Any amounts distributed hereunder by the Mortgagee to the Owner
Trustee shall be paid to the Owner Trustee (within the time limits contemplated
by Section 2.04(a)) by wire transfer of funds of the type received by the
Mortgagee 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
Mortgagee from time to time. The Owner Trustee hereby notifies the Mortgagee
that unless and until the Mortgagee receives notice to the contrary from the
Owner Trustee, all amounts to be distributed to the Owner Trustee pursuant to
clause "Second" of Section 3.01 or clause "Fourth" of Section 3.03 hereof shall
be distributed by wire transfer of funds of the type received by the Mortgagee
to the Owner Participant's account (within the time limits contemplated by
Section 2.04(a)) specified in Schedule 1 to the Participation Agreement.
<PAGE>
ARTICLE IV
COVENANTS OF OWNER TRUSTEE; EVENTS OF
DEFAULT; REMEDIES OF MORTGAGEE
SECTION 4.01. COVENANTS OF OWNER TRUSTEE.
The Owner Trustee hereby covenants and agrees (the covenants and
agreements only in clause (b) below being made by the Owner Trustee in its
individual capacity) as follows:
(a) the Owner Trustee will duly and punctually pay the Original Amount
of, Make-Whole Amount, if any, and interest on and other amounts due under
the Equipment Notes and hereunder in accordance with the terms of the
Equipment Notes and this Trust Indenture and all amounts, if any, payable
by it to the Note Holders under the Participation Agreement or Section 9 of
the Lease;
(b) the Owner Trustee in its individual capacity covenants and agrees
that it shall not, directly or indirectly, cause or permit to exist a
Lessor Lien attributable to it in its individual capacity with respect to
the Aircraft or any other portion of the Trust Estate; that it will
promptly, at its own expense, take such action as may be necessary to duly
discharge such Lessor Lien attributable to it in its individual capacity;
and that it will make restitution to the Trust Indenture Estate for any
actual diminution of the assets of the Trust Estate resulting from such
Lessor Liens attributable to it in its individual capacity;
(c) in the event the Owner Trustee shall have Actual Knowledge of an
Event of Default, a Default or an Event of Loss, the Owner Trustee will
give prompt written notice of such Event of Default, Default or Event of
Loss to the Mortgagee, each Note Holder, Lessee and the Owner Participant;
(d) the Owner Trustee will furnish to the Note Holders and the
Mortgagee, promptly upon receipt thereof, duplicates or copies of all
reports, notices, requests, demands, certificates and other instruments
furnished to the Owner Trustee under the Lease, including, without
limitation, a copy of each report or notice received pursuant to Section 9
or 8.2 or Annex D, Paragraph E of the Lease to the extent that the same
shall not have been furnished or is not required to be furnished by the
Lessee to the Note Holders or the Mortgagee pursuant to the Lease;
(e) except with the consent of the Mortgagee (acting pursuant to
instructions given in accordance with Section 9.01 hereof) or as provided
in Section 2 of the Participation Agreement, the Owner Trustee will not
contract for, create, incur, assume or suffer 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
<PAGE>
(f) the Owner Trustee will not enter into any business or other
activity other than the business of owning the Aircraft, the leasing
thereof to Lessee and the carrying out of the transactions contemplated
hereby and by the Lease, the Participation Agreement and the Trust
Agreement and the other Operative Agreements.
SECTION 4.02. EVENT OF DEFAULT.
"Event of Default" means any of the following events (whatever the
reason for such Event of Default and whether 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):
(a) any Lease Event of Default (provided that any such Lease Event of
Default caused solely by a failure of Lessee to pay to the Owner Trustee or
the Owner Participant when due any amount that is included in the
definition of Excluded Payments shall not constitute an Event of Default
unless notice is given by the Owner Trustee to the Mortgagee that such
failure shall constitute an Event of Default); or
(b) the failure of the Owner Trustee to pay when due any payment of
Original Amount of, interest on, Make-Whole Amount, if any, or other amount
due and payable under any Equipment Note or hereunder (other than as a
result of a Lease Event of Default or a Lease Default) and such failure
shall have continued unremedied for ten Business Days in the case of any
payment of Original Amount or interest or Make-Whole Amount, if any,
thereon and, in the case of any other amount, for ten Business Days after
the Owner Trustee or the Owner Participant receives written demand from the
Mortgagee or any Note Holder; or
(c) any Lien required to be discharged by the Owner Trustee, in its
individual capacity pursuant to Section 4.01(b) hereof or in its individual
or trust capacity pursuant to Section 7.3.1 of the Participation Agreement,
or by the Owner Participant pursuant to Section 7.2.1 of the Participation
Agreement shall remain undischarged for a period of 30 days after the Owner
Trustee or the Owner Participant, as the case may be, shall have received
written notice from the Mortgagee or any Note Holder of such Lien; or
(d) any representation or warranty made by the Owner Participant or
the Owner Trustee in the Participation Agreement or this Trust Indenture or
in any certificate furnished by the Owner Participant or the Owner Trustee
to the Mortgagee or any Note Holder in connection with the transactions
contemplated by the Operative Agreements shall prove to have been false or
incorrect when made in any material respect and continues to be material
and adverse to the interests of the Mortgagee or the Note Holders; and if
such misrepresentation is capable of being corrected and if such correction
is being sought diligently, such misrepresentation shall not have been
corrected within 60 days (or, without affecting Section 4.02(f) hereof, in
the case of the representation made in Section 6.3.6 or 6.2.6 of the
Participation Agreement as to citizenship of the Owner Trustee in its
individual capacity or of the Owner Participant, respectively, as soon as
is reasonably practicable but in any event within 60 days) following notice
<PAGE>
thereof from the Mortgagee or any Note Holder to the Owner Trustee or the
Owner Participant, as the case may be; or
(e) other than as provided in (c) above or (f) below, any failure by
the Owner Trustee or Owner Participant to observe or perform any other
covenant or obligation of the Owner Trustee or Owner Participant, as the
case may be, for the benefit of the Mortgagee or the Note Holders contained
in the Participation Agreement, Section 4.2.1 of the Trust Agreement, the
Equipment Notes or this Trust Indenture which is not remedied within a
period of 60 days after notice thereof has been given to the Owner Trustee
and the Owner Participant; or
(f) if at any time when the Aircraft is registered under the Laws of
the United States, the Owner Participant shall not be a "citizen of the
United States" within the meaning of Section 40102(a)(15) of Part A of
Subtitle VII of Title 49, United States Code, and as the result thereof the
registration of the Aircraft under the Act, and regulations then applicable
thereunder, shall cease to be effective; provided that no Event of Default
shall be deemed to have occurred under this paragraph (f) unless such
circumstances continue unremedied for more than 30 days after the Owner
Participant has Actual Knowledge of the state of facts that resulted in
such ineffectiveness and of such loss of citizenship; or
(g) at any time either (i) the commencement of an involuntary case or
other proceeding in respect of the Owner Participant, the Owner Trustee,
the Trust or the Trust Estate 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 seeking
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Owner Participant, the Owner
Trustee, the Trust or the Trust Estate 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 and
unstayed for a period of 60 consecutive days; or (ii) the commencement by
the Owner Participant, the Owner Trustee, the Trust or the Trust Estate of
a voluntary case or proceeding 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 the Owner Participant, the Owner Trustee, the Trust or the Trust
Estate to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Owner Participant, the Owner Trustee, the Trust or the
Trust Estate or for all or substantially all of its property, or the making
by the Owner Participant, the Owner Trustee, the Trust or the Trust Estate
of any assignment for the benefit of creditors or the Owner Participant or
the Owner Trustee shall take any action to authorize any of the foregoing;
PROVIDED, HOWEVER, that an event referred to in this Section 4.02(g) with
respect to the Owner Participant shall not constitute an Event of Default
if within 30 days of the commencement of the case or proceeding a final
non-appealable order, judgment or decree shall be entered in such case or
proceeding by a court or a trustee, custodian, receiver or liquidator, to
the effect that, no part of the Trust Estate (except for the Owner
<PAGE>
Participant's beneficial interest therein) and no right, title or interest
under the Trust Indenture Estate shall be included in, or be subject to,
any declaration or adjudication of, or proceedings with respect to, the
bankruptcy, insolvency or liquidation of the Owner Participant referred to
in this Section 4.02(g).
SECTION 4.03. CERTAIN RIGHTS.
The Mortgagee shall give the Note Holders, the Owner Trustee and the
Owner Participant prompt written notice of any Event of Default of which the
Mortgagee has Actual Knowledge and shall give the Note Holders, the Owner
Trustee and the Owner Participant not less than ten Business Days' prior written
notice of the date (the "Enforcement Date") on or after which the Mortgagee may,
subject to the limitation set forth in Section 4.04(a), commence and consummate
the exercise of any remedy or remedies described in Section 4.04, 4.05 or 4.06
hereof; PROVIDED, HOWEVER, that in the event the Mortgagee shall have validly
terminated the Lease, without the prior written consent of the Owner
Participant, the Mortgagee shall not sell or lease, or otherwise afford the use
of, the Aircraft or any portion thereof to the Lessee or any Affiliate thereof.
Without limiting the generality of the foregoing, the Mortgagee shall give the
Owner Trustee, the Owner Participant and the Lessee at least ten Business Days'
prior written notice (which may be given concurrently with notice of the
Enforcement Date) of any declaration of the Lease to be in default pursuant to
Sections 14 and 15 of the Lease or any termination of the Lease or of the
exercise of any remedy or remedies pursuant to Section 15 of the Lease. If an
Event of Default shall have occurred and be continuing, the Owner Trustee shall
have the rights set forth below, any of which may be exercised directly by the
Owner Participant.
If as a result of the occurrence of an Event of Default in respect of
the nonpayment by Lessee of Basic Rent due under the Lease, the Mortgagee shall
have insufficient funds to make any payment of Original Amount and interest on
any Equipment Note on the day it becomes due and payable, the Owner Trustee may,
but shall not be obligated to pay the Mortgagee prior to the Enforcement Date,
in the manner provided in Section 2.04 hereof, for application in accordance
with Section 3.01 hereof, an amount equal to the portion of the Original Amount
and interest (including interest, if any, on any overdue payments of such
portion of Original Amount and interest) then due and payable on the Equipment
Notes, and, unless the Owner Trustee has cured Events of Default in respect of
payments of Basic Rent on each of the six immediately preceding Basic Rent
payment dates, or the Owner Trustee has cured twelve previous Events of Default
in respect of payments of Basic Rent, such payment by the Owner Trustee shall,
solely for purposes of this Trust Indenture be deemed to cure any Event of
Default which would otherwise have arisen on account of the nonpayment by Lessee
of such installment of Basic Rent (but not any other Default or Event of Default
which shall have occurred and be continuing).
If any Event of Default (other than in respect of the nonpayment of
Basic Rent by the Lessee) which can be cured by the payment of money has
occurred, the Owner Trustee may, but shall not be obligated to, cure such Event
of Default by making such payment prior to the Enforcement Date as is necessary
to accomplish the observance or performance of the defaulted covenant, condition
or agreement to the party entitled to the same.
<PAGE>
Except as hereinafter in this Section 4.03 provided, the Owner Trustee
shall not, as a result of exercising the right to cure any such Event of
Default, obtain any Lien on any of the Mortgaged Property or any Rent payable
under the Lease for or on account of costs or expenses incurred in connection
with the exercise of such right, nor shall any claim of the Owner Trustee
against Lessee or any other party for the repayment of such costs or expenses
impair the prior right and security interest of the Mortgagee in and to the
Mortgaged Property. Upon any payment by the Owner Trustee pursuant to the first
or second preceding paragraphs of this Section 4.03, the Owner Trustee shall be
subrogated to the rights of the Mortgagee and the Note Holders in respect of the
Basic Rent which was overdue at the time of such payment and interest payable by
the Lessee on account of its being overdue and any Supplemental Rent in respect
of the reimbursement of amounts paid by Owner Trustee pursuant to the
immediately preceding paragraph (but in either case shall have no rights as a
secured party hereunder), and thereafter, the Owner Trustee shall be entitled
(so long as the application thereof shall not give rise to an Event of Default
hereunder) to receive such overdue Basic Rent or Supplemental Rent, as the case
may be, and interest thereon upon receipt thereof by the Mortgagee; PROVIDED,
HOWEVER, that (i) if the Original Amount and interest on the Equipment Notes
shall have become due and payable pursuant to Section 4.04(b) hereof, such
subrogation shall, until the Secured Obligations shall have been paid in full,
be subordinate to the rights of the Mortgagee, the Note Holders and the
Indenture Indemnitees in respect of such payment of overdue Basic Rent,
Supplemental Rent and such interest and (ii) the Owner Trustee shall not
otherwise attempt to recover any such amount paid by it on behalf of the Lessee
pursuant to this Section 4.03 except by demanding of the Lessee payment of such
amount, or by commencing an action at law against the Lessee and obtaining and
enforcing a judgment against the Lessee for the payment of such amount or taking
appropriate action in a pending action at law against the Lessee (PROVIDED,
HOWEVER, that at no time while an Event of Default shall have occurred and be
continuing shall any such demand be made or shall any such action be commenced
(or continued) and any amounts nevertheless received by the Owner Trustee in
respect thereof shall be held in trust for the benefit of, and promptly paid to,
the Mortgagee for distribution as provided in Section 3.03 hereof).
Neither the Owner Trustee nor the Owner Participant shall have the
right to cure any Lease Event of Default or Lease Default except as specified in
this Section 4.03.
SECTION 4.04. REMEDIES.
(a) If an Event of Default shall have occurred and be continuing and
so long as the same shall continue unremedied, then and in every such case
the Mortgagee may, subject to the second and third paragraphs of this
Section 4.04(a), exercise any or all of the rights and powers and pursue
any and all of the remedies pursuant to this Article IV and shall have and
may exercise all of the rights and remedies of a secured party under the
Uniform Commercial Code and, in the event such Event of Default is also a
Lease Event of Default, any and all of the remedies pursuant to Section 15
of the Lease and may take possession of all or any part of the properties
covered or intended to be covered by the Lien created hereby or pursuant
hereto and may exclude the Owner Participant, the Owner Trustee and Lessee
and all persons claiming under any of them wholly or partly therefrom;
PROVIDED, HOWEVER, that the Mortgagee shall give the Owner Trustee and the
<PAGE>
Owner Participant twenty days' prior written notice of its intention to
sell the Aircraft. Unless an Event of Default not resulting from or
relating to a Lease Event of Default has occurred and is continuing, the
Owner Participant may bid at the sale and become the purchaser. Without
limiting any of the foregoing, it is understood and agreed that the
Mortgagee may exercise any right of sale of the Aircraft available to it,
even though it shall not have taken possession of the Aircraft and shall
not have possession thereof at the time of such sale.
Anything in this Trust Indenture to the contrary notwithstanding, the
Mortgagee shall not be entitled to foreclose the lien of this Indenture as a
result of an Event of Default which arises solely by reason of one or more
events or circumstances which constitute a Lease Event of Default unless the
Mortgagee as security assignee of the Owner Trustee shall have exercised or
concurrently be exercising one or more of the dispossessory remedies provided
for in Section 15 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 Mortgagee 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)(1)(A) of the Bankruptcy Code (such 60-day or other period
being the "New 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 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 New Section 1110
Period to the extent that the continuation of such Continuous Stay Period
subsequent to the expiration of the New Section 1110 Period (A) results from an
agreement by the trustee or the debtor-in-possession in such proceeding during
the New 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 New Section 1110 Period with the consent of
the Mortgagee pursuant to Section 1110(b) of the Bankruptcy Code or (C) results
from the Lessee's assumption during the New Section 1110 Period with the
approval of the relevant court of the Lease pursuant to Section 365 of the
Bankruptcy Code and Lessee's continuous performance of the Lease as so assumed
or (D) is the consequence of the Mortgagee's own failure to give any requisite
notice to any person. In the event that the applicability of Section 1110 of the
Bankruptcy Code to the Aircraft is being contested by Lessee in judicial
proceedings, both of the Mortgagee and the Owner Trustee shall have the right to
participate in such proceedings; PROVIDED, HOWEVER, that any such participation
by the Owner Trustee shall not affect in any way any rights or remedy of the
Mortgagee hereunder.
It is expressly understood and agreed that, subject only to the two
preceding paragraphs, the inability, described in such paragraphs, of the
Mortgagee to exercise any right or remedy under the Lease shall in no event and
under no circumstances prevent the Mortgagee from exercising any or all of its
rights, powers and remedies under this Trust Indenture, including, without
limitation, this Article IV.
(b) If an Event of Default shall have occurred and be continuing, then
and in every such case the Mortgagee may (and shall, upon receipt of a
<PAGE>
written demand therefor from a Majority in Interest of Note Holders),
subject to Section 4.03 hereof, at any time, by delivery of written notice
or notices to the Owner Trustee and the Owner Participant, declare all the
Equipment Notes to be due and payable, whereupon the unpaid Original Amount
of all Equipment Notes then outstanding, together with accrued but unpaid
interest thereon (without Make-Whole Amount) and other amounts due
thereunder, shall immediately become due and payable without presentment,
demand, protest or notice, all of which are hereby waived; PROVIDED,
HOWEVER, that if an Event of Default referred to in clause (g) of Section
4.02 hereof shall have occurred or a Lease Event of Default under Section
14.5 of the Lease shall have occurred, then and in every such case the
unpaid Original Amount then outstanding, together with accrued but unpaid
interest and all other amounts due thereunder and hereunder shall
immediately and without further act become due and payable without
presentment, demand, protest or notice, all of which are hereby waived.
This Section 4.04(b), however, is subject to the condition that, if at
any time after the Original Amount of the Equipment Notes shall have become so
due and payable, and before any judgment or decree for the payment of the money
so due, or any thereof, shall be entered, all overdue payments of interest upon
the Equipment Notes and all other amounts payable under the Equipment Notes
(except the Original Amount of the Equipment Notes which by such declaration
shall have become payable) shall have been duly paid, and every other Default
and Event of Default with respect to any covenant or provision of this Trust
Indenture shall have been cured, then and in every such case a Majority in
Interest of Note Holders may (but shall not be obligated to), by written
instrument filed with the Mortgagee, rescind and annul the Mortgagee's
declaration (or such automatic acceleration) and its consequences; but no such
rescission or annulment shall extend to or affect any subsequent Default or
Event of Default or impair any right consequent thereon.
Any acceleration pursuant to this Section 4.04(b) shall be
automatically rescinded and any related declaration of an Event of Default
annulled in the event that the Owner Trustee shall have cured, in accordance
with Section 4.03 hereof, the Event of Default that resulted in such
acceleration or declaration.
(c) The Note Holders shall be entitled, at any sale pursuant to
Section 15 of the Lease or this Section 4.04, to credit against any
purchase price bid at such sale by such holder all or any part of the
unpaid obligations owing to such Note Holder and secured by the Lien of
this Trust Indenture (only to the extent that such purchase price would
have been paid to such Note Holder pursuant to Article III hereof if such
purchase price were paid in cash and the foregoing provisions of this
subsection (c) were not given effect).
(d) In the event of any sale of the Trust Indenture Estate, or any
part thereof, pursuant to any judgment or decree of any court or otherwise
in connection with the enforcement of any of the terms of this Trust
Indenture, the unpaid Original Amount of all Equipment Notes then
outstanding, together with accrued interest thereon (without Make-Whole
<PAGE>
Amount), and other amounts due thereunder, shall immediately become due and
payable without presentment, demand, protest or notice, all of which are
hereby waived.
(e) Notwithstanding anything contained herein, so long as the Pass
Through Trustee under any Pass Through Trust Agreement (or its designee) is
a Note Holder, the Mortgagee will not be authorized or empowered to acquire
title to any Mortgaged Property or take any action with respect to any
Mortgaged Property so acquired by it if such acquisition or action would
cause any Trust to fail to qualify as a "grantor trust" for federal income
tax purposes.
SECTION 4.05. RETURN OF AIRCRAFT, ETC.
(a) If an Event of Default shall have occurred and be continuing and
the Equipment Notes have been accelerated, subject to Section 4.03 hereof
and unless the Owner Trustee or the Owner Participant shall have elected to
purchase the Equipment Notes, at the request of the Mortgagee, the Owner
Trustee shall promptly execute and deliver to the Mortgagee such
instruments of title and other documents as the Mortgagee may deem
necessary or advisable to enable the Mortgagee or an agent or
representative designated by the Mortgagee, at such time or times and place
or places as the Mortgagee may specify, to obtain possession of all or any
part of the Mortgaged Property included in the Trust Indenture Estate to
which the Mortgagee shall at the time be entitled hereunder. If the Owner
Trustee shall for any reason fail to execute and deliver such instruments
and documents after such request by the Mortgagee, the Mortgagee may (i)
obtain a judgment conferring on the Mortgagee the right to immediate
possession and requiring the Owner Trustee to execute and deliver such
instruments and documents to the Mortgagee, to the entry of which judgment
the Owner Trustee hereby specifically consents to the fullest extent
permitted by Law, and (ii) pursue all or part of such Mortgaged Property
wherever it may be found and, in the event that a Lease Event of Default
has occurred and is continuing, may enter any of the premises of Lessee
wherever such Mortgaged Property may be or be supposed to be and search for
such Mortgaged Property and take possession of and remove such Mortgaged
Property. All expenses of obtaining such judgment or of pursuing, searching
for and taking such property shall, until paid, be secured by the Lien of
this Trust Indenture.
(b) Upon every such taking of possession, the Mortgagee may, from time
to time, at the expense of the Mortgaged Property, make all such
expenditures for maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, modifications or alterations to and of
the Mortgaged Property, as it may deem proper. In each such case, the
Mortgagee shall have the right to maintain, use, operate, store, insure,
lease, control, manage, dispose of, modify or alter the Mortgaged Property
and to carry on the business and to exercise all rights and powers of the
Owner Participant and the Owner Trustee relating to the Mortgaged Property,
as the Mortgagee shall deem best, including the right to enter into any and
all such agreements with respect to the maintenance, use, operation,
storage, insurance, leasing, control, management, disposition, modification
or alteration of the Mortgaged Property or any part thereof as the
<PAGE>
Mortgagee may determine, and the Mortgagee shall be entitled to collect and
receive directly all tolls, rents (including Rent), revenues, issues,
income, products and profits of the Mortgaged Property and every part
thereof, except Excluded Payments, without prejudice, however, to the right
of the Mortgagee under any provision of this Trust Indenture to collect and
receive all cash held by, or required to be deposited with, the Mortgagee
hereunder other than Excluded Payments. Such tolls, rents (including Rent),
revenues, issues, income, products and profits shall be applied to pay the
expenses of the maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, improvement, modification or alteration
of the Mortgaged Property and of conducting the business thereof, and to
make all payments which the Mortgagee may be required or may elect to make,
if any, for taxes, assessments, insurance or other proper charges upon the
Mortgaged Property 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 all other
payments which the Mortgagee may be required or authorized to make under
any provision of this Trust Indenture, as well as just and reasonable
compensation for the services of the Mortgagee, and of all persons properly
engaged and employed by the Mortgagee with respect hereto.
SECTION 4.06. REMEDIES CUMULATIVE.
Each and every right, power and remedy given to the Mortgagee
specifically or otherwise in this Trust 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 and in such order as may be
deemed expedient by the Mortgagee, 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 Mortgagee in the exercise of any right,
remedy or power or in the pursuance of any remedy shall impair any such right,
power or remedy or be construed to be a waiver of any default on the part of the
Owner Trustee or Lessee or to be an acquiescence therein.
SECTION 4.07. DISCONTINUANCE OF PROCEEDINGS.
In case the Mortgagee shall have instituted any proceeding to enforce
any right, power or remedy under this Trust Indenture by foreclosure, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely to the Mortgagee, then and in
every such case the Owner Trustee, the Mortgagee and Lessee shall, subject to
any determination in such proceedings, be restored to their former positions and
rights hereunder with respect to the Mortgaged Property, and all rights,
remedies and powers of the Owner Trustee, the Mortgagee or Lessee shall continue
as if no such proceedings had been instituted.
<PAGE>
SECTION 4.08. WAIVER OF PAST DEFAULTS.
Upon written instruction from a Majority in Interest of Note Holders,
the Mortgagee shall waive any past Default hereunder and its consequences and
upon any such waiver such Default shall cease to exist and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Trust Indenture, but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon; PROVIDED, HOWEVER, that in the
absence of written instructions from all the Note Holders, the Mortgagee shall
not waive any Default (i) in the payment of the Original Amount, Make-Whole
Amount, if any, and interest and other amounts due under any Equipment Note then
outstanding, or (ii) in respect of a covenant or provision hereof which, under
Article IX hereof, cannot be modified or amended without the consent of each
Note Holder.
SECTION 4.09. APPOINTMENT OF RECEIVER.
The Mortgagee shall, as a matter of right, be entitled to the
appointment of a receiver (who may be the Mortgagee or any successor or nominee
thereof) for all or any part of the Mortgaged Property, whether such
receivership be incidental to a proposed sale of the Mortgaged Property or the
taking of possession thereof or otherwise, and the Owner Trustee hereby consents
to the appointment of such a receiver and will not oppose any such appointment.
Any receiver appointed for all or any part of the Mortgaged Property shall be
entitled to exercise all the rights and powers of the Mortgagee with respect to
the Mortgaged Property.
SECTION 4.10. MORTGAGEE AUTHORIZED TO EXECUTE BILLS OF SALE, ETC.
Subject to the provisions of this Trust Indenture, the Owner Trustee
irrevocably appoints the Mortgagee the true and lawful attorney-in-fact of the
Owner Trustee (which appointment is coupled with an interest) in its name and
stead and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement of the Lien of this Trust Indenture,
whether pursuant to foreclosure or power of sale, assignments and other
instruments as may be necessary or appropriate, with full power of substitution,
the Owner Trustee hereby ratifying and confirming all that such attorney or any
substitute shall do by virtue hereof in accordance with applicable law.
Nevertheless, if so requested by the Mortgagee or any purchaser, the Owner
Trustee shall ratify and confirm any such sale, assignment, transfer or
delivery, by executing and delivering to the Mortgagee or such purchaser all
bills of sale, assignments, releases and other proper instruments to effect such
ratification and confirmation as may be designated in any such request.
SECTION 4.11. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Trust Indenture, the right
of any Note Holder to receive payment of principal of, and premium, if any, and
interest on an Equipment Note on or after the respective due dates expressed in
such Equipment Note, or to bring suit for the enforcement of any such payment on
or after such respective dates in accordance with the terms hereof, shall not be
impaired or affected without the consent of such Note Holder.
<PAGE>
ARTICLE V
DUTIES OF THE MORTGAGEE
SECTION 5.01. NOTICE OF EVENT OF DEFAULT.
If the Mortgagee shall have Actual Knowledge of an Event of Default or
of a Default arising from a failure to pay Rent, the Mortgagee shall give prompt
written notice thereof to the Owner Trustee, the Owner Participant, Lessee, and
each Note Holder. Subject to the terms of Sections 2.13, 4.03, 4.04, 4.08, 5.02
and 5.03 hereof, the Mortgagee shall take such action, or refrain from taking
such action, with respect to such Event of Default or Default (including with
respect to the exercise of any rights or remedies hereunder) as the Mortgagee
shall be instructed in writing by a Majority in Interest of Note Holders.
Subject to the provisions of Section 5.03, if the Mortgagee shall not have
received instructions as above provided within 20 days after mailing notice of
such Event of Default to the Note Holders, the Mortgagee may, subject to
instructions thereafter received pursuant to the preceding provisions of this
Section 5.01, take such action, or refrain from taking such action, but shall be
under no duty to take or refrain from taking any action, with respect to such
Event of Default or Default as it shall determine advisable in the best
interests of the Note Holders; PROVIDED, HOWEVER, that the Mortgagee may not
sell the Aircraft or any Engine without the consent of a Majority in Interest of
Note Holders. For all purposes of this Trust Indenture, in the absence of Actual
Knowledge on the part of the Mortgagee, the Owner Trustee or the Owner
Participant, the Mortgagee, the Owner Trustee or the Owner Participant, as the
case may be, shall not be deemed to have knowledge of a Default or an Event of
Default (except, in the case of the Mortgagee, the failure of Lessee to pay any
installment of Basic Rent within one Business Day after the same shall become
due, if any portion of such installment was then required to be paid to the
Mortgagee, which failure shall constitute knowledge of a Default) unless
notified in writing by Lessee, the Owner Trustee, the Owner Participant or one
or more Note Holders.
SECTION 5.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND
LIMITATIONS.
(a) Subject to the terms of Sections 2.13, 4.03, 4.04(a) and (b),
4.08, 5.01 and 5.03 hereof, upon the written instructions at any time and
from time to time of a Majority in Interest of Note Holders, the Mortgagee
shall, subject to the terms of this Section 5.02, take such of the
following actions as may be specified in such instructions: (i) give such
notice or direction or exercise such right, remedy or power hereunder as
shall be specified in such instructions; (ii) give such notice or direction
or exercise such right, remedy or power under the Lease, the Participation
Agreement, the Purchase Agreement, the Purchase Agreement Assignment, or
any other part of the Trust Indenture Estate as shall be specified in such
instructions; and (iii) approve as satisfactory to the Mortgagee all
matters required by the terms of the Lease to be satisfactory to the Owner
Trustee, it being understood that without the written instructions of a
Majority in Interest of Note Holders, the Mortgagee shall not approve any
such matter as satisfactory to the Mortgagee; PROVIDED, HOWEVER, that
<PAGE>
anything contained in this Trust Indenture, the Lease or the other
Operative Agreements to the contrary notwithstanding, but subject to the
next paragraph hereof:
(1) the Owner Trustee or the Owner Participant, may, without the
consent of the Mortgagee, demand, collect, sue for or otherwise obtain all
amounts included in Excluded Payments from Lessee and seek legal or
equitable remedies to require Lessee to maintain the insurance coverage
referred to in Section 11 of the Lease; PROVIDED, HOWEVER, that the rights
referred to in this clause (1) shall not be deemed to include the exercise
of any remedies provided for in Section 15 of the Lease other than the
right to proceed by appropriate court action, either at Law or in equity,
to enforce payment by Lessee of such amounts included in Excluded Payments
or performance by Lessee of such insurance covenant or to recover damages
for the breach thereof or for specific performance of any other term of the
Lease;
(2) (A) the Mortgagee shall not, without the consent of the Owner
Trustee, enter into, execute or deliver amendments or modifications in
respect of any of the provisions of the Lease, and (B) unless a Mortgagee
Event shall have occurred and be continuing, the Mortgagee shall not,
without the consent of the Owner Trustee, which consent shall not be
withheld if no right or interest of the Owner Trustee or the Owner
Participant shall be diminished or impaired thereby, (i) enter into,
execute or deliver waivers or consents in respect of any of the provisions
of the Lease, or (ii) approve any accountants, engineers, appraisers or
counsel as satisfactory to render services for or issue opinions to the
Owner Trustee pursuant to the Operative Agreements; PROVIDED, HOWEVER, that
whether or not any Mortgagee Event has occurred and is continuing, the
Owner Trustee's consent shall be required with respect to any waivers or
consents in respect of any of the provisions of Section 5, 7 or 11 of the
Lease, or of any other Section of the Lease to the extent such action shall
affect (y) the amount or timing of, or the right to enforce payment of any
Excluded Payment or (z) the amount or timing of any amounts payable by the
Lessee 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 Event of Default hereunder, would be distributable to the
Owner Trustee under Article III hereof;
(3) whether or not a Default or Event of Default under the Trust
Indenture has occurred and is continuing, the Owner Trustee and the Owner
Participant shall have the right, together with the Mortgagee, (i) to
receive from Lessee certificates and other documents and information which
Lessee is required to give or furnish to the Owner Trustee or the Lessor
pursuant to any Operative Agreement and (ii) to inspect in accordance with
the Lease the Airframe and Engines and all Aircraft Documents;
(4) whether or not a Default or Event of Default under the Trust
Indenture has occurred and is continuing, the Owner Trustee may, without
the consent of the Mortgagee, (i) solicit and make bids with respect to the
Aircraft under Section 9 of the Lease in respect of a termination of the
Lease by Lessee pursuant to Section 9 thereof, (ii) determine Fair Market
Sales Value and Fair Market Rental Value under Section 17 of the Lease for
<PAGE>
all purposes except following a Mortgagee Event pursuant to Section 15 of
the Lease, and (iii) make an election pursuant to and in accordance with
the provisions of Sections 9.1(b), 9.2 and 9.3 of the Lease; and
(5) so long as no Event of Default shall have occurred and be
continuing, all other rights of the "Lessor" under the Lease shall be
exercised by the Owner Trustee to the exclusion of the Mortgagee including,
without limitation, the right to (i) exercise all rights with respect to
Lessee's use and operation, modification or maintenance of the Aircraft and
any Engine which the Lease specifically confers on the Lessor, and (ii)
consent to and approve any assignment pursuant to Section 13 of the Lease;
PROVIDED, HOWEVER, that the foregoing shall not (x) limit (A) any rights
separately granted to the Mortgagee under the Operative Agreements or (B)
the right of the Mortgagee to receive any funds to be delivered to the
"Lessor" under the Lease (except with respect to Excluded Payments) and
under the Purchase Agreement or (y) confer upon the Owner Trustee the right
to adversely affect the validity or enforceability of the lien of this
Indenture.
Notwithstanding anything to the contrary contained herein (including
this Section 5.02), the Mortgagee shall have the right, to the exclusion of the
Owner Trustee and the Owner Participant, to (A) declare the Lease to be in
default under Section 15 thereof [except that, solely for purposes of making a
demand for any Guaranteed Payment, as defined in the Equity Guaranty, the Owner
Participant shall have the right to declare the Lease to be in default under
Section 15 thereof] and (B) subject only to the provisions of Sections 4.03,
4.04(a) and (b) and 2.13 hereof, exercise the remedies set forth in such Section
15 (other than in connection with Excluded Payments and provided that [the Owner
Participant shall have all rights and remedies available under the Equity
Guaranty, and that] each of the Owner Trustee, Owner Participant and Mortgagee
shall independently retain the rights set forth in clause (ii) of Section 15.1.5
of the Lease) at any time that a Lease Event of Default shall have occurred and
be continuing. Further and for the avoidance of doubt, and anything to the
contrary contained herein (including this Section 5.02), in no event may the
Owner Trustee amend or otherwise modify the final sentence of the definition of
Stipulated Loss Value or Termination Value, in any such case, without the prior
written consent of the Mortgagee.
The Mortgagee will execute and the Owner Trustee will file or cause to
be filed such continuation statements with respect to financing statements
relating to the security interest created hereunder in the Trust Indenture
Estate as may be specified from time to time in written instructions of a
Majority in Interest of Note Holders (which instructions shall be accompanied by
the form of such continuation statement so to be filed). The Mortgagee will
furnish to each Note Holder (and, during the continuation of a Mortgagee Event,
to the Owner Trustee and Owner Participant), promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands, certificates
and other instruments furnished to the Mortgagee under the Lease or hereunder,
including, without limitation, a copy of each report or notice received pursuant
to Section 9 and Paragraph E of Annex D of the Lease, respectively to the extent
that the same shall not have been furnished to such holder pursuant hereto or
the Lease.
<PAGE>
(b) If any Lease Event of Default shall have occurred and be
continuing and the Owner Trustee shall not have cured fully such Lease
Event of Default under and in accordance with Section 4.03 hereof, on
request of a Majority in Interest of Note Holders, the Mortgagee shall
declare the Lease to be in default pursuant to Section 15 thereof and
exercise those remedies specified by such Note Holders. The Mortgagee
agrees to provide to the Note Holders, the Owner Trustee and the Owner
Participant concurrently with such declaration by the Mortgagee, notice of
such declaration by the Mortgagee.
SECTION 5.03. INDEMNIFICATION.
The Mortgagee shall not be required to take any action or refrain from
taking any action under Section 5.01 (other than the first sentence thereof),
5.02 or Article IV hereof unless the Mortgagee shall have been indemnified to
its reasonable satisfaction against any liability, cost or expense (including
counsel fees) which may be incurred in connection therewith pursuant to a
written agreement with one or more Note Holders. The Mortgagee agrees that it
shall look solely to the Note Holders for the satisfaction of any indemnity
(except expenses for foreclosure of the type referred to in clause "First" of
Section 3.03 hereof) owed to it pursuant to this Section 5.03. The Mortgagee
shall not be under any obligation to take any action under this Trust Indenture
or any other Operative Agreement and nothing herein or therein shall require the
Mortgagee to expend or risk its own funds or otherwise incur the risk of any
financial liability in the performance of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it (the written indemnity of any Note Holder who is a QIB, signed by an
authorized officer thereof, in favor of, delivered to and in form reasonably
satisfactory to the Mortgagee shall be accepted as reasonable assurance of
adequate indemnity). The Mortgagee shall not be required to take any action
under Section 5.01 (other than the first sentence thereof) or 5.02 or Article IV
hereof, nor shall any other provision of this Trust Indenture or any other
Operative Agreement be deemed to impose a duty on the Mortgagee to take any
action, if the Mortgagee shall have been advised by counsel that such action is
contrary to the terms hereof or of the Lease or is otherwise contrary to Law.
SECTION 5.04. NO DUTIES EXCEPT AS SPECIFIED IN TRUST INDENTURE OR
INSTRUCTION.
The Mortgagee shall not have any duty or obligation to use, operate,
store, lease, control, manage, sell, dispose of or otherwise deal with the
Aircraft or any other part of the Trust Indenture Estate, or to otherwise take
or refrain from taking any action under, or in connection with, this Trust
Indenture or any part of the Trust Indenture Estate, except as expressly
provided by the terms of this Trust Indenture or as expressly provided in
written instructions from Note Holders as provided in this Trust Indenture; and
no implied duties or obligations shall be read into this Trust Indenture against
the Mortgagee. The Mortgagee agrees that it will in its individual capacity and
at its own cost and expense (but without any right of indemnity in respect of
any such cost or expense under Section 7.01 hereof), promptly take such action
as may be necessary duly to discharge all liens and encumbrances on any part of
the Trust Indenture Estate which result from claims against it in its individual
capacity not related to the ownership of the Aircraft or the administration of
<PAGE>
the Trust Indenture Estate or any other transaction pursuant to this Trust
Indenture or any document included in the Trust Indenture Estate.
SECTION 5.05. NO ACTION EXCEPT UNDER LEASE, TRUST INDENTURE OR
INSTRUCTIONS.
The Owner Trustee and the Mortgagee agree that they will not use,
operate, store, lease, control, manage, sell, dispose of or otherwise deal with
the Aircraft or any other part of the Trust Indenture Estate except (i) as
required by the terms of the Lease or (ii) in accordance with the powers granted
to, or the authority conferred upon, the Owner Trustee and the Mortgagee
pursuant to this Trust Indenture and in accordance with the express terms
hereof.
SECTION 5.06. REPLACEMENT ENGINES.
At any time an Engine is to be replaced under or pursuant to Section
10 of the Lease by a Replacement Engine, if no Lease Event of Default is
continuing, the Owner Trustee shall direct the Mortgagee to execute and deliver
to the Owner Trustee an appropriate instrument releasing such Engine as
appropriate from the Lien of this Trust Indenture and the Mortgagee shall
execute and deliver such instrument as aforesaid, but only upon compliance by
Lessee with the applicable provisions of Section 10 of the Lease.
SECTION 5.07. INDENTURE SUPPLEMENTS FOR REPLACEMENTS.
If a Replacement Engine is being substituted as contemplated by
Section 10 of the Lease, the Owner Trustee and the Mortgagee agree for the
benefit of the Note Holders and Lessee, subject to fulfillment of the conditions
precedent and compliance by Lessee with its obligations set forth in Section 10
of the Lease and the requirements of Section 5.06 hereof with respect to such
Replacement Engine, to execute and deliver a Lease Supplement and a Trust
Indenture Supplement, as applicable, as contemplated by Section 10 of the Lease.
SECTION 5.08. EFFECT OF REPLACEMENT.
In the event of the substitution of a Replacement Engine pursuant to
Section 10 of the Lease, all provisions of this Trust Indenture relating to the
Engine being replaced shall be applicable to such Replacement Engine with the
same force and effect as if such Replacement Engine were the same engine as the
Engine being replaced but for the Event of Loss with respect to the Engine being
replaced.
SECTION 5.09. INVESTMENT OF AMOUNTS HELD BY MORTGAGEE.
Any amounts held by the Mortgagee as assignee of the Owner Trustee's
rights to hold monies for security pursuant to Section 4.4 of the Lease shall be
held in accordance with the terms of such Section and the Mortgagee agrees, for
the benefit of Lessee, to perform the duties of the Owner Trustee under such
Section. Any amounts held by the Mortgagee pursuant to the proviso Clause
"Second" of to the first sentence of Section 3.01, pursuant to Section 3.02, or
pursuant to any provision of any other Operative Agreement providing for amounts
<PAGE>
to be held by the Mortgagee which are not distributed pursuant to the other
provisions of Article III hereof shall be invested by the Mortgagee from time to
time in Cash Equivalents as directed by the Owner Trustee so long as the
Mortgagee may acquire the same using its best efforts. Unless otherwise
expressly provided in this Trust Indenture, any income realized as a result of
any such investment, net of the Mortgagee's reasonable fees and expenses in
making such investment, shall be held and applied by the Mortgagee in the same
manner as the principal amount of such investment is to be applied and any
losses, net of earnings and such reasonable fees and expenses, shall be charged
against the principal amount invested. The Mortgagee shall not be liable for any
loss resulting from any investment required to be made by it under this Trust
Indenture other than by reason of its willful misconduct or gross negligence,
and any such investment may be sold (without regard to its maturity) by the
Mortgagee without instructions whenever such sale is necessary to make a
distribution required by this Trust Indenture.
ARTICLE VI
THE OWNER TRUSTEE AND THE MORTGAGEE
SECTION 6.01. ACCEPTANCE OF TRUSTS AND DUTIES.
The Mortgagee accepts the duties hereby created and applicable to it
and agrees to perform the same but only upon the terms of this Trust Indenture
and agrees to receive and disburse all monies constituting part of the Trust
Indenture Estate in accordance with the terms hereof. The Owner Trustee, in its
individual capacity, and the Mortgagee, in its individual capacity, shall not be
answerable or accountable under any circumstances, except (i) for their own
willful misconduct or gross negligence (other than for the handling of funds,
for which the standard of accountability shall be willful misconduct or
negligence), (ii) in the case of the Mortgagee, as provided in the fourth
sentence of Section 2.04(a) hereof and the last sentence of Section 5.04 hereof,
and (iii) for liabilities that may result, in the case of the Owner Trustee,
from the inaccuracy of any representation or warranty of the Owner Trustee
expressly made in its individual capacity in the Participation Agreement or in
Section 4.01(b) or 6.03 hereof (or in any certificate furnished to the Mortgagee
or any Note Holder in connection with the transactions contemplated by the
Operative Agreements) or, in the case of the Mortgagee (in its individual
capacity), from the inaccuracy of any representation or warranty of the
Mortgagee (in its individual capacity) in the Participation Agreement or
expressly made hereunder. Neither the Owner Trustee nor the Mortgagee shall be
liable for any action or inaction of the other or of the Owner Participant.
SECTION 6.02. ABSENCE OF DUTIES.
In the case of the Mortgagee, except in accordance with written
instructions furnished pursuant to Section 5.01 or 5.02 hereof, and except as
provided in, and without limiting the generality of, Sections 5.03, 5.04 and
6.08 hereof and, in the case of the Owner Trustee, except as provided in Section
4.01(b) hereof, the Owner Trustee and the Mortgagee shall have no duty (i) to
see to any registration of the Aircraft or any recording or filing of the Lease
or of this Trust Indenture or any other document, or to see to the maintenance
<PAGE>
of any such registration, recording or filing, (ii) to see to any insurance on
the Aircraft or to effect or maintain any such insurance, whether or not Lessee
shall be in default with respect thereto, (iii) to see to the payment or
discharge of any lien or encumbrance of any kind against any part of the Trust
Estate or the Trust Indenture Estate, (iv) to confirm, verify or inquire into
the failure to receive any financial statements from Lessee, or (v) to inspect
the Aircraft at any time or ascertain or inquire as to the performance or
observance of any of Lessee's covenants under the Lease with respect to the
Aircraft. The Owner Participant shall not have any duty or responsibility
hereunder, including, without limitation, any of the duties mentioned in clauses
(i) through (v) above; PROVIDED, HOWEVER, that nothing contained in this
sentence shall limit any obligations of the Owner Participant under the
Participation Agreement or relieve the Owner Participant from any restriction
under Section 4.03 hereof.
SECTION 6.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR
DOCUMENTS.
NEITHER THE MORTGAGEE IN ITS INDIVIDUAL OR TRUST CAPACITY NOR THE
OWNER TRUSTEE IN ITS INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE UNDER THE TRUST
AGREEMENT, MAKES OR SHALL BE DEEMED TO HAVE MADE AND EACH HEREBY EXPRESSLY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN,
QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, 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, except the Owner Trustee in its individual capacity
warrants that (i) the Owner Trustee has received on the Delivery Date whatever
title was conveyed to it, and (ii) the Aircraft is free and clear of Lessor
Liens attributable to the Owner Trustee in its individual capacity. Neither the
Owner Trustee, in its individual capacity or as Owner Trustee under the Trust
Agreement, nor the Mortgagee, in its individual or trust capacities, makes or
shall be deemed to have made any representation or warranty as to the validity,
legality or enforceability of this Trust Indenture, the Trust Agreement, the
Participation Agreement, the Equipment Notes, the Lease, the Purchase Agreement
or the Purchase Agreement Assignment with the Consent and Agreement attached
thereto, or as to the correctness of any statement contained in any thereof,
except for the representations and warranties of the Owner Trustee made in its
individual capacity and the representations and warranties of the Mortgagee in
its individual capacity, in each case expressly made in this Trust Indenture or
in the Participation Agreement. The Loan Participants, the Note Holders and the
Owner Participant make no representation or warranty hereunder whatsoever.
SECTION 6.04. NO SEGREGATION OF MONIES; NO INTEREST.
Any monies paid to or retained by the Mortgagee pursuant to any
provision hereof and not then required to be distributed to the Note Holders,
<PAGE>
Lessee or the Owner Trustee as provided in Article III hereof need not be
segregated in any manner except to the extent required by Law or Section 4.4 of
the Lease and Section 5.09 hereof, and may be deposited under such general
conditions as may be prescribed by Law, and the Mortgagee shall not be liable
for any interest thereon (except that the Mortgagee shall invest all monies held
as directed by Lessee so long as no Lease Event of Default or Lease Default has
occurred and is continuing (or in the absence of such direction, by the Majority
in Interest of Note Holders) in Cash Equivalents; PROVIDED, HOWEVER, that any
payments received, or applied hereunder, by the Mortgagee shall be accounted for
by the Mortgagee so that any portion thereof paid or applied pursuant hereto
shall be identifiable as to the source thereof.
SECTION 6.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL.
Neither the Owner Trustee nor the Mortgagee shall incur any liability
to anyone in acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
believed by it to be genuine and believed by it to be signed by the proper party
or parties. The Owner Trustee and the Mortgagee may accept a copy of a
resolution of the Board of Directors (or Executive Committee thereof) of any
party to the Participation Agreement, certified by the Secretary or an Assistant
Secretary thereof as duly adopted and in full force and effect, as conclusive
evidence that such resolution has been duly adopted and that the same is in full
force and effect. As to the aggregate unpaid Original Amount of Equipment Notes
outstanding as of any date, the Owner Trustee may for all purposes hereof rely
on a certificate signed by any Vice President or other authorized corporate
trust officer of the Mortgagee. As to any fact or matter relating to Lessee the
manner of which is not specifically described herein, the Owner Trustee and the
Mortgagee may for all purposes hereof rely on a certificate, signed by a duly
authorized officer of Lessee, as to such fact or matter, and such certificate
shall constitute full protection to the Owner Trustee and the Mortgagee for any
action taken or omitted to be taken by them in good faith in reliance thereon.
The Mortgagee shall assume, and shall be fully protected in assuming, that the
Owner Trustee is authorized by the Trust Agreement to enter into this Trust
Indenture and to take all action to be taken by it pursuant to the provisions
hereof, and shall not inquire into the authorization of the Owner Trustee with
respect thereto. In the administration of the trusts hereunder, the Owner
Trustee and the Mortgagee each 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 Indenture Estate, advise with
counsel, accountants and other skilled persons to be selected and retained by
it, and the Owner Trustee and the Mortgagee shall not be liable for anything
done, suffered or omitted in good faith by them in accordance with the written
advice or written opinion of any such counsel, accountants or other skilled
persons.
SECTION 6.06. CAPACITY IN WHICH ACTING.
The Owner Trustee acts hereunder solely as trustee as herein and in
the Trust Agreement provided, and not in its individual capacity, except as
otherwise expressly provided herein, in the Trust Agreement and in the
Participation Agreement.
<PAGE>
SECTION 6.07. COMPENSATION.
The Mortgagee shall be entitled to reasonable compensation, including
expenses and disbursements (including the reasonable fees and expenses of
counsel), for all services rendered hereunder and shall, on and subsequent to an
Event of Default hereunder, have a priority claim on the Trust Indenture Estate
for the payment of such compensation, to the extent that such compensation shall
not be paid by Lessee, and shall have the right, on and subsequent to an Event
of Default hereunder, to use or apply any monies held by it hereunder in the
Trust Indenture Estate toward such payments. The Mortgagee agrees that it shall
have no right against the Loan Participants, the Note Holders, the Owner Trustee
or the Owner Participant for any fee as compensation for its services as trustee
under this Trust Indenture.
SECTION 6.08. INSTRUCTIONS FROM NOTE HOLDERS.
In the administration of the trusts created hereunder, the Mortgagee
shall have the right to seek instructions from a Majority in Interest of Note
Holders should any provision of this Trust Indenture appear to conflict with any
other provision herein or should the Mortgagee's duties or obligations hereunder
be unclear, and the Mortgagee shall incur no liability in refraining from acting
until it receives such instructions. The Mortgagee shall be fully protected for
acting in accordance with any instructions received under this Section 6.08.
ARTICLE VII
INDEMNIFICATION OF MORTGAGEE BY OWNER TRUSTEE
SECTION 7.01. SCOPE OF INDEMNIFICATION.
The Owner Trustee, not in its individual capacity, but solely as Owner
Trustee, hereby agrees, whether or not any of the transactions contemplated
hereby shall be consummated, except as to matters covered by any indemnity
furnished as contemplated by Section 5.03 hereof and except as otherwise
provided in Section 2.03 or 2.04(b) hereof, to assume liability for, and does
hereby indemnify, protect, save and keep harmless the Mortgagee (in its
individual and trust capacities), and its successors, assigns, agents and
servants, from and against any and all liabilities, obligations, losses,
damages, penalties, taxes (excluding any taxes payable by the Mortgagee on or
measured by any compensation received by the Mortgagee for its services under
this Trust Indenture), claims, actions, suits, costs, expenses or disbursements
(including legal fees and expenses) of any kind and nature whatsoever, which may
be imposed on, incurred by or asserted against the Mortgagee (whether or not
also indemnified against by any other person under any other document) in any
way relating to or arising out of this Trust Indenture or any other Operative
Agreement to which it is a party 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, non-acceptance, rejection, ownership, delivery, lease, possession,
use, operation, condition, sale, return or other disposition of the Aircraft or
any Engine (including, without limitation, latent or 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
<PAGE>
the Trust Indenture Estate or the action or inaction of the Mortgagee hereunder
except only in the case of willful misconduct or gross negligence (or negligence
in the case of handling funds) of the Mortgagee in the performance of its duties
hereunder or resulting from the inaccuracy of any representation or warranty of
the Mortgagee (in its individual capacity) referred to in Section 6.03 hereof,
or as provided in Section 6.01 hereof or in the last sentence of Section 5.04
hereof, or as otherwise excluded by the terms of Section 9.1 or 9.3 of the
Participation Agreement from Lessee's indemnities under such Sections. In
addition, if necessary, the Mortgagee shall be entitled to indemnification from
the Trust Indenture Estate for any liability, obligation, loss, damage, penalty,
claim, action, suit, cost, expense or disbursement indemnified against pursuant
to this Section 7.01 to the extent not reimbursed by Lessee or others, but
without releasing any of them from their respective agreements of reimbursement;
and to secure the same the Mortgagee shall have a prior Lien on the Trust
Indenture Estate. Without limiting the foregoing, the Mortgagee agrees that,
prior to seeking indemnification from the Trust Indenture Estate, it will
demand, and diligently pursue in good faith (but with no duty to exhaust all
legal remedies therefor), indemnification available to the Mortgagee from Lessee
under the Lease or the Participation Agreement.
ARTICLE VIII
SUCCESSOR AND SEPARATE TRUSTEES
SECTION 8.01. NOTICE OF SUCCESSOR OWNER TRUSTEE.
In the case of any appointment of a successor to the Owner Trustee
pursuant to the Trust Agreement including upon any merger, conversion,
consolidation or sale of substantially all of the corporate trust business of
the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee
shall give prompt written notice thereof to the Mortgagee, Lessee and the Note
Holders.
SECTION 8.02. RESIGNATION OF MORTGAGEE; APPOINTMENT OF SUCCESSOR.
(a) The Mortgagee or any successor thereto may resign at any time
without cause by giving at least 30 days' prior written notice to Lessee,
the Owner Trustee, the Owner Participant and each Note Holder, such
resignation to be effective upon the acceptance of the trusteeship by a
successor Mortgagee. In addition, a Majority in Interest of Note Holders
may at any time (but only with the consent of the Lessee, which consent
shall not be unreasonably withheld, except that such consent shall not be
necessary if a Lease Event of Default is continuing) remove the Mortgagee
without cause by an instrument in writing delivered to the Owner Trustee,
Lessee, the Owner Participant and the Mortgagee, and the Mortgagee shall
promptly notify each Note Holder thereof in writing, such removal to be
effective upon the acceptance of the trusteeship by a successor Mortgagee.
In the case of the resignation or removal of the Mortgagee, a Majority in
Interest of Note Holders may appoint a successor Mortgagee by an instrument
signed by such holders, which successor, so long as no Lease Event of
Default shall have occurred and be continuing, shall be subject to Lessee's
<PAGE>
reasonable approval. If a successor Mortgagee shall not have been appointed
within 30 days after such notice of resignation or removal, the Mortgagee,
the Owner Trustee, the Owner Participant or any Note Holder may apply to
any court of competent jurisdiction to appoint a successor Mortgagee to act
until such time, if any, as a successor shall have been appointed as above
provided. The successor Mortgagee so appointed by such court shall
immediately and without further act be superseded by any successor
Mortgagee appointed as above provided.
(b) Any successor Mortgagee, however appointed, shall execute and
deliver to the Owner Trustee, the predecessor Mortgagee and the Lessee an
instrument accepting such appointment and assuming the obligations of the
Mortgagee under the Participation Agreement arising from and after the time
of such appointment, and thereupon such successor Mortgagee, without
further act, shall become vested with all the estates, properties, rights,
powers and duties of the predecessor Mortgagee hereunder in the trust
hereunder applicable to it with like effect as if originally named the
Mortgagee herein; but nevertheless upon the written request of such
successor Mortgagee, such predecessor Mortgagee shall execute and deliver
an instrument transferring to such successor Mortgagee, upon the trusts
herein expressed applicable to it, all the estates, properties, rights and
powers of such predecessor Mortgagee, and such predecessor Mortgagee shall
duly assign, transfer, deliver and pay over to such successor Mortgagee all
monies or other property then held by such predecessor Mortgagee hereunder.
(c) Any successor Mortgagee, however appointed, 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; Wilmington, Delaware; or Boston, Massachusetts and having (or
whose obligations under the Operative Agreements are guaranteed by an
affiliated 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 the Mortgagee hereunder upon reasonable
or customary terms.
(d) Any corporation into which the Mortgagee 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
Mortgagee shall be a party, or any corporation to which substantially all
the corporate trust business of the Mortgagee may be transferred, shall,
subject to the terms of paragraph (c) of this Section 8.02, be a successor
Mortgagee and the Mortgagee under this Trust Indenture without further act.
SECTION 8.03. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES.
(a) Whenever (i) the Mortgagee shall deem it necessary or desirable in
order to conform to any Law of any jurisdiction in which all or any part of
the Trust Indenture Estate shall be situated or to make any claim or bring
any suit with respect to or in connection with the Trust Indenture Estate,
this Trust Indenture, any other Indenture Agreement, the Equipment Notes or
any of the transactions contemplated by the Participation Agreement, (ii)
the Mortgagee shall be advised by counsel satisfactory to it that it is so
<PAGE>
necessary or prudent in the interests of the Note Holders (and the
Mortgagee shall so advise the Owner Trustee and Lessee), or (iii) the
Mortgagee shall have been requested to do so by a Majority in Interest of
Note Holders, then in any such case, the Mortgagee and, upon the written
request of the Mortgagee, the Owner Trustee, shall execute and deliver an
indenture supplemental hereto and such other instruments as may from time
to time be necessary or advisable either (1) to constitute one or more bank
or trust companies or one or more persons approved by the Mortgagee, either
to act jointly with the Mortgagee as additional trustee or trustees of all
or any part of the Trust Indenture Estate, or to act as separate trustee or
trustees of all or any part of the Trust Indenture Estate, in each case
with such rights, powers, duties and obligations consistent with this Trust
Indenture as may be provided in such supplemental indenture or other
instruments as the Mortgagee or a Majority in Interest of Note Holders may
deem necessary or advisable, or (2) to clarify, add to or subtract from the
rights, powers, duties and obligations theretofore granted any such
additional or separate trustee, subject in each case to the remaining
provisions of this Section 8.03. If the Owner Trustee shall not have taken
any action requested of it under this Section 8.03(a) that is permitted or
required by its terms within 15 days after the receipt of a written request
from the Mortgagee so to do, or if an Event of Default shall have occurred
and be continuing, the Mortgagee may act under the foregoing provisions of
this Section 8.03(a) without the concurrence of the Owner Trustee, and the
Owner Trustee hereby irrevocably appoints (which appointment is coupled
with an interest) the Mortgagee, its agent and attorney-in-fact to act for
it under the foregoing provisions of this Section 8.03(a) in either of such
contingencies. The Mortgagee may, in such capacity, execute, deliver and
perform any such supplemental indenture, or any such instrument, as may be
required for the appointment of any such additional or separate trustee or
for the clarification of, addition to or subtraction from the rights,
powers, duties or obligations theretofore granted to any such additional or
separate trustee. In case any additional or separate trustee appointed
under this Section 8.03(a) shall die, become incapable of acting, resign or
be moved, all the assets, property, rights, powers, trusts, duties and
obligations of such additional or separate trustee shall revert to the
Mortgagee until a successor additional or separate trustee is appointed as
provided in this Section 8.03(a).
(b) No additional or separate trustee shall be entitled to exercise
any of the rights, powers, duties and obligations conferred upon the
Mortgagee in respect of the custody, investment and payment of monies and
all monies received by any such additional or separate trustee from or
constituting part of the Trust Indenture Estate or otherwise payable under
any Operative Agreement to the Mortgagee shall be promptly paid over by it
to the Mortgagee. All other rights, powers, duties and obligations
conferred or imposed upon any additional or separate trustee shall be
exercised or performed by the Mortgagee and such additional or separate
trustee jointly except to the extent that applicable Law of any
jurisdiction in which any particular act is to be performed renders the
Mortgagee incompetent or unqualified to perform such act, in which event
such rights, powers, duties and obligations (including the holding of title
to all or part of the Trust Indenture Estate in any such jurisdiction)
<PAGE>
shall be exercised and performed by such additional or separate trustee. No
additional or separate trustee shall take any discretionary action except
on the instructions of the Mortgagee or a Majority in Interest of Note
Holders. No trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder, except that the Mortgagee
shall be liable for the consequences of its lack of reasonable care in
selecting, and the Mortgagee's own actions in acting with, any additional
or separate trustee. Each additional or separate trustee appointed pursuant
to this Section 8.03 shall be subject to, and shall have the benefit of
Articles IV through VIII and Article X hereof insofar as they apply to the
Mortgagee. The powers of any additional or separate trustee appointed
pursuant to this Section 8.03 shall not in any case exceed those of the
Mortgagee hereunder.
(c) If at any time the Trustee shall deem it no longer necessary or in
order to conform to any such Law or take any such action or shall be
advised by such counsel that it is no longer so necessary or desirable in
the interest of the Note Holders, or in the event that the Mortgagee shall
have been requested to do so in writing by a Majority in Interest of Note
Holders, the Mortgagee and, upon the written request of the Mortgagee, the
Owner Trustee, shall execute and deliver an indenture supplemental hereto
and all other instruments and agreements necessary or proper to remove any
additional or separate trustee. The Mortgagee may act on behalf of the
Owner Trustee under this Section 8.03(c) when and to the extent it could so
act under Section 8.03(a) hereof.
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS TO
TRUST INDENTURE AND OTHER DOCUMENTS
SECTION 9.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS.
(a) Except as provided in Section 5.02 hereof, the Owner Trustee
agrees it shall not enter into any amendment of or supplement to the Lease,
the Purchase Agreement, the Purchase Agreement Assignment or the Consent
and Agreement, or execute and deliver any written waiver or modification
of, or consent under, the terms of the Lease, the Purchase Agreement, the
Purchase Agreement Assignment or the Consent and Agreement, unless such
supplement, amendment, waiver, modification or consent is consented to in
writing by the Mortgagee and, unless the Note Holders are not adversely
affected thereby, a Majority in Interest of Note Holders. Anything to the
contrary contained herein notwithstanding, without the necessity of the
consent of any of the Note Holders or the Mortgagee, (i) any Excluded
Payments payable to the Owner Participant may be modified, amended, changed
or waived in such manner as shall be agreed to by the Owner Participant and
Lessee and (ii) the Owner Trustee and Lessee may enter into amendments of
or additions to the Lease to modify Section 5 (except to the extent that
such amendment would affect the rights or exercise of remedies under
Section 15 of the Lease) or Section 17 of the Lease so long as such
amendments, modifications and changes do not and would not affect the time
of, or reduce the amount of, Rent payments (except to the extent expressly
permitted by Section 5.02 hereof) until after the payment in full of all
Secured Obligations or otherwise adversely affect the Note Holders.
<PAGE>
(b) Without limiting the provisions of Section 9.01 hereof, the
Mortgagee agrees with the Note Holders that it shall not consent to or
enter into any amendment, waiver or modification of or supplement or
consent to this Trust Indenture, the Lease, the Purchase Agreement, the
Purchase Agreement Assignment, the Consent and Agreement or the
Participation Agreement, or any other agreement included in the Trust
Indenture Estate, unless such supplement, amendment, waiver, modification
or consent does not adversely affect the Note Holders or is consented to in
writing by a Majority in Interest of Note Holders, but upon the written
request of a Majority in Interest of Note Holders, the Trustee shall from
time to time enter into any such supplement or amendment, or execute and
deliver any such waiver, modification or consent, as may be specified in
such request and as may be (in the case of any such amendment, supplement
or modification), to the extent such agreement is required, agreed to by
the Owner Trustee and Lessee or, as may be appropriate, the Airframe
Manufacturer or the Engine Manufacturer; PROVIDED, HOWEVER, that, without
the consent of each holder of an affected Equipment Note then outstanding
and of each Liquidity Provider, no such amendment of or supplement to this
Trust Indenture, the Lease, the Purchase Agreement, the Purchase Agreement
Assignment, the Consent and Agreement or the Participation Agreement or
waiver or modification of the terms of, or consent under, any thereof,
shall (i) modify any of the provisions of this Section 9.01, or of Article
II or III or Section 4.02, 4.04(c), 4.04(d), 5.02 or 5.06 hereof, Section
13.3, 14 (except to add an Event of Default) or 16 of the Lease, Section
15.1 of the Participation Agreement, the definitions of "Event of Default,"
"Default," "Lease Event of Default," "Lease Default," "Majority in Interest
of Note Holders," "Make-Whole Amount" or "Note Holder," or the percentage
of Note Holders required to take or approve any action hereunder, (ii)
reduce the amount, or change the time of payment or method of calculation
of any amount, of Original Amount, Make-Whole Amount, if any, or interest
with respect to any Equipment Note, or alter or modify the provisions of
Article III hereof with respect to the order of priorities in which
distribution thereunder shall be made as among the Note Holders, the Owner
Trustee and Lessee, (iii) reduce, modify or amend any indemnities in favor
of the Owner Trustee, the Mortgagee or the Note Holders (except that the
Owner Trustee (in its individual capacity) or the Mortgagee, as the case
may be, may consent to any waiver or reduction of an indemnity payable to
it), (iv) consent to any change in the Trust Indenture or the Lease which
would permit redemption of Equipment Notes earlier than permitted under
Section 2.10 or 2.11 hereof or the purchase or exchange of the Equipment
Notes other than as permitted by Section 2.13 hereof, (v) except as
contemplated by the Lease or the Participation Agreement, reduce the amount
or extend the time of payment of Basic Rent, Stipulated Loss Value, or
Termination Value for the Aircraft in each case as set forth in the Lease,
or modify, amend or supplement the Lease or consent to any assignment of
the Lease, in either case releasing Lessee from its obligations in respect
of the payment of Basic Rent, Stipulated Loss Value or Termination Value
for the Aircraft or altering the absolute and unconditional character of
the obligations of Lessee to pay Rent as set forth in Sections 3 and 16 of
the Lease or (vi) permit the creation of any Lien on the Trust Indenture
Estate or any part thereof other than Permitted Liens or deprive any Note
Holder of the benefit of the Lien of this Trust Indenture on the Trust
Indenture Estate, except as provided in connection with the exercise of
remedies under Article IV hereof.
<PAGE>
(c) At any time after the date hereof, the Owner Trustee and the
Mortgagee may enter into one or more agreements supplemental hereto without
the consent of any Note Holder for any of the following purposes: (i) (a)
to cure any defect or inconsistency herein or in the Equipment Notes, or to
make any change not inconsistent with the provisions hereof (provided that
such change does not adversely affect the interests of any Note Holder in
its capacity solely as Note Holder) or (b) to cure any ambiguity or correct
any mistake; (ii) to evidence the succession of another party as the Owner
Trustee in accordance with the terms of the Trust Agreement or to evidence
the succession of a new trustee hereunder pursuant hereto, the removal of
the trustee hereunder or the appointment of any co-trustee or co-trustees
or any separate or additional trustee or trustees; (iii) to convey,
transfer, assign, mortgage or pledge any property to or with the Mortgagee
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 Note Holders in its capacity solely as Note Holder; (iv)
to correct or amplify the description of any property at any time subject
to the Lien of this Trust Indenture or better to assure, convey and confirm
unto the Mortgagee any property subject or required to be subject to the
Lien of this Trust Indenture, the Airframe or Engines or any Replacement
Engine; (v) to add to the covenants of the Owner Trustee for the benefit of
the Note Holders, or to surrender any rights or power herein conferred upon
the Owner Trustee, the Owner Participant or the Lessee; (vi) to add to the
rights of the Note Holders; and (vii) to include on the Equipment Notes any
legend as may be required by Law.
SECTION 9.02. TRUSTEES PROTECTED.
If, in the opinion of the institution acting as Owner Trustee under
the Trust Agreement or the institution acting as Mortgagee hereunder, any
document required to be executed by it pursuant to the terms of Section 9.01
hereof affects any right, duty, immunity or indemnity with respect to such
institution under this Trust Indenture or the Lease, such institution may in its
discretion decline to execute such document.
SECTION 9.03. DOCUMENTS MAILED TO NOTE HOLDERS.
Promptly after the execution by the Owner Trustee or the Mortgagee of
any document entered into pursuant to Section 9.01 hereof, the Mortgagee shall
mail, by first class mail, postage prepaid, a copy thereof to Lessee and to each
Note Holder at its address last set forth in the Equipment Note Register, but
the failure of the Mortgagee to mail such copies shall not impair or affect the
validity of such document.
SECTION 9.04. NO REQUEST NECESSARY FOR LEASE SUPPLEMENT OR TRUST
INDENTURE SUPPLEMENT.
No written request or consent of the Mortgagee, the Note Holders or
the Owner Participant pursuant to Section 9.01 hereof shall be required to
enable the Owner Trustee to enter into any Lease Supplement specifically
required by the terms of the Lease or to execute and deliver a Trust Indenture
Supplement specifically required by the terms hereof.
<PAGE>
ARTICLE X
MISCELLANEOUS
SECTION 10.01. TERMINATION OF TRUST INDENTURE.
Upon (or at any time after) payment in full of the Original Amount of,
Make-Whole Amount, if any, and interest on and all other amounts due under all
Equipment Notes and provided that there shall then be no other Secured
Obligations due to the Indenture Indemnitees, the Note Holders and the Mortgagee
hereunder or under the Participation Agreement or other Operative Agreement, the
Owner Trustee shall direct the Mortgagee to execute and deliver to or as
directed in writing by the Owner Trustee an appropriate instrument releasing the
Aircraft and the Engines from the Lien of this Trust Indenture and releasing the
Lease, the Purchase Agreement, the Purchase Agreement Assignment with the
Consent and Agreement attached thereto from the assignment and pledge thereof
hereunder and the Mortgagee shall execute and deliver such instrument as
aforesaid and give written notice thereof to Lessee; PROVIDED, HOWEVER, that
this Trust Indenture and the trusts created hereby shall earlier terminate and
this Trust Indenture shall be of no further force or effect upon any sale or
other final disposition by the Mortgagee of all property constituting part of
the Trust Indenture Estate and the final distribution by the Mortgagee of all
monies or other property or proceeds constituting part of the Trust Indenture
Estate in accordance with the terms hereof. Except as aforesaid otherwise
provided, this Trust Indenture and the trusts created hereby shall continue in
full force and effect in accordance with the terms hereof.
SECTION 10.02. NO LEGAL TITLE TO TRUST INDENTURE ESTATE IN NOTE
HOLDERS.
No holder of an Equipment Note shall have legal title to any part of
the Trust Indenture Estate. No transfer, by operation of law or otherwise, of
any Equipment Note or other right, title and interest of any Note Holder in and
to the Trust Indenture Estate or hereunder shall operate to terminate this Trust
Indenture or entitle such holder or any successor or transferee of such holder
to an accounting or to the transfer to it of any legal title to any part of the
Trust Indenture Estate.
SECTION 10.03. SALE OF AIRCRAFT BY MORTGAGEE IS BINDING.
Any sale or other conveyance of the Trust Indenture Estate, or any
part thereof (including any part thereof or interest therein), by the Mortgagee
made pursuant to the terms of this Trust Indenture shall bind the Note Holders
and shall be effective to transfer or convey all right, title and interest of
the Trustee, the Owner Trustee, the Owner Participant and such holders in and to
such Trust Indenture Estate or part thereof. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such sale or conveyance or as to the application of any sale or
other proceeds with respect thereto by the Mortgagee.
<PAGE>
SECTION 10.04. TRUST INDENTURE FOR BENEFIT OF OWNER TRUSTEE,
MORTGAGEE, OWNER PARTICIPANT, NOTE HOLDERS AND THE OTHER INDENTURE INDEMNITEES.
Nothing in this Trust Indenture, whether express or implied, shall be
construed to give any person other than the Owner Trustee, the Mortgagee, the
Owner Participant, the Note Holders and the other Indenture Indemnitees, any
legal or equitable right, remedy or claim under or in respect of this Trust
Indenture.
SECTION 10.05. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof,
all notices, requests, demands, authorizations, directions, consents, waivers or
documents provided or permitted by this Trust Indenture to be made, given,
furnished or filed shall be in writing, personally delivered or mailed by
certified mail, postage prepaid, or by facsimile or confirmed telex, and (i) if
to the Owner Trustee, addressed to it at 79 South Main Street, Salt Lake City,
Utah 84111 with a copy to the Owner Participant addressed as provided in clause
(iii) below, (ii) if to Mortgagee, addressed to it at its office at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, Attention:
Corporate Trust Administration, facsimile number (302) 651-8882, (iii) if to any
Participant, Lessee, any Note Holder or any other Indenture Indemnitee,
addressed to such party at such address as such party shall have furnished by
notice to the Owner Trustee and the Mortgagee, or, until an address is so
furnished, addressed to the address of such party (if any) set forth on Schedule
1 to the Participation Agreement or in the Equipment Note Register. Whenever any
notice in writing is required to be given by the Owner Trustee, any Participant
or the Mortgagee or any Note Holder to any of the other of them, such notice
shall be deemed given and such requirement satisfied when such notice is
received, or if such notice is mailed by certified mail, postage prepaid, three
Business Days after being mailed, addressed as provided above. Any party hereto
may change the address to which notices to such party will be sent by giving
notice of such change to the other parties to this Trust Indenture.
SECTION 10.06. SEVERABILITY.
Any provision of this Trust Indenture which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof. Any such prohibition or unenforceability in any
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 10.07. NO ORAL MODIFICATION OR CONTINUING WAIVERS.
No term or provision of this Trust Indenture or the Equipment Notes
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the Owner Trustee and the Mortgagee, in
compliance with Section 9.01 hereof. Any waiver of the terms hereof or of any
Equipment Note shall be effective only in the specific instance and for the
specific purpose given.
<PAGE>
SECTION 10.08. SUCCESSORS AND ASSIGNS.
All covenants and agreements contained herein shall be binding upon,
and inure to the benefit of, each of the parties hereto and the permitted
successors and assigns of each, all as herein provided. Any request, notice,
direction, consent, waiver or other instrument or action by any Note Holder
shall bind the successors and assigns of such holder. This Trust Indenture and
the Trust Indenture Estate shall not be affected by any amendment or supplement
to the Trust Agreement or by any other action taken under or in respect of the
Trust Agreement, except that each reference in this Trust Indenture to the Trust
Agreement shall mean the Trust Agreement as amended and supplemented from time
to time to the extent permitted hereby, thereby and by the Participation
Agreement. Each Note Holder by its acceptance of an Equipment Note agrees to be
bound by this Trust Indenture and all provisions of the Participation Agreement
applicable to a Loan Participant or a Note Holder.
SECTION 10.09. HEADINGS.
The headings of the various Articles and sections herein and in the
table of contents hereto are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof.
SECTION 10.10. NORMAL COMMERCIAL RELATIONS.
Anything contained in this Trust Indenture to the contrary
notwithstanding, Owner Trustee, Mortgagee, any Participant or any bank or other
Affiliate of such Participant may conduct any banking or other financial
transactions, and have banking or other commercial relationships, with Lessee,
fully to the same extent as if this Trust Indenture were not in effect,
including without limitation the making of loans or other extensions of credit
to Lessee for any purpose whatsoever, whether related to any of the transactions
contemplated hereby or otherwise.
SECTION 10.11. GOVERNING LAW; COUNTERPART FORM.
THIS TRUST INDENTURE SHALL IN ALL RESPECTS BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS TRUST
INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK. This Trust Indenture may
be executed by the parties hereto in separate counterparts (or upon separate
signature pages bound together into one or more counterparts), each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 10.12. VOTING BY NOTE HOLDERS.
All votes of the Note Holders shall be governed by a vote of a
Majority in Interest of Note Holders, except as otherwise provided herein.
<PAGE>
SECTION 10.13. BANKRUPTCY.
It is the intention of the parties that the Owner Trustee, as lessor
under the Lease (and the Mortgagee as assignee of the Owner Trustee hereunder),
shall be entitled to the benefits of Section 1110 with respect to the right to
take possession of the Aircraft, Airframe, Engines and Parts as provided in the
Lease in the event of a case under Chapter 11 of the Bankruptcy Code in which
Lessee is a debtor, and in any instance where more than one construction is
possible of the terms and conditions hereof or any other pertinent Operative
Agreement, each such party agrees that a construction which would preserve such
benefits shall control over any construction which would not preserve such
benefits.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Indenture and Mortgage to be duly executed by their respective officers thereof
duly authorized as of the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By:_____________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as Mortgagee
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
TO TRUST INDENTURE AND MORTGAGE 925
TRUST INDENTURE AND MORTGAGE 925 SUPPLEMENT
This TRUST INDENTURE AND MORTGAGE 925 SUPPLEMENT NO. 1, dated
September 25, 1997 (herein called this "Trust Indenture Supplement") of FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely
as Owner Trustee (herein called the "Owner Trustee") under that certain Trust
Agreement dated as of September 25, 1997 (the "Trust Agreement"), between the
Owner Trustee and the Owner Participant named therein.
W I T N E S S E T H:
WHEREAS, the Trust Indenture and Mortgage 925, dated as of September
25, 1997 (as amended and supplemented to the date hereof, the "Trust Indenture")
between the Owner Trustee and Wilmington Trust Company, as Mortgagee (the
"Mortgagee"), 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 Mortgagee; and
WHEREAS, each of the Trust Agreement and Trust Indenture relates to
the Airframe and Engines described below, and a counterpart of the Trust
Indenture is attached hereto and made a part hereof and this Trust Indenture
Supplement, together with such counterpart of the Trust Indenture, is being
filed for recordation on the date hereof with the FAA as one document;
NOW, THEREFORE, this Trust Indenture Supplement witnesseth that the
Owner Trustee hereby confirms that the Lien of the Trust Indenture on the Trust
Indenture Estate covers all of Owner Trustee's right, title and interest in and
to the following described property:
AIRFRAME
One airframe identified as follows:
FAA
Registration Manufacturer's
Manufacturer Model Number Serial Number
Embraer-Empresa Brasileira EMB-145 N14925 145.004
de Aeronautica S.A.
together with all of the Owner Trustee's right, title and interest in and to all
Parts of whatever nature, whether now owned or hereinafter acquired and which
are from time to time incorporated or installed in or attached to said airframe.
<PAGE>
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated
take-off horsepower or the equivalent thereof, identified as follows:
MANUFACTURER MANUFACTURER'S MODEL SERIAL NUMBER
------------ -------------------- -------------
Allison AE3007A CAE310005
Allison AE3007A CAE310004
together with all of Owner Trustee's right, title and interest in and to all
Parts of whatever nature, whether now owned or hereafter acquired and which are
from time to time incorporated or installed in or attached to either of such
engines.
Together with all of Owner Trustee's right, title and interest in and
to (a) all Parts of whatever nature, which from time to time are included within
the definition of "Airframe" or "Engine", whether now owned or hereafter
acquired, including all substitutions, renewals and replacements of and
additions, improvements, accessions and accumulations to the Airframe and
Engines (other than additions, improvements, accessions and accumulations which
constitute appliances, parts, instruments, appurtenances, accessories,
furnishings or other equipment excluded from the definition of Parts) and (b)
all Aircraft Documents.
As further security for the obligations referred to above and secured
by the Trust Indenture and hereby, 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 Mortgagee, its successors and assigns, for the security and
benefit of the Loan Participants, the Note Holders and the Indenture
Indemnitees, in the trust created by the Trust Indenture, all of the right,
title and interest of the Owner Trustee in, to and under the Lease Supplement of
even date herewith covering the property described above.
Notwithstanding any provision hereof, no Excluded Payment shall
constitute security for any of the aforementioned obligations.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Mortgagee, its successors and assigns, in trust for the equal and proportionate
benefit and security of the Loan Participants, the Note Holders and the
Indenture Indemnitees, except as provided in Section 2.14 and Article III of the
Trust Indenture without any preference, distinction or priority of any one
Equipment Note over any other by reason of priority of time of issue, sale,
negotiation, date of maturity thereof or otherwise for any reason whatsoever,
and for the uses and purposes and subject to the terms and provisions set forth
in the Trust Indenture.
<PAGE>
This Trust Indenture Supplement shall be construed as supplemental to
the Trust Indenture and shall form a part thereof. The Trust Indenture is each
hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft
referred to in this Trust Indenture Supplement and the aforesaid Lease
Supplement has been delivered to the Owner Trustee and is included in the
property of the Owner Trustee covered by all the terms and conditions of the
Trust Agreement, subject to the pledge and mortgage thereof under the Trust
Indenture.
* * *
IN WITNESS WHEREOF, the Owner Trustee has caused this Trust Indenture
Supplement to be duly executed by one of its officers, thereunto duly
authorized, on the day and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Owner Trustee,
Owner Trustee
By:_____________________________________
Name:
Title:
<PAGE>
TRUST INDENTURE AND MORTGAGE
<TABLE>
<CAPTION>
SCHEDULE I
ORIGINAL AMOUNT INTEREST RATE
--------------- -------------
<S> <C> <C>
Series A: $55,440,000 7.160%
Series B: 19,731,000 7.140%
Series C: 14,418,000 7.121%
</TABLE>
<PAGE>
TRUST INDENTURE AND MORTGAGE
EQUIPMENT NOTE AMORTIZATION
PERCENTAGE OF
ORIGINAL AMOUNT
PAYMENT DATE TO BE PAID
- ------------ ---------------
SERIES A SERIES B SERIES C
-------- -------- --------
AVMARK, INC.
1500 Wilson Boulevard, Suite 515
Arlington, VA 22209
September 5, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway, Suite 2010
Houston, TX 77019
Re: PRELIMINARY PROSPECTUS SUPPLEMENT, DATED SEPTEMBER 5, 1997,
TO THE PROSPECTUS DATED JULY 23, 1997, INCLUDED IN
REGISTRATION STATEMENT NO. 333-31285 OF CONTINENTAL
AIRLINES, INC.
Ladies and Gentlemen:
We consent to the use of our report and to the reference to our name
in the text under the headings "Prospectus Supplement Summary--Equipment Notes
and the Aircraft," "Risk Factors--Risk Factors Relating to the Certificates and
the Offering--Appraisals and Realizable Value of Aircraft," "Description of the
Aircraft and the Appraisals--The Appraisals" and "Experts" in the
above-captioned Preliminary Prospectus Supplement and to the summary contained
in the text under such headings of the report prepared by us with respect to the
Aircraft referred to therein. We also consent to such use, reference and summary
in the Final Prospectus Supplement relating to the offering described in such
Preliminary Prospectus Supplement, to the extent such use, references and
summary are unchanged.
Sincerely,
AVMARK, INC.
/s/ Robert C. Miers
________________________________________
Robert C. Miers
Director of Appraisals
SIMAT, HELLIESEN & EICHNER, INC.
90 Park Avenue
New York, New York 10016
September 5, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway, Suite 2010
Houston, TX 77019
Re: PRELIMINARY PROSPECTUS SUPPLEMENT, DATED SEPTEMBER 5, 1997,
TO THE PROSPECTUS DATED JULY 23, 1997, INCLUDED IN
REGISTRATION STATEMENT NO. 333-31285 OF CONTINENTAL
AIRLINES, INC.
Ladies and Gentlemen:
We consent to the use of our report and to the reference to our name
in the text under the headings "Prospectus Supplement Summary--Equipment Notes
and the Aircraft," "Risk Factors--Risk Factors Relating to the Certificates and
the Offering--Appraisals and Realizable Value of Aircraft," "Description of the
Aircraft and the Appraisals--The Appraisals" and "Experts" in the
above-captioned Preliminary Prospectus Supplement and to the summary contained
in the text under such headings of the report prepared by us with respect to the
Aircraft referred to therein. We also consent to such use, reference and summary
in the Final Prospectus Supplement relating to the offering described in such
Preliminary Prospectus Supplement, to the extent such use, references and
summary are unchanged.
Sincerely,
SIMAT, HELLIESEN & EICHNER, INC.
/s/ Clive G. Medland
_______________________________________
Clive G. Medland
Vice President
Certified Appraiser
International Society of Transport
Aircraft Trading
MORTEN BEYER AND AGNEW
8180 Greensboro Drive, Suite 1000
McLean, VA 22102
September 5, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway, Suite 2010
Houston, TX 77019
Re: PRELIMINARY PROSPECTUS SUPPLEMENT, DATED SEPTEMBER 5, 1997,
TO THE PROSPECTUS DATED JULY 23, 1997, INCLUDED IN
REGISTRATION STATEMENT NO. 333-31285 OF CONTINENTAL
AIRLINES, INC.
Ladies and Gentlemen:
We consent to the use of our report and to the reference to our name
in the text under the headings "Prospectus Supplement Summary--Equipment Notes
and the Aircraft," "Risk Factors--Risk Factors Relating to the Certificates and
the Offering--Appraisals and Realizable Value of Aircraft," "Description of the
Aircraft and the Appraisals--The Appraisals" and "Experts" in the
above-captioned Preliminary Prospectus Supplement and to the summary contained
in the text under such headings of the report prepared by us with respect to the
Aircraft referred to therein. We also consent to such use, reference and summary
in the Final Prospectus Supplement relating to the offering described in such
Preliminary Prospectus Supplement, to the extent such use, references and
summary are unchanged.
Sincerely,
MORTEN BEYER AND AGNEW
/s/ Morten S. Beyer
_______________________________________
Morten S. Beyer
Chairman & CEO
ISTAT Certified Senior Appraiser
AVMARK, INC.
1500 Wilson Boulevard, Suite 515
Arlington, VA 22209
September 19, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway, Suite 2010
Houston, TX 77019
Re: PROSPECTUS SUPPLEMENT, DATED SEPTEMBER 12, 1997, TO THE
PROSPECTUS DATED JULY 23, 1997, INCLUDED IN REGISTRATION
STATEMENT NO. 333-31285 OF CONTINENTAL AIRLINES, INC.
Ladies and Gentlemen:
We consent to the use of our report and to the reference to our name
in the text under the headings "Prospectus Supplement Summary--Equipment Notes
and the Aircraft," "Risk Factors--Risk Factors Relating to the Certificates and
the Offering--Appraisals and Realizable Value of Aircraft," "Description of the
Aircraft and the Appraisals--The Appraisals" and "Experts" in the
above-captioned Prospectus Supplement and to the summary contained in the text
under such headings of the report prepared by us with respect to the Aircraft
referred to therein.
Sincerely,
AVMARK, INC.
/s/ Robert C. Miers
_______________________________________
Robert C. Miers
Director of Appraisals
MORTEN BEYER AND AGNEW
8180 Greensboro Drive, Suite 1000
McLean, VA 22102
September 19, 1997
CONTINENTAL AIRLINES, INC.
2929 Allen Parkway, Suite 2010
Houston, TX 77019
Re: PROSPECTUS SUPPLEMENT, DATED SEPTEMBER 12, 1997, TO THE
PROSPECTUS DATED JULY 23, 1997, INCLUDED IN REGISTRATION
STATEMENT NO. 333-31285 OF CONTINENTAL AIRLINES, INC.
Ladies and Gentlemen:
We consent to the use of our report and to the reference to our name
in the text under the headings "Prospectus Supplement Summary--Equipment Notes
and the Aircraft," "Risk Factors--Risk Factors Relating to the Certificates and
the Offering--Appraisals and Realizable Value of Aircraft," "Description of the
Aircraft and the Appraisals--The Appraisals" and "Experts" in the
above-captioned Prospectus Supplement and to the summary contained in the text
under such headings of the report prepared by us with respect to the Aircraft
referred to therein.
Sincerely,
MORTEN BEYER AND AGNEW
/s/ Morten S. Beyer
_______________________________________
Morten S. Beyer
Chairman & CEO
ISTAT Certified Senior Appraiser
