March 30, 1998
Securities and Exchange Commission
Washington, DC 20549
To whom it may concern:
We file this amendment to the 1997 Form 10-K for the following reasons:
1) To correct several editing and formatting errors noted in the initial
submission accepted on March 25, 1998.
2) To include all exhibits not previously filed or incorporated by reference in
initial submission accepted on March 25, 1998.
Thank-you for your attention to this matter.
Sincerely,
David W. Asai
Vice President, Financial Planning
and Controller
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 1997
Commission file number 0-21976
ATLANTIC COAST AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State of incorporation) (IRS Employer
Identification No.)
515-A Shaw Road, Dulles, Virginia 20166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock par value $ .02 NASDAQ National Market
(Title of Class) (Name of each exchange on which registered)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No__
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 2, 1998 was approximately $253,399,036.
As of March 2, 1998 there were 9,107,786 shares of Common Stock of the
registrant issued and 7,635,286 shares of Common Stock were outstanding.
Documents Incorporated by Reference
Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.
Document Incorporated Part of Form 10-K
- --------------------- -----------------
Proxy Statement for 1998 Annual Meeting of Shareholders Part III, Items 10-13
PART I
Item 1. Business
General
This Annual Report on Form 10-K contains forward-looking
statements, particularly those statements identified by such words as
"anticipates", "believes", "plans" or "expects". Actual results may differ based
on a variety of factors including costs, competitive reactions, and marketplace
demand for services on the Company's routes.
Atlantic Coast Airlines, Inc. ("ACAI"), is the holding company
of Atlantic Coast Airlines ("ACA"), (together, the "Company"), a large regional
airline, serving 44 destinations in 19 states in the Eastern United States as of
March 2, 1998 with nearly 500 scheduled non-stop flights system-wide every
weekday. The Company markets itself as "United Express" and is the only
code-sharing regional airline for United Airlines, Inc. ("United") operating as
United Express in the Eastern United States. The Company caters primarily to
business travelers with its principle operations at Washington-Dulles
International Airport ("Washington-Dulles"), which serves the Northern Virginia
and Washington, D.C. markets. The Company coordinates its schedules with United,
particularly at Washington-Dulles, where United operates 63 daily departures to
31 cities in the U.S., Europe and Mexico. As of March 2, 1998, the Company
operated a fleet of 67 aircraft (six regional jets and 61 turboprop aircraft)
having an average age of approximately five years.
Summary of Company Strategy
The Company's long-term corporate objective is to achieve
sustained earnings growth by focusing its resources in the following areas:
1. Implementation of the Regional Jet Fleet and Expansion of
the Washington-Dulles Hub: In the fourth quarter of 1997, the Company placed
into service its first five 50-seat Canadair Regional Jets ("CRJs"). One CRJ was
delivered in January 1998 with eight additional CRJs scheduled for delivery in
the remainder of the year and nine in 1999. The Company has options to acquire
25 additional CRJs.
The Company anticipates that it will utilize CRJs as part of
its strategy to grow at Washington-Dulles airport by reclaiming passenger
traffic lost when United downsized its Washington-Dulles schedule in the early
1990's and by increasing market share, principally in markets beyond the
economic operating range of its turboprop aircraft. The Company believes that
utilizing CRJs in this manner will provide additional connecting passengers to
both its turboprop fleet and United's jets flying from Washington-Dulles. The
Company also believes that the CRJs could also be deployed as a complement to
its existing turboprop service in the short-haul, high-density markets and could
provide additional capacity during peak business travel times.
In December 1997, the Company petitioned the U.S. Department
of Transportation ("DOT") for 42 arrival/departure slots at Chicago's O'Hare
Airport to serve seven cities currently without nonstop service to Chicago. If
granted, the Company would utilize as many as six CRJs operating as United
Express pursuant to agreements with United Airlines (see discussion on slots
below).
2. Capitalize on and Promote the Company's Identity with
United Airlines: The Company intends to capitalize on and promote its
code-sharing relationship with United, which has contributed significantly to
the Company's growth. The Company has a shared market identity with United,
lists its flights under United's two letter flight designator code in airline
Computer Reservation Systems ("CRSs") and other published schedules and awards
United's "Mileage Plus" frequent flyer miles to its passengers. The Company
coordinates its schedules with United, particularly at Washington-Dulles, and
participates with United in cooperative advertising and marketing agreements. In
most cities served by the Company, United provides all airport facilities and
related ground support services. The Company also participates in United's
"Apollo" reservation system and all major CRSs, uses the United Express logo and
has exterior aircraft paint schemes similar to those of United.
The Company markets itself as "United Express" under its
United Express Agreements ("Agreements") with United Airlines. These Agreements,
originally scheduled to expire on March 31, 1998, have been extended for one
year.
3. Continue to Emphasize Operational Safety and Efficiency:
For over three years, the Company has worked with the Federal Aviation
Administration ("FAA") to develop enhanced pilot training and cockpit
decision-making procedures under two programs: the Advanced Qualification
Program ("AQP") and the Advanced Crew Resource Management Program ("ACRM"). AQP
and ACRM focus training curriculums on individual technical skills and crew
interaction scenarios. The FAA selected the Company to participate in a grant to
study how ACRM can be integrated with standard operational procedures such as
crew briefings and checklists. The Company anticipates that it will continue to
enhance and improve these programs in cooperation with the FAA.
The Company is also in the process of installing in its
aircraft an enhanced navigational aid which utilizes global positioning
satellite ("GPS") technology. Once implemented, the Company anticipates that GPS
will reduce both aircraft block hours and pilot workloads. On July 18, 1997, the
FAA approved the Company's use of GPS on certain routes. Full implementation of
GPS is contingent on FAA approval for use in all of the Company's operational
areas.
During 1997, the Company equipped most of its aircraft with an
automated aircraft time reporting system, which enables the Company to more
efficiently communicate with flight crews and further automate the flight
tracking process. In addition, this system improves the timeliness and accuracy
of flight information communicated and displayed to the Company's passengers.
During 1997, the Company performed most aircraft overnight and
heavy-maintenance checks in Lynchburg, Virginia, approximately 160 miles from
Washington-Dulles. In February 1998, the Company occupied its new maintenance
hangar at Washington-Dulles. Moving its maintenance operation to the larger
facility at Washington-Dulles accommodates the Company's expanding fleet and has
enabled the Company to eliminate aircraft ferrying costs. In addition, because
the new facility increases the proximity of maintenance technicians and spare
parts, the Company believes it will improve completion factor by reducing flight
cancellations (see discussion on leased facilities below).
Markets
As of March 2, 1998, the Company scheduled 218 non-stop
flights from Washington-Dulles representing more flights from that airport than
any other airline. During 1997, the Company accounted for more passenger
boardings from Washington-Dulles than any airline other than United. On a
combined basis, the Company and United generated approximately 55% of passenger
traffic at Washington-Dulles during 1997.
The Company's top four cities based on frequency of operations
are Washington-Dulles, Boston, New York-JFK and Newark. During 1997, the Company
added additional flights to existing Washington-Dulles markets, added new routes
from the Washington-Dulles, Boston and New York-JFK airports and ceased
operations in one market. The Company increased operations in existing
Washington-Dulles markets by 23 daily departures and added new service to three
cities: Fort Myers, FL; Jacksonville, FL; and Nashville, TN. Further, the
Company added new non-Dulles flights from Boston, consisting of one new market
with five daily departures; and New York-JFK with two new markets and eight
daily departures. In 1997, the Company ceased operations to New Haven, CT,
resulting in the elimination of four daily departures from Washington-Dulles. In
1997, the Company also provided seasonal service to Martha's Vineyard and
Nantucket, MA from Washington-Dulles.
The following table sets forth the destinations currently
served (or scheduled for service on the date indicated) by the Company, as of
March 2, 1998:
Albany, NY Manchester, NH
Allentown, PA Nashville, TN
Atlanta, GA New York, NY (Kennedy)
Baltimore, MD New York, NY (LaGuardia)
Binghamton, NY Newark, NJ
Boston, MA Newport News, VA
Buffalo, NY Norfolk, VA
Burlington, VT Philadelphia, PA
Charleston, SC Pittsburgh, PA
Charleston, WV Portland, ME
Charlottesville, VA Providence, RI
Cleveland, OH Raleigh-Durham, NC
Columbus, OH Richmond, VA
Dayton, OH Roanoke, VA
Detroit, MI Rochester, NY
Fort Myers, FL Savannah, GA (4/1/98)
Greensboro, NC State College, PA
Harrisburg, PA Stewart, NY
Hartford, CT Syracuse, NY
Indianapolis, IN (3/16/98) Tampa, FL
Jacksonville, FL Westchester County, NY
Knoxville, TN Washington-Dulles, VA
Lynchburg, VA Wilmington, NC
Worcester, MA (4/16/98)
Fleet Description
Fleet Expansion: As of March 2, 1998, the Company operated a
fleet of six CRJs and 61 turboprop aircraft, consisting of 29 British Aerospace
Jetstream-32 ("J-32s") and 32 British Aerospace Jetstream-41 ("J-41").
As of March 4, 1998, the Company had a total of 17 CRJs on
order from Bombardier, Inc., in addition to the six delivered, and held options
for 25 additional CRJs. The initial order for 12 CRJs and 36 options was placed
on January 28, 1997. Options were exercised on November 20, 1997 for an
additional six firm and six conditional CRJ deliveries. On March 4, 1998, five
of the six conditional orders were converted to firm orders and the remaining
one was restored to option status. The first six CRJs were delivered in the
third and fourth quarters of 1997, and January 1998. Eight additional deliveries
are scheduled in 1998 and nine deliveries are scheduled in 1999.
The Company accepted delivery of four new J-41s during the
first half of 1997, and had additional J-41s on order pursuant to a purchase
agreement with British Aerospace, dated February 23, 1997, the ("BA J-41
Agreement"). On May 29, 1997, British Aerospace announced that it would no
longer manufacture the J-41 as part of its regular product line. On July 2,
1997, the Company and British Aerospace amended the BA J-41 Agreement to cancel
any further deliveries pursuant to this agreement. On December 4, 1997, the
Company entered into a short term lease agreement and took delivery of a new
J-41.
Fleet Composition: The following table describes the
Company's fleet of aircraft, scheduled deliveries and options as of March 4,
1998:
<TABLE>
<CAPTION>
Future Scheduled
Number of Aircraft Passenger Capacity Average Age in Deliveries/
Years Options
<S> <C> <C> <C> <C>
British Aerospace J-32 29 19 8.2 -
British Aerospace J-41 32 29 3.2 -
Canadair Regional Jets 6 50 .4 17/25
-- -- -----
67 5.1 17/25
== =====
</TABLE>
Regional Jet Implementation
During the third quarter of 1997 the Company successfully
completed line certification of the Regional Jet. Accordingly, the Company
received authorization to conduct operations under the provisions of the FAA
Part 121 regulations. The Company is operating the CRJs under the same FAA
regulatory requirements mandated by the FAA for all other CRJ, and larger jet,
carriers. The Company believes that the market will support existing
high-density routes and new routes and schedules that the Company's expanded
fleet will facilitate. In addition, the Company expects that its customers will
find the new CRJs acceptable for relatively longer flights, thereby enhancing
the Company's ability to compete in a broader geographic market.
The United Express Agreements required the Company to obtain
United's consent to operate the 50-seat CRJs under the "United Express" name
which consent was obtained on November 22, 1997. All CRJ routes operated as
United Express must receive prior approval from United. While the Company's
request for that consent was pending, United agreed in August 1997 to reimburse
the Company for its estimated aircraft lease and associated flight crew expenses
for its CRJs that were delivered but not in operation during the period from
September 11, 1997 through December 31, 1997. On November 22, 1997, the Company
began scheduled CRJ passenger service to four cities. From November 22 to
December 7, 1997, in order to expedite the introduction of United Express CRJ
service, United agreed to reimburse the Company for the block hour costs
associated with providing CRJ service to three of these cities. United received
the revenue from these flights. The United subsidy associated with aircraft
lease and flight crew expenses also ceased after December 7, 1997.
United Express Agreements
The Company's code-sharing and related agreements with United
(the "United Express Agreements") define the Company's relationship with United.
The United Express Agreements authorize the Company to use United's "UA" flight
designator code to identify its flights and fares in the major CRSs, including
United's "Apollo" reservation system, to use the United Express logo and
exterior aircraft paint schemes and uniforms similar to those of United, and to
otherwise advertise and market its association with United.
Company passengers may participate in United's "Mileage Plus"
frequent flyer program and are eligible to receive a certain minimum number of
United frequent flyer miles for each of the Company's flights. Mileage Plus
members are also eligible to redeem their awards on the Company's route system.
In 1997, approximately 60% of the Company's passengers participated in United's
"Mileage Plus" frequent flyer program. The Company limits the number of "Mileage
Plus" tickets that may be used on its flights and believes that the
displacement, if any, of revenue passengers is minimal.
The United Express Agreements also provide for coordinated
schedules and through-fares. A through-fare is a fare offered by a major air
carrier to prospective passengers who, in order to reach a particular
destination, transfer between the major carrier and its code-sharing partner.
Generally, these fares are less expensive than purchasing the combination of
local fares. United establishes all through-fares and allows the Company a
portion of these fares on a fixed rate or formula basis subject to periodic
adjustment. The United Express Agreements also provide for interline baggage
handling, and for reduced airline fares for eligible United and Company
personnel and families. The United Express code-sharing agreement expires on
March 31, 1999.
Under the United Express Agreements, United provides a number
of additional services to the Company. These include publication of the fares,
rules and related information that are part of the Company's contracts of
carriage for passengers and freight; publication of the Company's flight
schedules and related information; provision of toll-free reservations services;
provision of ground support services at many of the airports served by both
United and the Company; provision of ticket handling services at United's
ticketing locations; provision of airport signage at airports where both the
Company and United operate; provision of United ticket stock and related
documents; provision of expense vouchers, checks and cash disbursements to
Company passengers inconvenienced by flight cancellations, diversions and
delays; and cooperation in the development and execution of advertising,
promotion, and marketing efforts featuring United Express and the relationship
between United and the Company. In return for these services, the Company pays
United monthly fees based on the total number of revenue passengers boarded by
the Company on its flights for the month. The fee escalates periodically over
the term of the United Express Agreements.
The United Express Agreements require the Company to obtain
United's consent to operate service between city pairs as "United Express". If
the Company experiences net operating expenses that exceed revenues for three
consecutive months on any required route, the Company may withdraw from that
route if United and the Company are unable to negotiate an alternative mutually
acceptable level of service for that route. The United Express Agreements also
require the Company to obtain United's approval if it chooses to enter into
code-sharing arrangements with other carriers, but do not prohibit United from
competing, or from entering into agreements with other airlines who would
compete, on routes served by the Company. The United Express Agreements may be
canceled if the Company fails to meet certain financial tests or performance
standards or fails to maintain certain minimum flight frequency levels, events
which the Company, based on experience to date, believes to be unlikely.
The United Express Agreements restrict the ability of the
Company to merge with another company or dispose of certain assets or aircraft
without offering United a right of first refusal to acquire the Company or such
assets or aircraft. United also has a right of first refusal with respect to
issuance by the Company of shares of its Common Stock if, as a result of the
issuance, certain of the Company's stockholders and their permitted transferees
do not own at least 50% of the Company's Common Stock after such issuance.
Because those Company stockholders and their permitted transferees own
substantially less than 50% today, management believes that such a right is
unlikely to be exercised.
Lufthansa Agreement
In October 1997, the Company entered into a code-sharing
agreement with Lufthansa German Airlines, which permits Lufthansa to place its
airline code on flights operated by the Company. In addition, the United
Express-Lufthansa agreement provides a wide range of benefits for code-share
passengers including the ability to check in once at their initial departure
city and receive boarding passes and seat assignments for the flights on both
carriers while their luggage is automatically checked through to their final
destination. Members of the Lufthansa Miles & More frequent flyer program
receive mileage credit for these flights. In January 1998, the Company added the
Lufthansa code to flights operated in ten city pair markets.
The following markets served by the Company now carry both the
United Airlines (UA) and Lufthansa (LH) designator codes on selected flights:
Washington-Dulles to Greensboro, NC; Charlottesville, VA; Cleveland, OH;
Norfolk, VA; Richmond, VA; Roanoke, VA; Syracuse, NY; Newport News, VA;
Pittsburgh, PA; and Raleigh-Durham, NC.
Fuel
The Company has not experienced difficulties with fuel
availability and expects to be able to obtain fuel at prevailing prices in
quantities sufficient to meet its future requirements. During 1997, the Company
purchased approximately 78% of its fuel from United Aviation Fuels Corporation
("UAFC"), an affiliate of United taking advantage of the affiliate's significant
buying power and fuel purchasing expertise. On March 17, 1997, the Company
renewed its fuel purchasing agreement with the United affiliate and obtained a
reduction in the base price of fuel at its Washington-Dulles hub. In January and
March 1998, the Company entered into fixed price fuel purchase agreements with
UAFC for the delivery of 33,000 barrels per month at Washington-Dulles. The
purchase contracts, representing approximately 46% of the Company's anticipated
1998 fuel requirements, expire December 31, 1998.
Marketing
The Company's advertising and promotional programs emphasize
the Company's close affiliation with United, including coordinated flight
schedules and the ability of the Company's passengers to participate in United's
"Mileage Plus" frequent flyer program. The Company's services are marketed
primarily by means of listings in CRSs and the Official Airlines Guide,
advertising and promotions, and through direct contact with travel agencies and
corporate travel departments. For the year ended December 31, 1997,
approximately 82% of the Company's passenger revenue was derived from ticket
sales generated through travel agencies and corporate travel departments. In
marketing to travel agents, the Company relies on personal contacts and direct
mail campaigns, provides familiarization flights, and hosts group presentations
and other functions to acquaint travel agents with the Company's services. Many
of these activities are conducted in cooperation with United marketing
representatives. In addition, the Company and United jointly create radio and
print advertising in markets served by the Company.
In February 1998, the Company announced that it would offer
double Mileage Plus miles to passengers on several United Express regional jet
markets from February 1 to April 15, 1998. Those flights include service between
Washington-Dulles International Airport and Fort Myers, Jacksonville and Tampa,
FL; as well as Atlanta, GA; Nashville, TN; and Raleigh-Durham, NC.
In September 1995, the Company became a participant in
United's electronic ticketing program. This program allows customers to travel
on flights of United and the Company without the need for a paper ticket. The
primary benefit of this program is improved customer service and reduced
ticketing costs. For the year ended December 31, 1997, 25.6% of the Company's
passengers utilized electronic tickets up from 18.4% for the year ended December
31, 1996.
Competition
The Company competes primarily with regional and major air
carriers as well as with ground transportation. The Company's competition from
other air carriers varies from location to location, type of aircraft (both
turbo-prop and jet), and in certain cities, comes from carriers which serve the
same destinations as the Company but through different hubs. The Company
believes that its ability to compete in its market areas is strengthened by its
code-sharing relationship with United, which has a substantial presence at
Washington-Dulles, thereby enhancing the importance of the "UA" flight
designator code on the East Coast. The Company seeks to compete with other
airlines by offering frequent flights. In addition, the Company's competitive
position benefits from the large number of participants in United's "Mileage
Plus" frequent flyer program who fly regularly to or from the markets served by
the Company.
At its Washington-Dulles hub, the Company faces limited direct
nonstop competition from other carriers. In eleven of its markets from Dulles,
other airlines have competing turboprop and/or jet service. There are no other
airlines serving the Company's remaining twenty-seven Dulles markets with
nonstop flights. However, flights to the Company's Washington-Dulles
destinations are also offered by other carriers from Ronald Reagan Washington
National and Baltimore-Washington International airports.
During 1997, the Company continued to see a trend toward a
lower percentage of its passengers connecting to United Airlines flights through
its Dulles hub. One potential cause for this trend was additional competition
for connecting passengers from other hub networks in the region controlled by
some of United's principal competitors. In 1997, regional jet operations were a
much larger part of these competing hub networks. As a result, the Company's
turbo-prop to jet connections with its code-share partner United are
increasingly competing with these other hub networks' jet to jet connections.
Some passengers may perceive jet to jet connections more favorably due to a
jet's shorter elapsed flight time and comfort relative to a turbo-prop aircraft.
The Company believes that the public's favorable perception of regional jets
supports its strategy for acquisition of these aircraft to mitigate any loss of
passengers to operators already using regional jets.
The Aviation Deregulation Act of 1978 (the "1978 Act")
eliminated many regulatory constraints on airline competition, thereby freeing
airlines to set prices and, with limited exceptions, to establish domestic
routes without the necessity of seeking government approval. The airline
industry is highly competitive, and there are few barriers to entry in the
Company's markets. Furthermore, larger carriers with greater resources can
impact the Company's markets through fare adjustments as well as flight schedule
modifications.
Yield Management
The Company closely monitors its inventory and pricing of
available seats by use of a computerized yield management system. In March 1997,
the Company implemented a state-of-the-art revenue management system, PROS IV,
marketed by PROS Strategic Solutions. This system enables the Company's revenue
control analysts, on a flight by flight basis, to establish the optimal
allocation of seats by fare class (the number of seats made available for sale
at various fares) to maximize system revenue.
Slots
Slots are reservations for takeoffs and landings at specified
times and are required by governmental authorities to operate at certain
airports. The Company utilizes takeoff and landing slots at the LaGuardia, New
York-JFK and White Plains, New York airports. Airlines may acquire slots by
governmental grant, by lease or purchase from other airlines, or by loan when
another airline does not use a slot but desires to avoid governmental
reallocation of a slot for lack of use. All leased and loaned slots are subject
to renewal and termination provisions.
As of March 2, 1998 the Company utilized 18 slots at
LaGuardia, 15 slots at New York-JFK, and six slots at White Plains. Of the above
slots, the Company controls five at LaGuardia and three at White Plains. The
LaGuardia slots are issued under FAA regulations which provide that although a
carrier may be a holder of a slot, it has no property interest in such slot.
These slots can be withdrawn without compensation under certain circumstances.
The other slots utilized by the Company are either loaned or leased from other
carriers and are subject to varying renewal dates. The Company believes that as
slots expire it will be able to either renew the lease or find substitute slots
at similar prices.
In December 1997, the Company applied to the U.S. Department
of Transportation ("DOT") for 42 slots to operate three daily round-trip flights
with 50-passenger regional jet aircraft between Chicago's O'Hare International
Airport and each of the following cities: Charleston, WV; Duluth, MN;
Fayetteville, AK; Montgomery, AL; Shreveport, LA; Springfield/Branson, MO; and
Wilkes-Barre/Scranton, PA. These flights would connect to ACA's code-share
partner, United, and other United Express operators at United's Chicago hub. An
affiliate of American Airlines, Inc., operating as American Eagle, has also
requested the DOT grant it slots to serve Chicago O'Hare from the same cities.
The DOT is expected to issue an order granting or denying the carrier requests
for slots to serve these city pair markets. There can be no assurance whether
any or all slots will be granted to the Company by the DOT.
Employees
As of March 2, 1998, the Company had 1,454 full-time and
151 part-time employees, classified as follows:
<PAGE>
Classification Full-Time Part-Time
Pilots 566 -
Flight attendants 191 -
Station personnel 277 139
Maintenance personnel 120 1
Administrative and clerical personnel 286 11
Management 14 -
--------------- ---------------
Total employees 1,454 151
=============== ===============
The Company's pilots are represented by the Airline Pilots
Association ("ALPA"), its flight attendants by the Association of Flight
Attendants ("AFA"), and its mechanics by the Aircraft Mechanics Fraternal
Association ("AMFA").
The ALPA collective bargaining agreement was amended on
February 26, 1997 and is effective for three years. The new contract modifies
work rules to allow more flexibility, includes regional jet pay rates, and
transfers pilots into the Company's employee benefit plans. The Company believes
that the incremental cost as a result of the amendments to the contract will not
have any material effect on the Company's financial position or results of its
operations over the life of the agreement.
On March 11, 1994, AMFA was certified by the National
Mediation Board (the "NMB") as the collective bargaining representative elected
by mechanics and related employees of the Company. As of March 2, 1998, AMFA
represented 110 of the Company's employees. The Company and AMFA have been
attempting to negotiate an initial contract under federal mediation since
December 1994, but have so far failed to reach agreement. The NMB has indicated
that it is in favor of continuing the negotiations, and the Company anticipates
participating in further negotiations. If, at some point, the NMB should decide
that the parties are deadlocked, the NMB could declare an impasse along with a
thirty day cooling off period. At the conclusion of that period if an agreement
has not been reached, AMFA would have the authority to use self help, up to and
including the right to strike.
The Company and AMFA were also engaged in litigation which
arose over certain work rule issues. In September 1997, the U.S. Court of
Appeals for the Second Circuit ruled in favor of the Company on all matters
pending before it, thereby resolving the pending litigation.
The Company's contract with the AFA became amendable on April
30, 1997. In March 1998, a tentative agreement between the Company and AFA was
rejected by a vote of the members. The Company expects to resume negotiations
during the second calendar quarter of 1998 and will continue to operate under
the terms of the existing agreement until negotiations are completed.
The Company believes that the wage rates and benefits for
other employee groups are comparable to similar groups at other regional
airlines. The Company is unaware of any significant organizing activities by
labor unions among its other non-union employees at this time.
As the Company continues to pursue its growth strategy, its
employee staffing needs and recruitment efforts are expected to increase
commensurately. Due to competitive local labor markets and normal attrition to
the major airlines, there can be no assurance that the Company will be able to
satisfy its hiring requirements. The Company has committed additional resources
to its employee retention efforts. Annual turnover of Company pilots was
approximately 11% during 1997, compared to 18% during 1996.
Pilot Training
The Company performs pilot training in state-of-the-art, full
motion simulators and conducts training in accordance with FAA Part 121
regulations. In 1993, the Company initiated an Advanced Qualification Program
("AQP") to enhance pilot training in both technical and Crew Resource Management
("CRM") skills. The FAA has recognized the Company's leadership in CRM training
by selecting the Company to participate in a FAA sponsored training grant. The
principal objective of the grant is to develop a prototype training program that
provides carriers with a more efficient approach for integrating CRM procedures
into standard operating procedures. For the past two and one half years, the
Company has worked closely with the FAA and George Mason University in the
development of proceduralized CRM. The second and final phase of the project,
operational implementation, began in August 1996 and is expected to be completed
in 1998.
Aviation Safety
On December 20, 1995, the FAA issued regulation 14 CFR Part
119, requiring air carriers operating aircraft under 14 CFR Part 135, with a
seating capacity of ten to thirty seats, excluding crew members, to comply with
and be certified under the more stringent air carrier safety regulation 14 CFR
Part 121 by March 20, 1997. The Company has had an internal audit program for
flight operations in place since October 1993 and has been training all of its
flight crews under CFR Part 121 since February 1994. Additionally, the Company
appointed a safety officer during 1995. The Company continues to emphasize
safety in its daily operations and plans to implement several new programs for
flight crews in 1997.
From time to the time, the FAA conducts inspections of air
carriers with varying degrees of intensity. The Company underwent an intensive,
two-week FAA Regional Aerospace Inspection Program ("RASIP") audit during the
fourth quarter of 1997. The final audit report consisted of recommendations and
minor findings, none of which resulted in civil penalties. The Company responded
to the findings and believes that it has met and continues to meet the required
standards for safety and operational performance. The Company's airline
operations will continue to be audited by the FAA for compliance with applicable
safety regulations.
Regulation
Economic. With the passage of the Deregulation Act, much of
the regulation of domestic airline routes and rates was eliminated. The DOT
still has extensive authority to issue certificates authorizing carriers to
engage in air transportation, establish consumer protection regulations,
prohibit certain unfair or anti-competitive pricing practices, mandate
conditions of carriage and make ongoing determinations of a carrier's fitness,
willingness and ability to provide air transportation. The DOT can also bring
proceedings for the enforcement of its regulations under applicable federal
statutes, which proceedings may result in civil penalties, revocation of
operating authority or criminal sanctions.
The Company holds a certificate of public convenience and
necessity, issued by the DOT, that authorizes it to conduct air transportation
of persons, property and mail between all points in the United States, its
territories and possessions. This certificate requires that the Company maintain
DOT-prescribed minimum levels of insurance, comply with all applicable statutes
and regulations and remain continuously "fit" to engage in air transportation.
Based on conditions in the industry, or as a result of
Congressional directives or statutes, the DOT from time to time proposes and
adopts new regulations or amends existing regulations. For example, the DOT has
implemented extensive regulations to prevent unfair, discriminatory and
deceptive practices by CRSs. Currently, these rules are being re-examined by the
DOT in light of changing market conditions since they were last recodified in
1992. The DOT must either re-enact these regulations or revise them on or before
March 31, 1999.
The DOT has also enacted rules establishing guidelines for
setting reasonable airport charges and procedural rules for challenging such
charges. The DOT has recently adopted a compliance policy regarding the
increasing use of ticketless travel and the consumer-related notices that must
be supplied to passengers before travel. The DOT has also proposed rules to
implement a statutory directive and a Presidential Commission recommendation to
improve notice to families of passengers involved in aviation accidents. The DOT
is considering the means by which it will require domestic and international
carriers to collect additional passenger-related information, including
emergency contact names and telephone numbers and other identifying information.
The DOT has estimated that the cost to the industry of obtaining this
information from each passenger could be significant.
Safety. The FAA regulates the safety-related activities of air
carriers. The Company is subject to the FAA's jurisdiction with respect to
aircraft maintenance and operations, equipment, ground facilities, flight
dispatch, communications, training, weather observation, flight personnel and
other matters affecting air safety. To ensure compliance with its regulations,
the FAA requires that airlines under its jurisdiction obtain an operating
certificate and operations specifications for the particular aircraft and types
of operations conducted by such airlines. The Company possesses an Air Carrier
Certificate issued by the FAA and related authorities authorizing it to conduct
operations with turboprop and turbojet equipment. In addition, the FAA has
approved the Company's commencement of CRJ service. The Company's authority to
conduct operations is subject to suspension, modification or revocation for
cause. The FAA has authority to bring proceedings to enforce its regulations,
which proceedings may result in civil or criminal penalties or revocation of
operating authority.
In order to ensure the highest level of safety in air
transportation, the FAA has authority to issue maintenance directives and other
mandatory orders relating to, among other things, inspection of aircraft and the
mandatory removal and replacement of parts that have failed or may fail in the
future. In addition, the FAA from time to time amends its regulations which such
amended regulations may impose additional regulatory burdens on the Company such
as the installation of new safety-related items (collision and windshear
avoidance systems and enhanced flight data recorders). Depending upon the scope
of the FAA's order and amended regulations, these requirements may cause the
Company to incur substantial, unanticipated expenses.
The FAA requires air carriers to adopt and enforce procedures
designed to safeguard property, ensure airport security and screen passengers to
protect against terrorist acts. The FAA, from time to time, imposes additional
security requirements on air carriers and airport authorities based on specific
threats or world conditions or as otherwise required. The FAA and the industry
are cooperating to test a system by which passengers and their baggage would be
more closely monitored to ensure that no bag is checked without a passenger
boarding the aircraft. The Company incurs substantial expense in complying with
current security requirements and it cannot predict what additional security
requirements may be imposed in the future or the cost of complying with such
requirements.
Associated with the FAA's security responsibility is its
program to ensure compliance with rules regulating the transportation of
hazardous materials. The Company both accepts and ships approved hazardous
materials for transportation and must train its employees to identify and
properly handle such materials. The FAA enforces its hazardous material
regulations by the imposition of civil penalties, which can be substantial.
Other Regulation. In the maintenance of its aircraft fleet and
ground equipment, the Company handles and uses many materials that are
classified as hazardous. The Environmental Protection Agency and similar local
agencies have jurisdiction over the handling and processing of these materials.
The Company is also subject to the oversight of the Occupational Safety and
Health Administration concerning employee safety and health matters. The Company
is subject to the Federal Communications Commission's jurisdiction regarding the
use of radio facilities.
The Airport Noise Control Act ("ANCA") requires that airlines
phase-out the operation of certain types of aircraft. None of the Company's
aircraft are subject to the phase-out provisions of ANCA. While ANCA generally
preempts airports from imposing unreasonable local noise rules that restrict air
carrier operations, airport operators may implement reasonable and
nondiscriminatory local noise abatement procedures, which procedures could
impact the ability of the Company to serve certain airports, particularly in
off-peak hours. Certain local noise rules adopted prior to ANCA were
grandfathered under the statute.
Federal Excise Taxes. Ticketing airlines are obligated to
collect a U.S. transportation excise tax on passenger ticket sales. This tax,
known as the aviation trust tax or the "ticket tax" is used to defray the cost
of FAA operations and other aviation programs. Recently, the federal statute
authorizing the ticket tax expired on two separate occasions - from January 1,
1996 through August 26, 1996, and from January 1, 1997 through March 6, 1997.
Ticketing airlines did not collect the ticket tax during these periods. The
ticket tax was most recently reinstated effective March 7, 1997, with an
expiration date of September 30, 1997. Beginning on October 1, 1997, a revised
formula for determining the ticket tax took effect. Under this revised formula,
the ticket tax is now comprised of a percentage of the passenger ticket price
plus a flat fee for each segment flown, and will be adjusted annually. For the
period from October 1, 1997 through September 30, 1998, the ticket tax will
equal nine percent of passenger ticket price plus $1 per segment.
Seasonality
As is common in the industry, the Company experiences lower
demand for its product during the period of December through February. Because
the Company's services and marketing efforts are focused on the business
traveler, this seasonality of demand is somewhat greater than for airlines which
carry a larger proportion of leisure travelers. In addition, the Company's
principal geographic area of operations experiences more adverse weather during
this period, causing a great77er percentage of the Company's and other airlines'
flights to be canceled. These seasonal factors have combined in the past to
reduce the Company's capacity, traffic, profitability, and cash generation for
this three month period as compared to the rest of the year.
Item 2. Properties
Leased Facilities
Airports
The Company leases gate and ramp facilities at all of the
airports it serves and leases ticket counter and office space at those locations
where ticketing is handled by Company personnel. Payments to airport authorities
for ground facilities are generally based on a number of factors, including
space occupied as well as flight and passenger volume. The Company believes that
it can accommodate through various arrangements the new flights it plans, and is
exploring possible long-term solutions for assuring access to adequate
facilities at Washington-Dulles.
Corporate Offices
On February 15, 1997, the Company established new headquarters
in Dulles, VA. The new facility provides over 45,000 square feet in one building
for the executive, administrative, training and system control departments. This
facility compares to the previous space consisting of approximately 28,500
square feet divided between two buildings. The Company believes that the new
headquarters provides adequate facilities to conduct its current and planned
operations.
Maintenance Facilities
The FAA's safety regulations mandate periodic inspection and
maintenance of commercial aircraft. The Company performs most maintenance,
service and inspection of its aircraft and engines at its maintenance facilities
using its own personnel.
In February 1998, the Company occupied its new 90,000 square
foot aircraft maintenance facility comprised of 60,000 square feet of hangar
space and 30,000 square feet of support space at Washington-Dulles. The Company
has consolidated all maintenance functions to this facility which includes
hangar, shop and office space necessary to maintain the Company's growing fleet.
Item 3. Legal Proceedings
The Company is a party to routine litigation and FAA
proceedings incidental to its business, none of which is likely to have a
material effect on the Company's financial position or the results of its
operations.
The Company is a party to an action pending in the United States District
Court for the Southern District of Ohio, Peter J. Ryerson, administrator of the
estate of David Ryerson, v. Atlantic Coast Airlines, Case No. C2-95-611. This
action is more fully described in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995. On March 10, 1997, the Court granted
Plaintiff's motion to the effect that liability would not be limited to those
damages available under the Warsaw Convention. The Company is currently unable
to estimate the monetary award, if any, resulting from this litigation, but
believes it remains fully covered under the Company's insurance policy.
The Company is also a party to an action pending in the United States Court
of Appeals for the Fourth Circuit known as Afzal v. Atlantic Coast Airlines,
Inc. (No. 98-1011). This action is an appeal of the December 1997 decision
granted in favor of the Company in a case claiming wrongful termination of
employment brought in the United States District Court for the Eastern District
of Virginia known as Afzal v. Atlantic Coast Airlines, Inc. (Civil Action No.
96-1537-A). The Company does not expect the outcome of this case to have any
material adverse effect on its financial condition or results of its operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fiscal quarter ended December 31, 1997,
to a vote of the security holders of the Company through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company's common stock, par value $.02 per share (the
"Common Stock"), is traded on the Nasdaq National Market ("Nasdaq/NM") under the
symbol "ACAI". Trading of the Common Stock commenced on July 21, 1993.
The following table sets forth the reported high and low
closing sale prices of the Common Stock on the Nasdaq/NM for the periods
indicated:
1996 High Low
---- ---- ---
First quarter $16.250 $7.375
Second quarter 17.125 12.625
Third quarter 15.875 11.000
Fourth quarter 13.125 9.25
1997
First quarter $17.000 $11.800
Second quarter 17.250 12.250
Third quarter 22.000 15.500
Fourth quarter 31.875 18.500
1998
First quarter $45.000 $29.750
(through March 2, 1997)
As of March 2, 1998, the closing sales price of the Common
Stock on Nasdaq/NM was $44.00 per share and there were approximately 109 holders
of record of Common Stock.
The Company has not paid any cash dividends on its Common
Stock and does not anticipate paying any Common Stock cash dividends in the
foreseeable future. The Company intends to retain earnings to finance the growth
of its operations. The payment of Common Stock cash dividends in the future will
depend upon such factors as earnings levels, capital requirements, the Company's
financial condition, the applicability of any restrictions imposed upon the
Company's subsidiary by certain of its financing agreements, and other factors
deemed relevant by the Board of Directors. In addition, Atlantic Coast Airlines,
Inc. is a holding company and its only significant asset is its investment in
its subsidiary, Atlantic Coast Airlines.
In January 1996, the Company's Board of Directors declared
dividends of approximately $0.3 million on its Redeemable Series A Cumulative
Convertible Preferred Stock representing the cumulative dividend for the full
year 1995. The Company paid these dividends in February 1996. On March 29, 1996,
the Company redeemed all of the preferred stock for $3.8 million. The preferred
stock was issued to JSX Capital Corporation ("JSX"), a subsidiary of British
Aerospace, Inc. in December 1994 as part of a $20 million financing agreement
consisting of an equity investment and available borrowings.
On July 2, 1997, the Company issued $50 million aggregate
principal amount of 7.0% Convertible Subordinated Notes due July 1, 2004 (the
"Notes"), pursuant to Rule 144A under the Securities Act of 1933, and received
net proceeds of approximately $48.3 million related to the sale of the Notes. On
July 18, 1997, the Company received additional net proceeds of $7.3 million for
the exercise of the over-allotment option. The notes are convertible into shares
of Common Stock, par value $0.02 of the Company (the "Common Stock") by the
holders at any time after sixty days following the latest date of original
issuance thereof and prior to maturity, unless previously redeemed or
repurchased, at a conversion price of $18 per share, subject to certain
adjustments. The Company may not call the notes for redemption prior to July 1,
2000.
In January 1998, $5.9 million face amounts of Notes were
converted at the option of several holders into 330,413 shares of the Company's
Common Stock. On March 3, 1998, the Company notified holders of the Notes that
the Company was temporarily reducing the conversion price in order to induce the
holders to redeem their Notes for Common Stock. If all remaining holders of the
Notes converted to Common Stock pursuant to this inducement, approximately
46,000 shares of Common Stock will be issued representing the reduction
component of the conversion price. The holders have until April 8, 1998 to
accept the Company's inducement.
In July 1997, the Company repurchased 1.46 million shares of
the Company's Common Stock from British Aerospace for $16.9 million using a
portion of the proceeds received from the issuance of the Notes.
Item 6. Selected Financial Data
The following selected financial data under the caption
"Consolidated Financial Data" and "Consolidated Balance Sheet Data" relating to
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 have been derived
from the Company's consolidated financial statements. The following selected
operating data under the caption "Selected Operating Data" have been derived
from Company records. The data should be read in conjunction with "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Annual Report on Form 10-K.
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share and related operating data)
Consolidated Financial Data: Years ended December 31,
<CAPTION>
1993 1994 1995 1996 1997
---------------- ---------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues:
Passenger revenues $145,786 $156,047 $153,918 $179,370 $202,540
Total operating revenues 149,103 158,919 156,968 182,484 205,444
Operating expenses:
Salaries and related costs 35,162 41,590 40,702 44,438 49,661
Aircraft fuel 15,397 15,189 13,303 17,124 17,766
Aircraft maintenance and materials 19,714 22,345 15,252 16,841 16,860
Aircraft rentals 31,087 35,565 25,947 29,137 29,570
Traffic commissions and related fees 22,914 25,913 25,938 28,550 32,667
Depreciation and amortization 1,654 2,329 2,240 2,846 3,566
Other 20,608 25,167 21,262 23,711 26,411
Write-off of intangible assets - 6,000 - - -
Restructuring charges (reversals) - 8,099 (521) (426) -
---------------- ---------------- ---------------- --------------
------------
Total operating expenses 146,536 182,197 144,123 162,221 176,501
---------------- ---------------- ---------------- -------------- ------------
Operating income (loss) 2,567 (23,278) 12,845 20,263 28,943
---------------- ---------------- ---------------- -------------- ------------
Interest expense (2,298) (2,153) (1,802) (1,013) (3,450)
Interest income 60 - 66 341 1,284
Other (expenses) income (225) 295 181 17 62
---------------- ---------------- ---------------- -------------- ----------
Total non operating expenses (2,463) (1,858) (1,555) (655) (2,104)
---------------- ---------------- ---------------- -------------- ------------
Income (loss) before income tax expense
and extraordinary item 104 (25,136) 11,290 19,608 26,839
Income tax provision (benefit) 67 - (1,212) 450 12,339
---------------- ---------------- ---------------- -------------- ------------
Income (loss) before extraordinary item 37 (25,136) 12,502 19,158 14,500
Extraordinary item (1) (1,780) - 400 - -
---------------- ---------------- ---------------- -------------- ------------
Net Income (loss) $(1,743) $(25,136) $12,902 $19,158 $14,500
================ ================ ================ ============== ============
</TABLE>
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(Dollars in thousands, except per share and related operating data)
Years ended December 31,
<CAPTION>
1993 1994 1995 1996 1997
-------------- -------------- -------------- ----------------- -------------
Income (loss) per share:
<S> <C> <C> <C> <C> <C>
Basic:
Income (loss) before extraordinary item $0.01 $(3.67) $1.46 $2.25 $1.85
Extraordinary item (0.29) - 0.05 - -
============== =============== ============== ================= =============
Net income (loss) per share $(0.28) $(3.67) $1.51 $2.25 $1.85
============== =============== ============== ================= =============
Diluted:
Income (loss) before extraordinary item $0.01 $(3.67) $1.29 $2.15 $1.61
Extraordinary item (0.29) - 0.04 - -
============== =============== ============== ================= =============
Net income (loss) per share $(0.28) $(3.67) $1.33 $2.15 $1.61
============== =============== ============== ================= =============
Weighted average number of shares used
in computation (in thousands)
Basic 6,083 6,858 8,342 8,481 7,824
Diluted 6,083 6,858 9,871 8,920 9,756
Selected Operating Data:
Departures 97,291 134,804 131,470 137,924 146,069
Revenue passengers carried 1,445,878 1,545,520 1,423,463 1,462,241 1,666,975
Revenue passenger miles (000s) (2) 381,489 393,013 348,675 358,725 419,977
Available seat miles (000s) (3) 853,668 885,744 731,109 771,068 861,222
Passenger load factor (4) 44.7% 44.3% 47.7% 46.5% 48.8%
Breakeven passenger load factor (5) 43.9% 47.0% 43.9% 41.4% 41.8%
Revenue per available seat mile $0.175 $0.179 $0.215 $0.237 $0.239
Cost per available seat mile (6) $0.171 $0.189 $0.198 $0.211 $0.205
Average yield per revenue passenger $0.382 $0.397 $0.441 $0.500 $0.482
mile (7)
Average fare $101 $101 $108 $123 $122
Average passenger trip length (miles) 264 254 245 245 252
Aircraft in service (end of period) 62 56 54 57 65
Destinations served (end of period) 54 42 41 39 43
Consolidated Balance Sheet Data:
Working capital (deficiency) $(3,935) (4,488) $4,552 $17,782 $45,177
Total assets 52,448 40,095 47,499 64,758 148,992
Long-term debt and capital leases, less
current portion 5,941 6,675 7,054 5,673 76,146
Redeemable common stock warrants - - - - -
Redeemable Series A, Cumulative,
Convertible, Preferred Stock - 3,825 3,825 - -
Total stockholders' equity 19,595 1,922 14,561 34,637 34,805
</TABLE>
<PAGE>
(1) In connection with the early extinguishment of certain senior notes,
in 1993 the Company recorded an extraordinary charge of $1,779,583
resulting from the write-off of the unamortized portion of debt
discount and the deferred finance costs associated with the
extinguished debt; and in 1995 an extraordinary gain of $400,000
related to the early extinguishment of debt. No similar
extinguishments were recognized in 1996 or 1997.
(2) "Revenue passenger miles" or "RPMs" represent the number of miles
flown by revenue passengers.
(3) "Available seat miles" or "ASMs" represent the number of seats
available for passengers multiplied by the number of scheduled miles
the seats are flown.
(4) "Passenger load factor" represents the percentage of seats filled by
revenue passengers and is calculated by dividing revenue passenger
miles by available seat miles.
(5) "Breakeven passenger load factor" represents the percentage of seats
filled by revenue passengers for the airline to break even after
operating expenses, less other revenues and excluding restructuring
and write-offs of intangible assets. Had restructuring and write-offs
of intangible assets been included for the years ended December 31,
1993, 1994, 1995, 1996 and 1997, this percentage would have been
43.9%, 51.0%, 43.8%, 41.3% and 41.8%, respectively.
(6) "Operating cost per available seat mile" represents total operating
expenses excluding restructuring and write-offs of intangible assets
divided by available seat miles. Had restructuring and write-offs of
intangible assets been included for the years ended December 31, 1993,
1994, 1995, 1996 and 1997, cost per available seat mile would have
been $0.172, $0.206, $0.197, $0.210 and $0.205 respectively.
(7) "Average yield per revenue passenger mile" represents the average
passenger revenue received for each mile a revenue passenger is
carried.
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
General
In 1997, Atlantic Coast Airlines, Inc. ("ACAI") and its
wholly-owned subsidiary, Atlantic Coast Airlines ("ACA"), together ("the
Company"), posted a profit of $14.5 million compared to a profit of $19.2
million for 1996, and $12.9 million in 1995. The reduced profitability from 1996
to 1997 is primarily due to an increase in the Company's provision for income
taxes of approximately $12.3 million in 1997 as compared to approximately
$500,000 for 1996. The increase in the tax provision in 1997 reflects the full
utilization of net operating loss carryforwards in 1996 and the use of a more
conservative approach to estimating permanent differences between taxable and
book income. Pretax income increased 37% from 1996 to 1997 principally caused by
a 2.3 point load factor gain and a 2.8% reduction in cost per available seat
mile ("ASM") partially offset by a 3.6% reduction in yield. The improvement from
1995 to 1996 reflects increases in the Company's yields as well as a reduction
in the break-even passenger load factor. Management believes that the
improvement from 1995 to 1996 is attributable to the benefits realized from a
major restructuring in 1994. As a result of these actions, coupled with
improvements in yield management, marketing, and a generally improved economic
environment for airlines, the Company returned to profitability in the second
quarter 1995, achieving record operating profits for 1995, 1996 and 1997.
Results of Operations
The Company earned net income of $14.5 million or $1.61 per
diluted share in 1997 compared to net income of $19.2 million or $2.15 per
diluted share in 1996, and $12.9 million or $1.33 per diluted share in 1995.
During 1997, the Company generated operating income of $28.9 million compared to
$20.3 million for 1996, and $12.8 million for 1995. Operating margins for 1997,
1996 and 1995 were 14.1%, 11.1% and 8.2%, respectively.
The improvement in operating results from 1996 to 1997 reflects a 1.0%
increase in unit revenue (revenue per ASM) from $0.237 to $0.239 coupled with an
11.7% increase in ASMs and a 2.8% decrease in unit cost (cost per ASM).
The improvement in operating results from 1995 to 1996
reflects a 10.2% increase in unit revenue (revenue per ASM) from $0.215 to
$0.237 coupled with a 5.5% increase in ASMs partially offset by a 6.6% increase
in unit cost (cost per ASM). These results were achieved despite a challenging
operating environment brought about by a 20.5% increase in the cost per gallon
of fuel in 1996.
Fiscal Year 1996 vs. 1997
Operating Revenues
The Company's operating revenues increased 12.6% to $205.4 million in 1997
compared to $182.5 million in 1996. The increase resulted from an 11.7% increase
in ASMs, an increase in load factor of 2.3 points, partially offset by a 3.6%
decrease in yield.
The reduction in yield is related in part to the reinstatement
of the federal excise ticket tax from March 7, 1997 through the remainder of the
year. During 1996, this tax was only in effect from August 27, 1996 to December
31, 1996. Total passengers increased 14.0% in 1997 compared to 1996 as a result
of the 11.7% increase in ASMs and 2.3 point increase in load factor.
Operating Expenses
The Company's operating expenses increased 8.8% to $176.5
million in 1997 compared to $162.2 million in 1996 due primarily to an 11.7%
increase in ASMs, and a 14.0% increase in passengers. The increase in ASMs
reflects the net addition of five British Aerospace Jetstream-41 ("J-41")
aircraft during 1997.
A summary of operating expenses as a percentage of operating revenue and
operating cost per ASM for the years ended December 31, 1996 and 1997 is as
follows:
<TABLE>
Year Ended December 31,
1996 1997
<CAPTION>
------------------------------ --------------------------------
Percent of Cost Percent of Cost
Operating per ASM Operating per ASM
Revenues (cents) Revenues (cents)
--------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
Salaries and related costs 24.4% 5.8 24.2% 5.8
Aircraft fuel 9.4% 2.2 8.6% 2.1
Aircraft maintenance and materials 9.2% 2.2 8.2% 2.0
Aircraft rentals 16.0% 3.8 14.4% 3.4
Traffic commissions and related fees 15.6% 3.7 15.9% 3.8
Depreciation and amortization 1.6% .4 1.7% .4
Other 13.0% 3.0 12.9% 3.0
---------------- ------------- ---------------- ---------------
Total (before reversals of
restructuring charges) 89.2% 21.1 85.9% 20.5
---------------- ------------- ---------------- ---------------
</TABLE>
Costs per ASM before reversals of restructuring charges
decreased 2.8% to 20.5 cents in 1997 compared to 21.1 cents in 1996 primarily
due to an 11.7% increase in ASMs in 1997 compared to 1996, offset by a 14.0%
increase in passengers carried. The increase in ASMs resulted from the net
addition of five J-41 aircraft and five 50-seat Canadair Regional Jets ("CRJ")
aircraft along with a 1.8% improvement in daily aircraft block hour utilization.
Salaries and related costs per ASM remained unchanged at 5.8
cents in 1997 compared to 1996. In absolute dollars, salaries and related
expenses increased 11.9% from $44.4 million in 1996 to $49.7 million in 1997.
The increase resulted from additional flight payroll related to a contractual
increase in May 1996 and February 1997 and a 10.7% increase in profit sharing
expense year over year.
The cost per ASM of aircraft fuel decreased to 2.1 cents in
1997 compared to 2.2 cents in 1996. The total cost of fuel per gallon decreased
4.2% to 79.3 cents in 1997 compared to 82.8 cents in 1996. In absolute dollars,
aircraft fuel expense increased 4.1% from $17.1 million in 1996 to $17.8 million
in 1997.
The cost per ASM of aircraft maintenance and materials
decreased to 2.0 cents in 1997 compared to 2.2 cents in 1996. The decreased
maintenance expense resulted primarily from the receipt of performance guarantee
fees from an overhaul vendor. In absolute dollars, aircraft maintenance and
materials expense increased 0.6% from $16.8 million in 1996 to $16.9 million in
1997.
The cost per ASM of aircraft rentals decreased to 3.4 cents in
1997 compared to 3.8 cents in 1996. The decreased unit costs reflect the
refinancing to lower rental rates of eleven used J-41 aircraft and the purchase
by the Company of three used J-41s. All of these transactions were accomplished
in the second half of 1997. In absolute dollars, aircraft rentals increased 1.7%
from $29.1 million in 1996 to $29.6 million in 1997.
The cost per ASM of traffic commissions and related fees
increased to 3.8 cents in 1997 compared to 3.7 cents in 1996. The increased
commissions reflect the contractual increases in program fees paid to United and
a higher percentage of tickets sold by travel agencies. Commission rates as a
percent of total passenger revenue fluctuate based on the mix of commissionable
and non-commissionable tickets, and have changed due to a cap on the total
amount of commission that travel agents can earn. Commissions as a percentage of
total passenger revenue averaged 7.3% in 1997 and 7.4% in 1996. Related fees
include program fees to United and segment booking fees for reservations. In
absolute dollars, traffic commissions and related fees increased 14.3% from
$28.6 million in 1996 to $32.7 million in 1997.
The cost per ASM of depreciation and amortization remained
unchanged at 0.4 cents in 1997 compared to 1996. Absolute increases in
depreciation expense were offset by increases in ASMs. The absolute increase
results primarily from the purchase of four J-41 aircraft (one of these aircraft
was new to the fleet in 1997), additional rotable spare parts associated with
additional J-41 aircraft, improvements to aircraft, leasehold improvements and
purchases of computer equipment. In absolute dollars, depreciation and
amortization expense increased 28.6% from $2.8 million in 1996 to $3.6 million
in 1997.
The cost per ASM of other operating expenses remained
unchanged at 3.0 cents in 1997 compared to 1996. Absolute increases were offset
by increased ASMs. The absolute increase in expenses are primarily attributable
to increased facility rents and distressed passenger expenses. In absolute
dollars, other operating expenses increased 11.4% from $23.7 million in 1996 to
$26.4 million in 1997.
As a result of the foregoing expense items, total operating
expenses before reversals of restructuring charges were approximately $176.5
million for 1997, an increase of 8.5% compared to $162.6 million in 1996. Total
ASMs increased 11.7% year over year and the cost per ASM decreased from 21.1
cents for 1996 to 20.5 cents for 1997.
The Company reversed excess restructuring reserves of $426,000
in 1996 (0.1 cents per ASM). The Company established the reserves with a charge
of $8.1 million in 1994. The reversals reflected remaining unused reserves for
pilot requalification, return conditions, spare parts reconciliation and
miscellaneous professional fees. As of December 31, 1996, there were no
remaining reserves related to the restructuring.
Interest expense, net of interest income, was $2.2 million in
1997 and $672,000 in 1996. The increased expense reflects the Company's issuance
in July 1997 of $57.5 million of 7% convertible debt and $16.4 million of
equipment notes associated with pass through trust certificates issued in
September 1997 reduced by a significant increase in the Company's cash balances
in 1997 and use of proceeds from the convertible debt to repay higher interest
bearing debt.
The Company recorded a provision for income taxes of
approximately $12.3 million for 1997, compared to a provision for income taxes
of approximately $500,000 in 1996. The 1996 effective tax rate of approximately
2.3% is significantly less than the statutory federal and state rates due
principally to the full utilization of net operating loss carryforwards and the
elimination of the valuation allowance. The 1997 effective tax rate of
approximately 46% is higher than the statutory federal and state rates. The
Company believes the higher effective tax rate is nonrecurring and reflects a
more conservative approach to estimating permanent differences between taxable
and book income. The Company expects a more normalized effective tax rate in
1998. The Company has recorded a net deferred tax asset of approximately
$688,000 at December 31, 1997 compared to $3.1 million at December 31, 1996. No
net operating loss carryforwards were available for 1997.
Fiscal Year 1995 vs. 1996
Operating Revenues
The Company's operating revenues increased 16.2% to $182.5
million in 1996 compared to $157 million in 1995. The increase resulted from a
5.5% increase in ASMs and a 13.3% increase in yield, partially offset by a 1.2
percentage point decrease in passenger load factor.
The increase in yield is related in part to the expiration of
the ticket tax on December 31, 1995. The increase in yield caused by this factor
cannot be determined nor can the impact on revenue that resulted from the
reinstatement of the tax on August 27, 1996. Revenue per ASM improved 10.2% year
over year. Total passengers increased 2.7% in 1996 compared to 1995.
Operating Expenses
The Company's operating expenses increased 12.6% in 1996 compared to 1995
due primarily to a 5.5% increase in ASMs, and a 2.7% increase in passengers. The
increase in ASMs reflects the addition of two J-41 aircraft.
A summary of operating expenses as a percentage of operating revenues and
operating cost per ASM for the years ended December 31, 1995 and 1996 is as
follows:
<PAGE>
<TABLE>
Year Ended December 31,
1995 1996
<CAPTION>
------------------------------ ------------------------------
Percent of Cost Percent of Cost
Operating per ASM Operating per ASM
Revenues (cents) Revenues (cents)
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Salaries and related costs 25.9% 5.7 24.4% 5.8
Aircraft fuel 8.5% 1.8 9.4% 2.2
Aircraft maintenance and materials 9.7% 2.1 9.2% 2.2
Aircraft rentals 16.5% 3.5 16.0% 3.8
Traffic commissions and related fees 16.5% 3.5 15.6% 3.7
Depreciation and amortization 1.4% .3 1.6% .4
Other 13.6% 2.9 13.0% 3.0
--------------- -------------- -------------- ---------------
Total (before reversals of
restructuring charges) 92.1% 19.8 89.2% 21.1
--------------- -------------- -------------- ---------------
</TABLE>
Cost per ASM before reversals of restructuring charges
increased 6.6% to 21.1 cents in 1996 compared to 19.8 cents in 1995 primarily
due to the increased cost of fuel, increases in aircraft rental expense and
landing fees from additional aircraft and additional traffic commissions and
related fees resulting from a 16.3% increase in total operating revenue. These
factors were slightly offset by a 5.5% increase in ASMs.
Salaries and related costs per ASM increased to 5.8 cents in
1996 compared to 5.7 cents in 1995. The increase resulted from additional flight
payroll related to a contractual increase in May 1996 and an 80.4% increase in
profit sharing year over year. In absolute dollars, salaries and related
expenses increased 9.1% from $40.7 million in 1995 to $44.4 million in 1996.
The total cost per ASM of aircraft fuel increased to 2.2 cents
in 1996 compared to 1.8 cents in 1995. The total cost of fuel per gallon
increased 20.5% due to increases in aircraft fuel prices and the 4.3 cents per
gallon fuel tax imposed by the federal government in October 1995. The average
cost per gallon, including into-plane fees, was 82.8 cents in 1996 and 68.7
cents in 1995. In absolute dollars, aircraft fuel expense increased 28.6% from
$13.3 million in 1995 to $17.1 million in 1996.
The cost per ASM of aircraft maintenance and materials
increased to 2.2 cents in 1996 compared to 2.1 cents in 1995. The increased
maintenance expense resulted primarily from an increase in the average age of
the fleet, the expiration of warranty coverage on certain aircraft and rate
increases in contract maintenance for engines. In absolute dollars, aircraft
maintenance and materials expense increased 9.8% from $15.3 million in 1995 to
$16.8 million in 1996.
The cost per ASM of aircraft rentals increased to 3.8 cents in
1996 compared to 3.5 cents in 1995. The increased expenses reflect two
additional J-41 aircraft delivered in 1996 and the full year effect of aircraft
delivered in 1995. In absolute dollars, aircraft rentals increased 12.4% from
$25.9 million in 1995 to $29.1 million in 1996.
The cost per ASM of traffic commissions and related fees
increased to 3.7 cents in 1996 compared to 3.5 cents in 1995. The increased
commission reflects the increase in passenger revenue and contractual increases
in program fees paid to United. Commission rates fluctuate based on the mix of
commissionable and non-commissionable tickets, and have changed due to a cap on
the total amount of commission that travel agents can claim. Commission as a
percentage of total passenger revenue averaged 7.4% in 1996 and 8.0% in 1995.
Related fees include program fees to United and segment booking fees for
reservations. In absolute dollars, traffic commissions and related fees
increased 10.4% from $25.9 million in 1995 to $28.6 million in 1996.
The cost per ASM of depreciation and amortization increased to
0.4 cents in 1996 compared to 0.3 cents in 1995. The increase results primarily
from the acquisition of additional rotable spare parts associated with
additional J-41 aircraft, improvements to aircraft, leasehold improvements and
purchases of computer equipment. There were no significant changes in
amortization in either 1996 or 1995. In absolute dollars, depreciation and
amortization expense increased 27.3% from $2.2 million in 1995 to $2.8 million
in 1996.
The cost per ASM of other operating expenses increased to 3.0
cents in 1996 compared to 2.9 cents in 1995. The increased expenses are
primarily attributable to increased glycol costs resulting from relatively
severe winter weather, additional pilot training costs and increased legal fees.
In absolute dollars, other operating expenses increased 11.3% from $21.3 million
in 1995 to $23.7 million in 1996.
As a result of the foregoing components, total operating
expenses before reversals of restructuring charges were approximately $162.6
million for 1996, an increase of 12.4% compared to $144.6 million in 1995. Total
ASMs increased 5.5% year over year and the cost per ASM increased from 19.8
cents for 1995 to 21.1 cents for 1996.
The Company reversed excess restructuring reserves of $426,000
in 1996 (0.1 cents per ASM) and $521,000 in 1995 (0.1 cents per ASM). The
Company established the reserves with a charge of $8.1 million in 1994. The
reversals reflected remaining unused reserves for pilot requalification, return
conditions, spare parts reconciliation and miscellaneous professional fees. As
of December 31, 1996, there were no remaining reserves related to the
restructuring.
Interest expense, net of interest income, was $672,000 in 1996
and $1.7 million in 1995. The decreased expense reflects reduced borrowings
under the Company' accounts receivable financing facility and the early
retirement of a $4 million convertible term note to British Aerospace in
December 1995.
The Company recorded a provision for income taxes of
approximately $500,000 for 1996, compared to a benefit of approximately $1.2
million in 1995. The benefit recorded in 1995 reflects the recognition of the
deferred tax asset of $1.5 million in the fourth quarter of 1995, net of
valuation allowance. The 1996 effective tax rate of approximately 2.3% is
significantly less than the statutory federal and state rates due principally to
the full utilization of net operating loss carryforwards and the elimination of
the valuation allowance. The Company recorded a net deferred tax asset of $3.1
million at December 31, 1996.
Outlook
This Outlook section and the Liquidity and Capital Resources
section below contain forward-looking statements. The Company's actual results
may differ significantly from the results discussed in forward-looking
statements. Factors that could cause the Company's future results to differ
materially from the expectations described here include the response of the
Company's competitors to the Company's business strategy, market acceptance of
CRJ service to new destinations, the cost of fuel, the weather, satisfaction of
regulatory requirements and general economic and industry conditions.
A central element of the Company's business strategy is expansion of its
aircraft fleet. At December 31, 1997, the Company had commitments to acquire 18
50-seat CRJs, five of which were delivered in 1997 and one in January 1998. The
introduction of these aircraft will expand the Company's business into new
markets. In general, service to new markets may result in increased operating
expenses that may not be immediately offset by increases in operating revenues.
Liquidity and Capital Resources
The Company's balance sheet improved significantly during 1997
compared to 1996. As of December 31, 1997, the Company had cash and cash
equivalents of $39.2 million and working capital of $45.2 million compared to
$21.5 million and $17.8 million respectively as of December 31, 1996. During the
year ended December 31, 1997, cash and cash equivalents increased $17.7 million,
reflecting net cash provided by operating activities of $21.3 million, net cash
used in investing activities of $55.2 million (related to deposits for the CRJs,
purchases of equipment and increases in short term investments) and net cash
provided by financing activities of $51.6 million. Net cash provided by
financing activities increased principally due to the receipt of net proceeds of
$55.6 million in July 1997 from the issuance of convertible notes due 2004
partially offset by the $16.9 million purchase of the Company's common stock
from British Aerospace in July 1997.
As of December 31, 1996 the Company had cash and cash
equivalents of $21.5 million and working capital of $17.8 million compared to
$8.4 million and $4.6 million respectively as of December 31, 1995. During 1996,
cash and cash equivalents increased $13.1 million, reflecting net cash provided
by operations of $20.1 million, net cash used in investing activities of $2.2
million (related to purchases or spare parts and equipment) and net cash used in
financing activities of $4.9 million (primarily related to the redemption of
preferred stock and payments on long-term debt and capital lease obligations).
Other Financing
The Company has an asset-based lending agreement with a
financial institution that provides the Company with a line of credit of up to
$20 million, depending on the amount of assigned ticket receivables. Borrowings
under the line of credit can provide the Company a source of working capital
until proceeds from ticket coupons are received. The line is collateralized by
all of the Company's receivables and there were no borrowings under the line
during 1997. The Company pledged $7.7 million of this line of credit as
collateral to secure letters of credit issued on behalf of the Company by a
financial institution.
In June 1997, the Industrial Development Authority of Loudoun
County, Virginia ("IDA") approved a $9.4 million tax exempt bond issuance in
connection with the Company's proposed construction of a maintenance facility at
Washington-Dulles. The Company has paid approximately $500,000 to cover the
costs associated with furnishing and equipping the new facility. These bonds
were issued under a variable interest rate structure for a twenty-five year term
including a requirement for a monthly sinking fund provision, and are
collateralized by a $9.6 million letter of credit issued on behalf of the
Company by a financial institution. The letter of credit is collateralized by
the Company's leasehold deed of trust on the maintenance facility and $4.9
million of the Company's line of credit. The Company will be obligated to pay
rent for the facility and the underlying land leasehold, the proceeds from which
the IDA will make the required interest and sinking fund payments on the bond
obligation. In the event of a default, the Company would be obligated to
reimburse the financial institution to the maximum amount of the letter of
credit. Annual rent is subject to escalation every five years. In February 1998,
the Company occupied this building and began paying rent.
On July 2, 1997, the Company issued $50 million aggregate
principal amount of 7% Convertible Subordinated Notes due July 1, 2004 ("the
Notes"). The Company received net proceeds of approximately $48.3 million
related to the sale of the Notes. In addition, the Company granted the initial
purchasers a thirty day option to purchase up to an additional $7.5 million
aggregate principal amount of the Notes solely to cover over-allotments. On July
18, 1997, the Company received net proceeds of $7.3 million related to the
exercise of this option. The net proceeds of the Note offering have been used to
support the introduction of the Company's regional jet fleet, repurchase 1.46
million shares of the Company's Common Stock from British Aerospace as described
below, retire higher interest rate debt and for general corporate purposes.
The Notes are convertible into shares of Common Stock, unless
previously redeemed or repurchased, at a conversion price of $18 per share,
subject to certain adjustments. Interest on the Notes is payable on April 1 and
October 1 of each year, commencing October 1, 1997. The Notes are not redeemable
by the Company until July 1, 2000. Thereafter, the Notes will be redeemable, at
any time, on at least 15 days notice at the option of the Company, in whole or
in part, at the redemption prices set forth in the Indenture dated July 2, 1997,
in each case, together with accrued interest.
In January 1998, $5.9 million face amount of Notes were
converted by several holders into 330,413 shares of the Company's Common Stock.
On March 3, 1998, the Company notified holders of the Notes
that the Company was temporarily reducing the conversion price in order to
induce the Note holders to convert their Notes into Common Stock. The Note
holders have until April 8, 1998 to accept the Company's inducement.
In April 1997, the Company executed a short term promissory note for
deposits totaling $11 million related to the acquisition of the CRJs. The
promissory note was paid in full on July 2, 1997 from the net proceeds of the
Notes.
In July 1997, the Company repurchased 1.46 million shares of
the Company's Common Stock from British Aerospace for approximately $16.9
million from the net proceeds of the sale of the Notes as described above. The
stock was repurchased at a 22.5% discount from the average of the closing bid
prices during the period June 24 through June 30, 1997.
During July 1997, the Company retired $3.1 million of other high interest
rate debt from the proceeds of the Notes. In January 1998, the Company retired
an additional $1.4 million in capital lease obligations.
In September 1997, approximately $112 million of pass through
certificates were issued in a private placement by separate pass through trusts,
which purchased with the proceeds, equipment notes (the "Equipment Notes")
issued in connection with (i) leveraged lease transactions relating to four
J-41s and six CRJs (delivered or expected to be delivered), all of which are or
will be leased to the Company (the "Leased Aircraft"), and (ii) the financing of
four J-41s owned by the Company (the "Owned Aircraft"). The Equipment Notes
issued with respect to the Owned Aircraft are direct obligations of ACA,
guaranteed by ACAI and are included in the accompanying consolidated financial
statements. The Equipment Notes issued with respect to the Leased Aircraft are
not obligations of ACA or guaranteed by ACAI.
With respect to one CRJ leased aircraft, at December 31, 1997
(the "Prefunded Aircraft"), the proceeds from the sale of the Equipment Notes
were deposited into collateral accounts, to be released at the closing of a
leveraged lease related to the Prefunded Aircraft. In January 1998, an equity
investor purchased this aircraft and entered into a leveraged lease with the
Company and the collateral accounts were released.
Other Commitments
In July 1997, the Company entered into a series of interest
rate swap contracts in the amount of $39.8 million. The swaps were executed by
purchasing six contracts maturing between March and September 1998 with
Bombardier, Inc. as the counter party. The interest rate hedge is designed to
limit approximately 50% of the Company's exposure to interest rate changes until
permanent financing for its second six CRJ aircraft, which are scheduled for
delivery between March and September 1998, is secured. At December 31, 1997, had
all contracts settled on that date, the Company would have been obligated to pay
the counter party approximately $1.4 million.
In January 1998, the Company entered into a contract to
purchase fuel from United Aviation Fuels Corporation ("UAFC"), a wholly-owned
subsidiary of United Airlines during the period February through September 1998.
The Company has committed to purchase 33,000 barrels of fuel per month during
the term of this contract at a delivered price excluding taxes and into plane
fees of 52.2 cents per gallon. In March 1998, the Company extended the contract
through December 1998 committing to purchase 33,000 barrels per month, October
through December, at a delivered price excluding taxes and into plane fees of
50.35 cents per gallon. Fuel purchased under this arrangement represents
approximately 46% of the Company's anticipated 1998 fuel requirements.
The Company has started to review its computer systems and
application programs for year 2000 compliance. The Company believes that the
cost to modify any of its non-compliant systems or applications will not have a
material effect on its financial position or results of its operations. However,
the Company can not give any assurances that the systems of other parties upon
which the Company must rely, will be year 2000 compliant on a timely basis.
Examples of systems operated by others that the Company may use and or rely upon
are: FAA Air Traffic Control, Computer Reservation Systems for travel agent
sales and United Airlines' reservation, passenger check in and ticketing
systems. The Company's business, financial condition and or results of
operations could be materially adversely affected by the failure of its systems
and applications or those operated by others.
Aircraft
The Company has significant lease obligations for aircraft
that are classified as operating leases and therefore are not reflected as
liabilities on the Company's balance sheet. The remaining terms of such leases
range from less than one year to sixteen and a half years. The Company's total
rent expense in 1997 under all non-cancelable aircraft operating leases with
remaining terms of more than one year was approximately $29.2 million. As of
December 31, 1997, the Company's minimum rental payments for 1998 under all
non-cancelable aircraft operating leases with remaining terms of more than one
year were approximately $36 million.
As of March 4, 1998, the Company had a total of 17 CRJs on
order from Bombardier, Inc., in addition to the six delivered, and held options
for 25 additional CRJs. The initial order for 12 CRJs and 36 options was placed
on January 28, 1997. Options were exercised on November 20, 1997 for an
additional six firm and six conditional CRJ deliveries. On March 4, 1998, five
of the six conditional orders were converted to firm orders and the remaining
one was restored to option status. The first five CRJs were delivered in the
third and fourth quarters of 1997. Two additional CRJs have been delivered
during the first quarter 1998 under operating leases. Seven additional
deliveries are scheduled in 1998 and nine deliveries are scheduled in 1999 which
the Company is obligated to purchase and finance (including leveraged leases) at
an approximate capital cost of $296 million.
On February 23, 1997, the Company entered into an agreement
with Aero International (Regional) (the "BA J-41 Agreement") to acquire 12 new
J-41 aircraft, and into a related agreement that gave the Company permission to
refinance through third parties up to fifteen previously delivered J-41 aircraft
that were under leases supported by British Aerospace. The new aircraft were to
be delivered under long-term leases with British Aerospace, but were also
eligible for third party financing. Four of the new aircraft had been delivered
as of May 29, 1997, when British Aerospace announced that it would no longer
manufacture the J-41 as part of its regular product line. On July 2, 1997, the
Company and British Aerospace amended the BA J-41 Agreement to cancel any
further deliveries of J-41s pursuant to the BA J-41 Agreement. As part of the
amended BA J-41 Agreement, the Company received certain manufacturer credits and
support. The amendment also provides that British Aerospace will provide
additional asset value support for such contemplated third party financings.
During 1997, the Company completed third party financings of
eighteen J-41 aircraft as follows: On August 1, 1997, three new J-41s through
leveraged leases with a third party; on September 15, 1997, two used J-41s
through single investor leases with a third party; on September 26, 1997, four
used J-41s through leveraged leases with a third party as part of the pass
through certificates as described above; on September 26, 1997, one new and
three used J-41s purchased by the Company with debt as part of the pass through
certificates; on September 30, 1997, two used J-41s through single investor
leases with a third party, and on December 30, 1997, three used J-41s through
single investor leases with a third party. All of these aircraft were already on
lease to the Company at the time of closing, and prior leases were terminated as
part of these transactions. As compared to the prior leases, these refinancings
have resulted in reduced payment obligations, shorter lease terms, and improved
return conditions. On February 13, 1998, the Company entered into a single
investor lease with a third party for the last J-41 eligible for refinancing.
In November 1997, the Company entered into a lease and
purchase agreement with Aero International (Regional) for the acquisition of one
additional new J-41. The Company will be required to arrange third party
financing of this aircraft, or to purchase it outright, during the second
quarter of 1998, subject to the aircraft being properly modified by Aero
International.
In order to ensure the highest level of safety in air
transportation, the FAA has authority to issue maintenance directives and other
mandatory orders relating to, among other things, inspection of aircraft and the
mandatory removal and replacement of parts that have failed or may fail in the
future. In addition, the FAA from time to time amends its regulations which such
amended regulations may impose additional regulatory burdens on the Company such
as the installation of new safety-related items (collision and windshear
avoidance systems and enhanced flight data recorders). Depending upon the scope
of the FAA's order and amended regulations, these requirements may cause the
Company to incur substantial, unanticipated expenses.
Capital Equipment and Debt Service
In 1998 the Company anticipates capital spending of
approximately $60 million consisting primarily of $40 million to own two CRJs
and one J-41 aircraft, $17 million for spare parts, engines and equipment, and
$3 million for other capital assets. The Company anticipates that it will be
able to arrange financing for the aircraft and spares through a combination of
manufacturer and third party financing arrangements on favorable terms, although
there is no certainty that such financing will be available or in place before
the commencement of deliveries. The Company currently has an agreement in
principle from a third party for approximately $126 million in debt financing
associated with the purchase of nine CRJ's to be delivered in 1998 and 1999.
Debt service for 1998 is estimated to be approximately $9.2
million reflecting increased borrowings related to the issuance of the 7%
Convertible Subordinated Notes and the purchase of four J-41 aircraft. The
foregoing amount does not include additional debt that may be required for the
financing of the CRJ spare parts and engines.
The Company believes that, in the absence of unusual
circumstances, its cash flow from operations, the accounts receivable credit
facility, and other available equipment financing will be sufficient to meet its
working capital needs, capital expenditures, and debt service requirements for
the next twelve months.
Inflation
Inflation has not had a material effect on the Company's
operations.
Recent Accounting Pronouncements
In July 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 130 ("SFAS No. 130"), "Reporting Comprehensive
Income", which requires that comprehensive income and the associated income tax
expense or benefit be reported in financial statements with the same prominence
as other financial statements with an aggregate amount of comprehensive income
reported in that same financial statement. "Comprehensive Income" refers to
revenues, expenses, gains and losses that under GAAP are not included in net
income. The impact of SFAS No. 130 will not change levels of net income, but
will result in new disclosure requirements for the Company.
In July 1997, the FASB also issued Statement No. 131 ("SFAS
No. 131"), "Disclosures About Segments of an Enterprise and Related Information"
which requires disclosure for each segment, for which the chief operating
decision maker organizes the company for making operating decisions and
assessing performance. Reportable segments are based on products and services,
geography, legal structure, management structure and any manner in which
management disaggregates the company. The impact of SFAS No. 131 will also
result in new disclosure requirements for the Company.
Recently, the American Institute of Certified Public
Accountants issued a proposed statement of position on accounting for start-up
costs, including preoperating costs related to the introduction of new fleet
types by airlines. The proposed accounting guidelines would require companies to
expense start-up costs as incurred. The FASB recently approved the proposed
guidelines, and they will take effect for fiscal years beginning after December
15, 1998. The Company has deferred certain start-up costs related to the
introduction of the CRJs and is amortizing such costs to expense ratably over
four years. The Company will be required to expense any unamortized amounts
remaining as of January 1, 1999. The Company estimates the remaining unamortized
balance for deferred start-up costs will be approximately $1.4 million on
January 1, 1999.
<PAGE>
Item 8. Consolidated Financial Statements
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report for the year ended December 31, 1997
Report of Independent Certified Public Accountants for the
years ended December 31, 1995 and 1996 34 December 31, 1995 and 1996
Consolidated Balance Sheets as of December 31, 1996 and 1997
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 38 December 31, 1995, 1996 and
1997
Notes to Consolidated Financial Statements
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Atlantic Coast Airlines, Inc.
We have audited the accompanying consolidated balance sheet of Atlantic Coast
Airlines, Inc. and Subsidiary as of December 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Atlantic Coast
Airlines, Inc. and Subsidiary as of December 31, 1997 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Washington, D.C. KPMG Peat Marwick LLP
January 28, 1998, except as to note 17,
which is as of March 4, 1998
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Atlantic Coast Airlines, Inc.
We have audited the accompanying consolidated balance sheet of Atlantic Coast
Airlines, Inc. and Subsidiary, as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Atlantic Coast
Airlines, Inc. and Subsidiary at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Washington, D.C.
January 24, 1997, except for Note 18, The date which is May 29, 1997
<PAGE>
<TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Balance Sheets
(In thousands, except for share data and par values)
December 31,
<CAPTION>
1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $ 21,470 $ 39,167
Short term investments - 10,737
Accounts receivable, net 15,961 21,621
Expendable parts and fuel inventory, net 1,759 2,477
Prepaid expenses and other current assets 2,554 2,855
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total current assets 41,744 76,857
Property and equipment at cost, net of accumulated depreciation and
amortization 16,157 40,638
Preoperating costs, net of accumulated amortization 225 2,004
Intangible assets, net of accumulated amortization 2,882 2,613
Deferred tax asset 3,140 688
Debt issuance costs, net of accumulated amortization - 3,051
Aircraft deposits 570 19,040
Other assets 40 4,101
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total assets $ 64,758 $ 148,992
- ------------------------------------------------------------------------------------ ----------------- ------------------
Liabilities and Stockholders' Equity
Current:
Accounts payable $ 3,770 $ 4,768
Current portion of long-term debt 1,319 1,851
Current portion of capital lease obligations 1,497 1,730
Accrued liabilities 17,376 23,331
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total current liabilities 23,962 31,680
Long-term debt, less current portion 2,407 73,855
Capital lease obligations, less current portion 3,266 2,290
Deferred credits, net 486 6,362
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total liabilities 30,121 114,187
- ------------------------------------------------------------------------------------ ----------------- ------------------
Stockholders' equity:
Preferred Stock: $.02 par value per share; shares authorized
5,000,000; no shares issued or outstanding in 1996 or 1997 - -
Common stock: $.02 par value per share; shares authorized 15,000,000; shares
issued 8,498,910 in 1996 and 8,739,507 in 1997; shares outstanding 8,486,410
in 1996 and 7,267,007 in 1997 170 175
Class A common stock: nonvoting; par value; $.02 stated value per share; shares
authorized 6,000,000; no shares issued or outstanding - -
Additional paid-in capital 37,689 40,296
Less: Common stock in treasury, at cost, 12,500 shares in 1996 and 1,472,500
shares in 1997 (125) (17,069)
Retained earnings (deficit) (3,097) 11,403
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total Stockholders' Equity 34,637 34,805
- ------------------------------------------------------------------------------------ ----------------- ------------------
Total Liabilities and Stockholders' Equity $ 64,758 $ 148,992
- ------------------------------------------------------------------------------------ ----------------- ------------------
Commitments and Contingencies
- ------------------------------------------------------------------------------------ ----------------- ------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Operations
(In thousands, except for per share data)
Years ended December 31,
<CAPTION>
1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues:
Passenger $ 153,918 $ 179,370 $ 202,540
Other 3,050 3,114 2,904
- ---------------------------------------------------------------------------------------------------------------------------
Total operating revenues 156,968 182,484 205,444
- ---------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Salaries and related costs 40,702 44,438 49,661
Aircraft fuel 13,303 17,124 17,766
Aircraft maintenance and materials 15,252 16,841 16,860
Aircraft rentals 25,947 29,137 29,570
Traffic commissions and related fees 25,938 28,550 32,667
Depreciation and amortization 2,240 2,846 3,566
Other 21,262 23,711 26,411
Restructuring charges (reversals)
(521) (426) -
- ---------------------------------------------------------------------------------------------------------------------------
Total operating expenses 144,123 162,221 176,501
Operating income 12,845 20,263 28,943
- ---------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense
(1,802) (1,013) (3,450)
Interest income 66 341 1,284
Other income 181 17 62
- ---------------------------------------------------------------------------------------------------------------------------
Total other expense
(1,555) (655) (2,104)
- ---------------------------------------------------------------------------------------------------------------------------
Income before income tax provision (benefit)
and extraordinary 11,290 19,608 26,839
item
Income tax provision (benefit) 450 12,339
(1,212)
- ---------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 12,502 19,158 14,500
Extraordinary Item 400 - -
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 12,902 $ 19,158 $ 14,500
- ---------------------------------------------------------------------------------------------------------------------------
Income per share:
Basic
Income before extraordinary item $1.46 $2.25 $1.85
Extraordinary item 0.05 - -
-----------------------------------------------------
Net income $1.51 $2.25 $1.85
=====================================================
Diluted
Income before extraordinary item $1.29 $2.15 $1.61
Extraordinary item 0.04 - -
-----------------------------------------------------
Net income $1.33 $2.15 $1.61
=====================================================
Weighted average shares used in computation:
Basic 8,342 8,481 7,824
Diluted 9,871 8,920 9,756
- ---------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Stockholders' Equity
(In thousands, except for share data)
<CAPTION>
Common Stock Additional Treasury Stock Retained
----------------------------Paid-In ----------------------------- Earnings
Capital (Deficit)
Shares Amount Shares Amount
- ---------------------------------------- ------------------------- ------------ ---------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 8,324,470 $ 166 $ 36,703 12,500 $ (125) $ (34,822)
Exercise of common stock options 31,941 1 71 - - -
Preferred stock dividends declared - - - - - (335)
Net Income - - - - - 12,902
- ---------------------------------------- ------------- ----------- ------------ -------------- ------------- -----------------
Balance, December 31, 1995 8,356,411 167 36,774 12,500 (125) (22,255)
Exercise of common stock options 142,499 3 351 - - -
Tax benefit of stock option exercise - - 564 - - -
Net Income - - - - - 19,158
- ---------------------------------------- ------------- ----------- ------------ -------------- ------------- -----------------
Balance December 31, 1996 8,498,910 170 37,689 12,500 (125) (3,097)
Exercise of common stock options 240,597 5 1,250 - - -
Tax benefit of stock option exercise - - 1,357 - - -
Purchase of treasury stock - - - 1,460,000 (16,944) -
Net Income - - - - - 14,500
- ---------------------------------------- ------------- ----------- ------------ -------------- ------------- -----------------
Balance December 31, 1997 8,739,507 $ 175 $ 40,296 1,472,500 $ (17,069) $ 11,403
- ---------------------------------------- ------------- ----------- ------------ -------------- ------------- -----------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
(In thousands)
Years ended December 31,
<CAPTION>
1995 1996 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,902 $ 19,158 $ 14,500
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Extraordinary gain (400) - -
Depreciation and amortization 1,815 2,434 3,111
Amortization of intangibles and preoperating costs 425 412 455
Provision for uncollectible accounts 229 387 168
Provision for inventory obsolescence 120 50 63
Amortization of deferred credits - (27) (243)
Amortization of debt issuance costs - - 181
(Increase) decrease in deferred tax asset (1,500) (1,640) 2,452
Net (gain) loss on disposal of fixed assets (7) 1 450
Amortization of debt discount and finance 7 46 76
costs
Gain on disposal of (177) - -
slots
Changes in operating assets and liabilities:
Accounts receivable (1,169) (1,741) (5,829)
Expendable parts and fuel inventory 686 41 (781)
Prepaid expenses and other current assets 2,814 (796) 403
Preoperating costs - - (2,057)
Other assets 62 - -
Accounts payable (1,393) 238 998
Accrued liabilities 1,259 1,590 7,313
---------------------------------------------------------
Net cash provided by operating activities 15,673 20,153 21,260
Net cash provided by (used in) operating activities Cash flows from investing
activities:
Purchase of property and equipment (4,260) (2,128) (26,005)
Proceeds from sales of fixed assets 1,916 - -
Purchase of short term investments - - (10,737)
Proceeds from sale of intangible assets 375 - -
Payments for aircraft and other deposits - (61) (18,447)
---------------------------------------------------------
Net cash used in investing activities (1,969) (2,189) (55,189)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 4,210 486 75,220
Payments of long-term debt (4,769) (1,234) (3,241)
Payments of capital lease obligations (689) (1,171) (2,258)
Net decrease in lines of credit (6,356) - -
Proceeds from receipt of deferred credits and other - 513 809
Deferred financing costs (66) (239) (3,215)
Payment of convertible preferred stock dividend - (335) -
Redemption of convertible preferred stock - (3,825) -
Proceeds from exercise of stock options 72 915 1,255
Purchase of treasury stock - - (16,944)
Net cash (used in) provided by financing activities (7,598) (4,890) 51,626
Net cash (used in) provided by financing activities
Net increase in cash and cash equivalents 6,106 13,074 17,697
Cash and cash equivalents, beginning of year 2,290 8,396 21,470
---------------------------------------------------------
Cash and cash equivalents, end of year $ 8,396 $ 21,470 $ 39,167
- -------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
Atlantic Coast Airlines, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
- -------------------------------------------------------------------------------
39
1. Summary of Accounting (a) Basis of Presentation
Policies
The accompanying consolidated financial
statements include the accounts of Atlantic
Coast Airlines, Inc. ("ACAI") and its
wholly-owned subsidiary, Atlantic Coast
Airlines ("ACA"), together, (the
"Company"). All significant intercompany
accounts and transactions have been
eliminated in consolidation. As of December
31, 1997, the Company operated in the air
transportation industry providing scheduled
service for passengers to 40 destinations
in 17 eastern states of the United States.
All of the Company's flights are currently
operated under a code sharing agreement
with United Airlines, Inc. ("United") and
are identified as United Express flights in
computer reservation systems.
(b) Cash, Cash Equivalents and Short-Term
Investments
The Company considers investments with an
original maturity of three months or less
when purchased to be cash equivalents.
Investments with an original maturity
greater than three months are considered
short-term investments. All short-term
investments are considered to be available
for sale. Due to the short maturities
associated with the Company's investments,
the amortized cost approximates fair market
value. Accordingly, no adjustment has been
made to record unrealized holding gains and
losses.
(c) Airline Revenues
Passenger fares and cargo revenues are
recorded as operating revenues at the time
transportation is provided. The value of
unused passenger tickets sold by the
Company is included in current liabilities.
Accounts receivable are stated net of
allowances for uncollectible accounts of
approximately $550,000, $287,000 and
$269,000 at December 31, 1995, 1996 and
1997, respectively. Amounts charged to
costs and expenses for uncollectible
accounts in 1995, 1996 and 1997 were
$229,000, $387,000 and $168,000
respectively. Write-off to accounts
receivable were none, $650,000 and $186,000
in 1995, 1996 and 1997, respectively.
The Company participates in United
Airlines, Inc.'s ("United") Mileage Plus
frequent flyer program. The Company does
not accrue for incremental costs for
mileage accumulation relating to this
program because the Company believes such
costs are immaterial. Incremental costs for
awards redeemed on the Company's flights
are expensed as incurred.
(d) Concentrations of Credit Risk
The Company provides commercial air
transportation in the eastern United
States. Substantially all of the Company's
passenger tickets are sold by other air
carriers. The Company has a significant
concentration of its accounts receivable
with other air carriers with no collateral.
At December 31, 1996 and 1997, accounts
receivable from air carriers totaled
approximately $14.3 million and $18.7
million, respectively. Such accounts
receivable serve as collateral to a
financial institution in connection with
the Company's line of credit arrangement.
Of the total amount, approximately $11
million and $14.8 million at December 31,
1996 and 1997, respectively, were due from
United. Historically, accounts receivable
losses have been insignificant.
(e) Risks and Uncertainties
The airline industry is highly competitive
and volatile. The Company competes
primarily with other air carriers and,
particularly with respect to its shorter
flights, with ground transportation.
Airlines primarily compete in areas of
pricing, scheduling and type of equipment.
The Company's operations are primarily
dependent upon business-related travel and
are not subject to wide seasonal
fluctuation. However, some seasonal decline
does occur during portions of the winter
months due to lesser demand. The ability of
the Company to compete with ground
transportation and other air carriers
depends upon public acceptance of its
aircraft and the provision of convenient,
frequent and reliable service to its
markets at reasonable rates.
The Company operates under a code-sharing
agreement with United, which expires on
March 31, 1999. The agreement allows the
Company to operate under United's colors,
utilize the "United Express" name and
identify its flights using United's
designator code. The Company believes that
its relationship with United substantially
enhances its ability to compete for
passengers. The loss of the Company's
affiliation with United could have a
material adverse effect on the Company's
business.
The United Express Agreements require the
Company to obtain United's consent to
operate service between city pairs as
"United Express". If the Company
experiences net operating expenses that
exceed revenues for three consecutive
months on any required route, the Company
may withdraw from that route if United and
the Company are unable to negotiate an
alternative mutually acceptable level of
service for that route. The United Express
Agreements also require the Company to
obtain United's approval if it chooses to
enter into code-sharing arrangements with
other carriers, but do not prohibit United
from competing, or from entering into
agreements with other airlines who would
compete, on routes served by the Company.
The United Express Agreements may be
canceled if the Company fails to meet
certain financial tests or performance
standards or fails to maintain certain
minimum flight frequency levels, events
which the Company, based on experience to
date, believes to be unlikely.
The Company's pilots are represented by the
Airline Pilots Association ("ALPA"), its
flight attendants by the Association of
Flight Attendants ("AFA"), and its
mechanics by the Aircraft Mechanics
Fraternal Association ("AMFA").
The ALPA collective bargaining agreement
was amended on February 26, 1997. The
agreement is for three years and is
amendable on February 28, 2000. The new
contract modifies work rules to allow more
flexibility, introduces regional jet pay
rates, and transfers pilots into the
Company's employee benefit plans.
On March 11, 1994, AMFA was certified by
the National Mediation Board (the "NMB") as
the collective bargaining representative
elected by mechanics and related employees
of the Company. The Company and AMFA have
been attempting to negotiate an initial
contract under federal mediation since
December 1994, but have so far failed to
reach agreement. The NMB has indicated that
it is in favor of continuing the
negotiations, and the Company anticipates
participating in further negotiations.
If, at some point, the NMB should decide
that the parties were deadlocked, then the
NMB could declare an impasse along with a
thirty day cooling off period. At the
conclusion of that period if an agreement
had not been reached, AMFA would have the
authority to use self help, up to and
including the right to strike.
The Company's contract with the AFA became
amendable on April 30, 1997. In March 1998,
a tentative agreement between the Company
and AFA was rejected by a vote of the
members. The Company expects to resume
negotiations during the second calendar
quarter of 1998 and will continue to
operate under the terms of the existing
agreement until negotiations are completed.
The Company believes that the wage rates
and benefits for other employee groups are
comparable to similar groups at other
regional airlines. The Company is unaware
of significant organizing activities by
labor unions among other non-union
employees at this time.
(f) Use of Estimates
The preparation of financial statements in
accordance with generally accepted
accounting principles requires management
to make certain estimates and assumptions
regarding valuation of assets, recognition
of liabilities for costs such as aircraft
maintenance, differences in timing of air
traffic billings from United and other
airlines, operating revenues and expenses
during the period and disclosure of
contingent assets and liabilities at the
date of the financial statements. Actual
results could differ from those estimates.
(g) Expendable Parts
Expendable parts and supplies are stated at
the lower of cost or market, less an
allowance for obsolescence of $120,000,
$169,950 and $232,601 for the years ended
December 31, 1995, 1996 and 1997,
respectively. Expendable parts and supplies
are charged to expense as they are used.
Amounts charged to costs and expenses for
obsolescence in 1995, 1996 and 1997 were
$120,000, $49,950 and $62,652 respectively.
(h) Property and Equipment
Property and equipment are stated at cost.
Depreciation is computed on the
straight-line method over the estimated
useful lives of the related assets which
range from five to fifteen years.
Amortization of capital leases is included
in depreciation expense. The Company
periodically evaluates whether events and
circumstances have occurred which may
impair the estimated useful life or the
recoverability of the remaining balance of
its long-lived assets. If such events or
circumstances were to indicate that the
carrying amount of these assets would not
be recoverable, the Company would estimate
the future cash flows expected to result
from the use of the assets and their
eventual disposition. If the sum of the
expected future cash flows (undiscounted
and without interest charges) is less than
the carrying amount of the asset, an
impairment loss would be recognized by the
Company.
(i) Preoperating Costs
Preoperating costs represent the cost of
integrating new types of aircraft. Such
costs, which consist primarily of flight
crew training and aircraft ownership
related costs, are deferred and amortized
over a period of four years on a
straight-line basis.
In 1997, the Company capitalized
approximately $1.8 million of these costs
related to the introduction of the Canadair
Regional Jet ("CRJ") into the Company's
fleet. Accumulated amortization of
preoperating costs at December 31, 1996 and
1997 were $722,000 and $53,000,
respectively. In 1997, the J-41
preoperating costs were completely
amortized and written off.
(j) Intangible Assets
Goodwill of approximately $3.2 million,
representing the excess of cost above the
fair value of net assets acquired in the
acquisition of ACA, is being amortized by
the straight-line method over twenty years.
The primary financial indicator used by the
Company to assess the recoverability of its
goodwill is undiscounted future cash flows
from operations. The amount of impairment,
if any, is measured based on projected
future cash flows using a discount rate
reflecting the Company's average cost of
funds. Slots are being amortized by the
straight-line method over twenty years.
Accumulated amortization of intangible
assets at December 31, 1996 and 1997 was
$911,000 and $1.1 million, respectively.
(k) Maintenance
The Company's maintenance accounting policy
is a combination of expensing events as
incurred and accruing for certain
maintenance events. The Company accrues for
current and future maintenance events on an
ongoing basis at rates it estimates will be
sufficient to cover maintenance costs for
the aircraft. For the J-32 aircraft, the
Company accrues for engine overhaul costs
on a per flight hour basis. For the J-41
aircraft, the Company accrues for airframe
component and engine overhaul costs on a
per flight hour basis. For the CRJ
aircraft, the Company accrues for the
replacement of engine life limited parts on
a per cycle basis. All other maintenance
costs are expensed as incurred.
(l) Deferred Credits
The Company accounts for lease incentives
provided by the aircraft manufacturers as
deferred credits. These credits are
amortized on a straight-line basis as a
reduction to lease expense over the
respective lease term. The lease incentives
are credits that may be used to purchase
spare parts, satisfy aircraft return
conditions and or be applied against future
rental payments.
(m) Income Taxes
The Company accounts for deferred income
taxes using the asset and liability method.
Under the asset and liability method,
deferred tax assets and liabilities are
recognized for the future tax consequences
attributable to differences between the
financial statement carrying amounts for
existing assets and liabilities and
respective tax bases. Deferred tax assets
and liabilities are measured using enacted
tax rates expected to apply to taxable
income in future years in which those
temporary differences are expected to be
recovered or settled.
(n) Stock Options
The Company accounts for its stock-based
compensation plans using the intrinsic
value method prescribed under Accounting
Principles Board (APB) No. 25. Under these
principles, the Company records
compensation expense for stock options only
if the exercise price is less than the fair
market value of the stock on the
measurement date.
(o) Income Per Share
On March 3, 1997 the Financial Accounting
Standards Board issued Statement of
Financial Accounting Standards No, 128,
"Earnings per Share (SFAS 128)", which
became effective for the Company's fiscal
year ended December 31, 1997 and required
restatement of previously reported earnings
per share data. SFAS 128 provides for the
calculation of Basic and Diluted income per
share.
Basic income per share is computed by
dividing net income, after deducting any
preferred dividend requirements, by the
weighted average number of common shares
outstanding. Diluted income per share is
computed by dividing net income, after
deducting any preferred dividend
requirements, by the weighted average
number of common shares outstanding and
common stock equivalents, which consist of
shares subject to stock options computed
using the treasury stock method. In
addition, dilutive convertible securities
are included in the denominator while
interest, net of tax, for convertible debt
is included in the numerator. In 1995, the
dilutive effect of the convertible
preferred stock and the convertible debt
are included in the calculation of diluted
income per share. In 1996, convertible
preferred stock is included, but the
convertible debt was retired in 1995 and
therefore, not included in the 1996
calculation. In 1997, the calculation
included the dilutive effect of new
convertible debt, but not the convertible
preferred stock as it was redeemed in 1996.
A reconciliation of the numerator and
denominator used in computing income per
share is as follows (in thousands except
per share amounts):
<TABLE>
1995 1996 1997
---- ---- ----
<CAPTION>
Basic Diluted Basic Diluted Basic Diluted
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Share calculation:
Average number of common shares
outstanding 8,342 8,342 8,481 8,481 7,824 7,824
Common stock equivalents
due to assumed exercise of - 415 - 311 - 350
options
Common stock equivalents due to
assumed conversion of preferred
stock - 546 - 128 - -
Common stock equivalents due to
assumed conversion of
convertible debt - 568 - - - 1,582
--------------------------------------------------------------------------
Total common shares and common stock
equivalents 8,342 9,871 8,481 8,920 7,824 9,756
--------------------------------------------------------------------------
Adjustments to net income:
Net income $ 12,902 $ 12,902 $ 19,158 $ 19,158 $ 14,500 $ 14,500
Preferred dividend
requirements based on average
number of preferred shares (335) - (64) - - -
Interest expense, net of tax - 237 - - - 1,187
--------------------------------------------------------------------------
Net income available to common
shareholders $ 12,567 $ 13,139 $ 19,094 $ 19,158 $ 14,500 $ 15,687
--------------------------------------------------------------------------
Net income per share $ 1.51 $ 1.33 $ 2.25 $ 2.15 $ 1.85 $ 1.61
---------------------------------------------------------------------------------------------------------------
</TABLE>
(p) Reclassifications
Certain amounts as previously reported have
been reclassified to conform to to the
current year presentation.
<TABLE>
2. Property and
Equipment Property and equipment consist of the following:
(in thousands)
<CAPTION>
December 31, 1996 1997
---------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
Owned aircraft and improvements - $ 18,916
Improvements to leased aircraft $ 2,350 3,521
Flight equipment, primarily rotable spare parts 14,014 18,456
Maintenance and ground equipment 3,380 4,166
Computer hardware and software 1,464 2,029
Furniture and fixtures 296 445
Leasehold improvements 619 1,831
---------------------------------------------------------- ---------------- ---------------
22,123 49,364
Less: Accumulated depreciation and amortization 5,966 8,726
---------------------------------------------------------- ---------------- ---------------
$ 16,157 $ 40,638
---------------------------------------------------------- ---------------- ---------------
</TABLE>
<TABLE>
3. Accrued Accrued liabilities consist of the following:
Liabilities
(in thousands)
<CAPTION>
December 31, 1996 1997
---------------------------------------------------------- ---------------- ---------------
<S> <C> <C>
Accrued payroll and employee benefits $ 4,929 $ 6,914
Air traffic liability 2,703 1,404
Interest 13 1,352
Aircraft rents 564 1,644
Reservations and handling 2,454 2,441
Engine and airframe overhaul costs 3,311 3,589
Fuel 1,196 977
Accrued taxes payable - 2,704
Other 2,206 2,306
---------------------------------------------------------- ---------------- ---------------
$17,376 $23,331
---------------------------------------------------------- ---------------- ---------------
</TABLE>
4. Debt On November 1, 1995, the Company entered into a line of
credit agreement with a financial institution which, based on a
specified percentage of outstanding interline receivables
(financing base), provides for borrowings of up to $20 million.
The line of credit is collateralized by accounts receivables and
general intangibles and will expire on September 30, 2000, or
upon termination of the United Express marketing agreement,
whichever is sooner. Interest is payable monthly at an annual
rate of prime plus 1% (8.5% at December 31, 1997). The Company
has pledged approximately $7.7 million of this line as collateral
to secure letters of credit issued on behalf of the Company. At
December 31, 1997, the Company's remaining available borrowing
limit was approximately $4 million. There was no balance
outstanding under the line of credit at December 31, 1996, or
December 31, 1997.
<PAGE>
<TABLE>
Long-term debt consists of the following:
(in thousands)
December 31,
<CAPTION>
1996 1997
----------------------------------------------------------------------------- ------------------ ----------------
<S> <C> <C>
Convertible subordinated notes, principal due July 1, 2004,
interest payable in semi-annual installments on the
outstanding principal with interest
at 7%, unsecured. $ - $57,500
EquipmentNotes associated with Pass Through Trust Certificates,
due January 1, 2008 and January 1, 2010, principal payable
annually
through January 1, 2006 and semi-annually thereafter through
maturity, interest payable semi-annually at 7.49% throughout
term of notes,
collateralized by J-41 aircraft. - 16,431
Notes to institutional lenders, originally due between March 1998
and April 2001, principal and interest payable in monthly
installments ranging between $9,500 and $40,000, with
interest from 6.5% to 12%, collateralized by flight
equipment, spare engines and parts, and
ground equipment. 2,302 331
Note payable to supplier, due May 15, 2000, principal payable monthly with
interest at 6.74%, unsecured. - 1,225
Note payable to airport authority, due April 1, 2001, principal
payable monthly with interest at 6.5% through March 31, 1995
and prime plus
1.5% thereafter through maturity, collateralized by expendable parts 760 -
inventory.
Note payable to institutional lender, due October 1, 1998, principal payable
monthly with interest at 6.61%, unsecured. 466 217
Note payable to other airline, due March 31, 1998, principal
payable in quarterly installments of $38,400 with interest at
9%, collateralized
by ground support equipment. 192 -
Other 6 2
----------------------------------------------------------------------------- ------------------ ----------------
Total 3,726 75,706
----------------------------------------------------------------------------- ------------------ ----------------
Less: Current Portion 1,319 1,851
----------------------------------------------------------------------------- ------------------ ----------------
$2,407 $73,855
----------------------------------------------------------------------------- ------------------ ----------------
</TABLE>
In September 1997, approximately $112 million of
pass through certificates were issued in a
private placement by separate pass through
trusts, which used the proceeds to purchase
equipment notes (the "Equipment Notes") issued in
connection with (i) leveraged lease transactions
relating to four J-41s and six CRJs (delivered or
expected to be delivered), all of which are or
will be leased to the Company (the "Leased
Aircraft"), and (ii) the financing of four J-41s
owned by the Company (the "Owned Aircraft"). The
Equipment Notes issued with respect to the Owned
Aircraft are direct obligations of ACA,
guaranteed by ACAI and are included as debt
obligations in the accompanying financial
statements. The Equipment Notes issued with
respect to the Leased Aircraft are neither debt
obligations of ACA nor guaranteed by ACAI. The
Equipment Notes for the Owned Aircraft carry a
weighted average interest rate of approximately
7.49% with three Equipment Notes maturing on
January 1, 2008, and one Equipment Note maturing
January 1, 2010. The aggregate principal amount
of the notes is approximately $16.4 million.
Aggregate principal payments for the next five
years will be approximately $1 million in each of
the years of 1998 through 2001 and $1.1 million
in 2002.
With respect to one CRJ leased aircraft, at
December 31, 1997 (the "Prefunded Aircraft"), the
proceeds from the sale of the Equipment Notes
were deposited into collateral accounts, to be
released at the closing of a leveraged lease
related to the Prefunded Aircraft. In January
1998, an equity investor purchased this aircraft
and entered into a leveraged lease with the
Company and the collateral accounts were
released.
Pursuant to a Purchase Agreement executed on June
27, 1997, between the Company and Alex. Brown &
Sons, Incorporated and The Robinson-Humphrey
Company, Inc. as Initial Purchasers, on July 2,
1997, the Company issued $50 million aggregate
principal amount of 7% Convertible Subordinated
Notes due July 1, 2004 (the "Notes"), pursuant to
Rule 144A under the Securities Act of 1933, and
received net proceeds of approximately $48.3
million related to the sale of the Notes. On July
18, 1997 the Company issued an additional $7.5
million aggregate principal amount of the Notes
to cover over-allotments, and received net
proceeds of $7.3 million related to the exercise
of the over-allotment option.
The Notes are convertible into shares of Common
Stock, par value $0.02 of the Company (the
"Common Stock") by the holders at any time after
sixty days following the latest date of original
issuance thereof and prior to maturity, unless
previously redeemed or repurchased, at a
conversion price of $18 per share, subject to
certain adjustments. Interest on the Notes is
payable on April 1 and October 1 of each year,
commencing October 1, 1997. The Notes are not
redeemable by the Company until July 1, 2000.
Thereafter, the Notes will be redeemable, at any
time, on at least 15 days notice at the option of
the Company, in whole or in part, at the
redemption prices set forth in the Indenture
dated July 2, 1997, in each case, together with
accrued interest. The Notes are unsecured and
subordinated in right of payment in full to all
existing and future Senior Indebtedness as
defined in the Indenture. The holders of the
Notes have certain registration rights with
respect to the Notes and the underlying Common
Stock (see subsequent events footnote).
On April 1, 1997, the Company executed an $11
million short-term promissory note for deposits
related to the acquisition of CRJs. The
promissory note was paid in full on July 2, 1997
from the proceeds of the Notes issued on July 2,
1997 as described above. During 1997, the Company
retired $3.1 million of certain high interest
rate debt with the proceeds of the Notes. On
December 30, 1994, the Company entered into a $20
million financing agreement with JSX Capital
Corporation ("JSX"), an affiliate of British
Aerospace, Inc. ("BAI"). This arrangement
included the conversion of an outstanding loan on
a revolving credit facility of $10 million to
equity, an additional $1 million cash equity
investment, creation of a term loan facility in
the amount of $4 million, issuance of redeemable
convertible preferred stock of approximately $3.8
million, and a new revolving line of credit
facility of $5 million.
The $4 million convertible term loan was due
October 31, 1999, with interest at prime plus 2%,
payable monthly, except that through June 30,
1995, interest was deferrable and could be added
to the principal balance, at the Company's
option. The principal repayment consisted of 12
equal payments of principal (plus the pro rata
portion of any unpaid interest) payable on April
30, July 31, and October 31 of the years 1996
through 1999. Any principal or interest unpaid as
of October 31, 1999, could, at the option of JSX,
be converted into common stock at $7 per share at
any time thereafter until paid. The term loan was
collateralized by the Company's fixed assets and
accounts receivable. During 1995, the Company
prepaid the balance in full at a discount which
resulted in an extraordinary gain of $400,000.
A total of 3,825 shares of Series A Redeemable
Convertible Preferred Stock at $1,000 per share
with liquidation preference of full face amount
plus accrued and unpaid dividends was issued,
resulting in total proceeds of $3.8 million. The
shares were to be redeemed by the Company at the
end of seven years and were redeemable at the
option of the Company, prior to redemption. The
Company redeemed, at par, the Series A Redeemable
Convertible Preferred Stock on March 29, 1996.
<PAGE>
As of December 31, 1997, maturities of long-term
debt are as follows:
(in thousands)
-------------------------------------------------
1998 1,851
1999 1,650
2000 1,403
2001 1,042
2002 1,115
2003-2010 68,645
-------------------------------------------------
$75,706
-------------------------------------------------
The Company has various financial covenant
requirements associated with its debt and
marketing agreements. These covenants require
meeting certain financial ratio tests, including
tangible net worth, net earnings, current ratio
and debt service levels.
5. Obligations Under Capital Leases
The Company leases certain equipment for noncancellable terms of more than
one year. The net Under Capital book value of the equipment under capital leases
at December 31, 1996 and 1997 is $5.2 million and $4.5 million, respectively.
The leases were capitalized at the present value of the lease payments. Interest
rates for these leases ranged from 2.3% to 18.1%.
At December 31, 1997, the future minimum payments, by year and in the
aggregate, together with the present value of the net minimum lease
payments, are as follows:
(in thousands)
Year Ending December 31,
-------------------------------------------------
1998 $ 1,820
1999 1666
2000 581
2001 201
2002 19
-------------------------------------------------
Future minimum lease payments 4,287
Amount representing interest 267
-------------------------------------------------
Present value of minimum lease payments 4,020
Less: Current maturities 1,730
-------------------------------------------------
$ 2,290
-------------------------------------------------
6. Operating Leases
The Company leases its principal administrative, airport and
maintenance facilities under operating leases expiring from
2002 to 2023. Future minimum lease payments will average approximately
$2.4 million per year.
Future minimum lease payments under noncancellable aircraft operating
leases at December 31, 1997 are as follows:
(in thousands)
Year ending December 31,
-------------------------------------------------
1998 $ 36,037
1999 35,146
2000 34,909
2001 33,304
2002 32,708
2003 - 2007 134,212
2008 - 2012 60,413
2013 - 2014 12,829
------------------------------------------------
Total minimum lease payments $ 379,558
-------------------------------------------------
The noncancellable aircraft operating lease
commitments above reflect amounts for one CRJ
pursuant to an operating lease with a third party
that was not signed until January 1998. As of
December 31, 1997, and prior to entering into the
long term operating lease in January 1998, the
Company was obligated to pay rent to the
manufacturer under a month to month operating
lease agreement. Certain of the Company's leases
require aircraft to be in a specified maintenance
condition at lease termination or upon return of
the aircraft.
The Company's lease agreements generally provide
that the Company pay taxes, maintenance,
insurance and other operating expenses applicable
to leased assets. Operating lease expense was
$30.5 million; $33.8 million; and $35.7 million
for the years ended December 31, 1995, 1996 and
1997, respectively.
7. Stockholders' Stock Option Plans
Equity
The Company has two nonqualified stock option
plans which provide for the issuance of options
to purchase common stock of the Company to
certain employees and directors of the Company.
Under the plans, options are granted by the
compensation committee of the board of directors
and vest over a three year period, commencing one
year after the date of the grant.
The Company has reserved 1,500,000 shares of
common stock for issuance upon the exercise of
options granted under the plan.
A summary of the status of the Company's stock
options as of December 31, 1995, 1996 and 1997 and
changes during the periods ending on those dates
is presented below:
<TABLE>
1995 1996 1997
---- ---- ----
Weighted-average Weighted-average Weighted-average
exercise exercise exercise price
price price
<CAPTION>
Shares Shares Shares
------------- ------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 653,002 $ 2.32 729,558 $ 2.86 958,392 $6.32
Granted 140,500 $ 5.30 395,500 $ 11.42 342,000 $17.82
Exercised 31,941 $ 2.25 142,499 $ 2.49 240,597 $5.20
Canceled 32,003 $ 3.02 24,167 $ 7.85 31,334 $10.89
------------- ------------- ------------ ------------- ------------- --------------
Outstanding at end of year 729,558 $ 2.86 958,392 $ 6.32 1,028,461 $10.27
------------- ------------- ------------ ------------- ------------- --------------
Options exercisable at year-end 541,889 $ 2.23 531,443 $ 3.34 458,284 $4.54
------------- ------------- ------------ ------------- ------------- --------------
Weighted-average fair value of options
granted during the year $4.03 $8.49 $12.98
</TABLE>
The following table summarizes information about fixed stock options
at December 31, 1997:
<TABLE>
Options Outstanding Options Exercisable
Weighted-average
Number remaining Weighted-average Number Weighted-average
outstanding at contractual life exercise price exercisable exercise price
<CAPTION>
Range of exercise price 12/31/97 (years) 12/31/97
- ------------------------------------ ----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
$2.08 - $3.45 340,500 4.9 $ 2.15 321,503 $ 2.12
$3.45 - $6.90 22,000 7.0 $ 4.25 15,333 $ 4.08
$6.90 - $10.35 116,619 7.9 $ 8.96 51,613 $ 8.83
$10.35 - $13.80 247,342 8.9 $12.41 58,170 $11.89
$13.80 - $17.25 162,500 9.1 $15.63 11,665 $16.04
$17.25 - $20.70 9,500 9.7 $19.17 0 $ 0.00
$20.70 - $24.15 127,500 9.8 $22.17 0 $ 0.00
$27.60 - $31.05 2,500 10.0 $30.50 0 $ 0.00
----------------- ----------------- ----------------- ----------------- -----------------
1,028,461 7.6 $10.27 458,284 $ 4.54
</TABLE>
A risk-free interest rate of 5.8%, 5.25% and 5.8%
for 1995, 1996, and 1997, a volatility rate of
76%, 71% and 50% for 1995, 1996 and 1997, with an
expected life of 7.5 years for 1995, 1996 and
1997, was assumed in estimating the fair value. No
dividend rate was assumed for any of the years.
The following summarizes the pro forma effects
assuming compensation for such awards had been
recorded based upon the estimated fair value. The
proforma information disclosed below does not
include the impact of awards made prior to January
1, 1995 (in thousands, except per share data):
<TABLE>
1995 1996 1997
<CAPTION>
As Reported Pro As Reported Pro Forma As Reported Pro Forma
Forma
--------------- -------------- ------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 12,902 $ 12,819 $ 19,158 $ 18,117 $ 14,500 $ 13,436
Basic earnings
per share $ 1.51 $ 1.50 $ 2.25 $ 2.13 $ 1.85 $ 1.72
Diluted earnings per
share $ 1.33 $ 1.30 $ 2.15 $ 2.03 $ 1.61 $ 1.50
</TABLE>
Preferred Stock
The Board of Directors of the Company is
authorized to provide for the issuance by the
Company of preferred stock in one or more series
and to fix the rights, preferences, privileges,
qualifications, limitations and restrictions
thereof, including, without limitation, dividend
rights, dividend rates, conversion rights, voting
rights, terms of redemption or repurchase,
redemption or repurchase prices, limitations or
restrictions thereon, liquidation preferences and
the number of shares constituting any series or
the designation of such series, without any
further vote or action by the stockholders.
At December 31, 1996, and 1997, the Company had
5,000,000 shares of $.02 par value preferred stock
authorized. 8,000 of those shares were designated
in 1994 as Series A Cumulative Convertible
Preferred Stock, of which 3,825 shares were issued
as of December 31, 1995. These shares were issued
in connection with a financing arrangement entered
into by the Company on December 30, 1994.
In January 1996, the Company's Board of Directors
declared dividends of $334,688 on its Series A
Cumulative Convertible Preferred Stock. This
represents accrued dividends for the year ended
December 31, 1995, in accordance with the
financing arrangement entered into by the Company
in December 1994. The Company paid these dividends
in February 1996.
The Company redeemed $3.8 million in Series A
Redeemable Cumulative Convertible Preferred Stock
on March 29, 1996.
8. Employee Benefit Plans
The Company established an Employee Stock Ownership Plan (the "ESOP")
covering substantially all employees. For each of the years 1992
through 1995, the Company made contributions to the ESOP which were
used in part to make loan and interest payments. For the year ended
December 31, 1995, the Company made contributions to the ESOP
amounting to $131,040. No contributions were made in 1996 or 1997.
Shares of common stock acquired by the ESOP are to be allocated to
each employee based on the employee's annual compensation.
Effective January 1, 1992, the Company adopted a 401(k) Plan (the
"Plan"). The Plan covers substantially all full-time employees who
meet the Plan's eligibility requirements. Employees may elect a salary
reduction contribution up to 17% of their annual compensation not to
exceed the maximum amount allowed by the Internal Revenue Service.
Effective October 1, 1994, the Plan was amended to require the Company
to make contributions to the Plan for eligible pilots in exchange for
certain concessions. These contributions are in excess of any
discretionary contributions made for the pilots under the original
terms of the plan. The contribution is 100% vested and equal to 3% of
the first $15,000 of compensation plus 2% of compensation in excess of
$15,000. The Company's contributions for the pilots shall not exceed
15% of the Company's adjusted net income before extraordinary items
for such plan year. The Company's obligations to make contributions
with respect to all plan years in the aggregate is limited to $2.5
million. Contribution expense was approximately $395,000, $370,000,
and $445,000 for 1995, 1996 and 1997, respectively.
Effective June 1, 1995, the Plan was amended to allow the Company to
make a discretionary matching contribution for non-union employees
equal to 25% of salary contributions up to 4% of total compensation.
Contribution expense was approximately $13,000, $29,000 and $133,000
for 1995, 1996 and 1997, respectively. Effective April 1, 1997, all
eligible pilots were included under the original terms of the Plan.
In addition to the pilot 401(k), the Company has profit sharing
programs which result in periodic payments to all eligible employees.
Profit sharing compensation, which is based on attainment of certain
performance and financial goals, was approximately $1.2 million, $2.6
million, and $3.6 million in 1995, 1996 and 1997, respectively.
9. Income Taxes
The provision (benefit) for income taxes includes the following
components:
<TABLE>
(in thousands)
<CAPTION>
Year Ending December 31, 1995 1996 1997
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal:
Current 238 1,699 7,342
Deferred (1,230) (1,344) 1,907
--------------------------------------- ------------------ ----------------- -------------------
Total federal provision (benefit) (992) 355 9,249
--------------------------------------- ------------------ ----------------- -------------------
State:
Current 50 391 2,545
Deferred (270) (296) 545
--------------------------------------- ------------------ ----------------- -------------------
Total state provision (benefit) (220) 95 3,090
--------------------------------------- ------------------ ----------------- -------------------
Total provision (benefit) $ (1,212) $ 450 $ 12,339
--------------------------------------- ------------------ ----------------- -------------------
</TABLE>
A reconciliation of income tax expense (benefit)
at the applicable federal statutory income tax
rate of 35% to the tax provision (benefit)
recorded is as follows:
<TABLE>
(in thousands)
<CAPTION>
Year ending December 31, 1995 1996 1997
--------------------------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Income tax expense
at statutory rate $ 4,092 $ 6,863 $ 9,394
Increase (decrease) in tax
expense (benefit):
Change in valuation
allowance (1,500) (1,640) -
Utilization of net operating
loss carryforward (4,677) (5,811) -
Alternative minimum tax
expense ("AMT") 210 - -
Permanent differences
and other 78 58 937
State income taxes, net
of federal benefit 585 980 2,008
--------------------------------------- ------------------ ------------------ ------------------
Income tax expense (benefit) $(1,212) $ 450 $12,339
--------------------------------------- ------------------ ------------------ ------------------
</TABLE>
Deferred income taxes result from temporary
differences which are the result of provisions of
the tax laws that either require or permit certain
items of income or expense to be reported for tax
purposes in different periods than for financial
reporting purposes.
The following is a summary of the Company's
deferred income taxes as of December 31, 1996, and
1997:
<TABLE>
(in thousands)
<CAPTION>
December 31, 1996 1997
------------------------------------------------ -------------------------- ------------------
<S> <C> <C>
Deferred tax assets:
Engine overhaul reserve $ 1,324 $ 1,489
Intangible assets 1,195 1,139
Revenue valuation reserves 1,362 746
Reserve for bad debts 265 150
Alternative minimum tax
credit 661 -
carryforwards
Deferred credits - 1,940
Other 358 715
----------------------------------------- ------ -------------------------- ------------------
Total deferred tax assets 5,165 6,179
Deferred tax liabilities:
Depreciation and amortization (1,935) (4,614)
Preoperating costs (90) (828)
Other - (49)
------------------------------------------ ----- -------------------------- ------------------
Total deferred tax liabilities (2,025) (5,491)
------------------------------------------ ----- -------------------------- ------------------
Net deferred income tax assets $ 3,140 $ 688
------------------------------------------ ----- -------------------------- ------------------
</TABLE>
No valuation allowance was established in either
1996 or 1997 as the Company believes that the
future realization of the deferred tax asset is
more likely than not.
The Tax Reform Act of 1986 enacted an alternative
minimum tax system, generally effective for
taxable years beginning after December 31, 1986.
The Company is not subject to alternative minimum
tax for the year ended December 31, 1997. An AMT
tax credit carryover of approximately $564,000 was
fully utilized in 1997.
The Company recorded a provision for income taxes
of approximately $500,000 for 1996, compared to a
provision for income taxes of approximately $12.3
million in 1997. The 1996 effective tax rate of
approximately 2.3% is significantly less than the
statutory federal and state rates due principally
to the full utilization of net operating loss
carryforwards and the elimination of the valuation
allowance. The 1997 effective tax rate of
approximately 46% is higher than the statutory
federal and state rates. The higher effective tax
reflects a more conservative approach to
estimating permanent differences between taxable
and book income.
10. Commitments Aircraft
As of December 31, 1997, the Company had a total
of 18 CRJs on order from Bombardier, Inc. The
initial order for 12 CRJs and 36 options was
placed on January 28, 1997. Options were
exercised on November 20, 1997 for an additional
six firm and six conditional CRJ deliveries. The
first five CRJs were delivered in the third and
fourth quarters of 1997. Nine deliveries are
scheduled in 1998 and nine deliveries are
scheduled in 1999. The capital cost to the
Company for these 18 deliveries is approximately
$166.5 million in 1998 and $166.5 million in
1999. As of December 31, 1997, the Company has
made $15 million of non-refundable aircraft
purchase deposits on these aircraft (see
Footnote 17, Subsequent Events).
The Company is exploring various third party
lease financing arrangements for future
aircraft. However, the Company has backup lease
financing arrangements or sufficient financing
support with the manufacturer such that the
Company believes it will be able to acquire the
aircraft at competitive rates. The Company
currently has an agreement in principle from a
third party for approximately $126 million in
debt financing associated with the purchase of
nine CRJ's to be delivered in 1998 and 1999.
In July 1997, the Company entered into a series
of interest rate swap contracts in the amount of
$39.8 million. The swaps were executed by
purchasing six contracts maturing between March
and September 1998 with Bombardier, Inc. as the
counter party. The interest rate hedge is
designed to limit approximately 50% of the
Company's exposure to interest rate changes
until permanent financing for its second six CRJ
aircraft, which are scheduled for delivery
between March and September 1998, is secured. At
December 31, 1997, had all contracts settled on
that date, the Company would have been obligated
to pay the counter party approximately $1.4
million. Gains or losses resulting from the
interest rate swap contracts will be deferred
until the contracts are settled.
Maintenance Facility
In June 1997, the Industrial Development
Authority of Loudoun County, Virginia ("IDA")
approved a $9.4 million tax exempt bond issuance
in connection with the Company's proposed
construction of a maintenance facility at
Washington-Dulles. These bonds were issued under
a variable interest rate structure for a
twenty-five year term including a requirement
for a monthly sinking fund provision, and are
collateralized by a $9.6 million letter of
credit issued on behalf of the Company by a
financial institution. The letter of credit is
collateralized by $4.9 million of the Company's
line of credit and the Company's leasehold deed
of trust on the maintenance facility. The
Company will be obligated to pay rent for the
facility and the underlying land leasehold, the
proceeds from which the IDA will make the
required interest and sinking fund payments. In
the event of a default, the Company would be
obligated to reimburse the financial institution
to the maximum amount of the letter of credit.
Annual rent is subject to escalation every five
years. In February 1998, the Company occupied
this building and began paying rent.
11. Restructuring Charges
In 1994 the Company commenced a major restructuring plan. The basis of
the plan was to simplify the fleet by eliminating the EMB-120
and Dash-8 aircraft fleets in conjunction with the elimination of
unprofitable routes, the consolidation of maintenance bases and other
cost saving measures. As a result, the Company established an $11
million reserve for restructuring costs in 1994. The Company reversed
$521,000 and $426,000 of reserves in 1995 and 1996, respectively.
There are no remaining reserves on the Company's balance sheet related
to the restructuring.
12. Litigation
The Company is a party to routine litigation incidental to its
business, none of which is likely to have a material effect on the
Company's financial position.
The Company is a party to an action pending in the United States District
Court for the Southern District of Ohio known as Peter J. Ryerson,
administrator of the estate of David Ryerson, v. Atlantic Coast
Airlines, Case No. C2-95-611. On March 10, 1997, the Court granted
Plaintiff's motion to the effect that liability would not be limited
to those damages available under the Warsaw Convention. The Company is
currently unable to estimate the monetary award, if any, resulting
from this litigation, but believes it remains fully covered under the
Company's insurance policy.
The Company is also a party to an action pending in the United States
Court of Appeals for the Fourth Circuit known as Afzal v. Atlantic
Coast Airlines, Inc. (No. 98-1011). This action is an appeal of the
December 1997 decision granted in favor of the Company in a case
claiming wrongful termination of employment brought in the United
States District Court for the Eastern District of Virginia known as
Afzal v. Atlantic Coast Airlines, Inc. (Civil Action No. 96-1537-A).
The Company does not expect the outcome of this case to have any
material adverse effect on its financial condition or results of its
operations.
13. Related Party Transactions
The Company paid approximately $25,000 for the year ended December 31,
1995 in consulting fees to The Acker Group, a Company
owned by one of the Company's officers/stockholders. The agreement
under which the fees were paid ended as of February 1995.
14. Financial Instruments
In December 1995, the Company adopted Statement of Financial
Accounting Standards No. 107, "Disclosure of Fair Value of
Financial Instruments" (SFAS 107). SFAS 107 requires the disclosure of
the fair value of financial instruments; however, this information
does not represent the aggregate net fair value of the Company. Some
of the information used to determine fair value is subjective and
judgmental in nature; therefore, fair value estimates, especially for
less marketable securities, may vary. The amounts actually realized or
paid upon settlement or maturity could be significantly different.
Unless quoted market price indicates otherwise, the fair values of
cash and cash equivalents and short term investments generally
approximate market because of the short maturity of these instruments.
The Company has estimated the fair value of long term debt based on
quoted market prices.
The estimated fair values of the Company's financial instruments, none
of which are held for trading purposes, are summarized as follows
(brackets denote liability):
<TABLE>
----------------------------------------------------------------------------------------------
(in thousands)
----------------------------------------------------------------------------------------------
December 31, 1996 December 31, 1997
<CAPTION>
------------------------------- ------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $21,470 $21,470 $39,167 $ 39,167
Short-term investments - - 10,737 10,737
Long-term debt (3,726) (3,912) (75,706) (120,125)
------------------------------ --------------- --------------- -------------- ----------------
</TABLE>
15. Supplemental Cash Flow Information
Year ended December 31, (in thousands)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C> <C>
- Interest $1,804 $ 883 $1,778
- Income taxes 190 1,319 5,767
------------------------------ --------------- -------------------- --------------------------
</TABLE>
The following non cash investing and financial
activities took place in 1995, 1996 and 1997:
In 1995, the Company acquired $2.3 million in
rotable parts under capital lease obligations
and by issuing notes. These purchases were
financed by suppliers.
In December 1995, the Company accrued dividends
of $335,000 on its Series A Cumulative
Convertible Preferred Stock (see Note 7).
In 1996, the Company acquired $1.2 million in
rotable parts, ground equipment, telephone
system upgrades and Director's and Officer's
Liability Insurance under capital lease
obligations and by issuing notes. These
purchases were financed by suppliers and
outside lenders.
In 1997, the Company acquired $2.9 million in
rotable parts, spare engines, market planning
software and other fixed assets and expendable
parts under capital lease obligations and
through the use of manufacturers credits. As of
December 31, 1997, there was a remaining
balance of $700,000 in unused manufacturer
credits which is reflected in prepaid expenses
and other current assets.
In November 1997, the Company received $4.3
million in additional manufacturers credits of
which $261,000 was received in cash by the end
of 1997 leaving a balance of $4.1 million due
from the manufacturer as of December 31, 1997.
Such amount has been classified as other
assets.
16. Year 2000 Compliance
The Company has started to review its computer systems and application
programs for year 2000 compliance. The Company believes
that the cost to modify any of its non-compliant systems or
applications will not have a material effect on its financial position
or results of its operations. However, the Company can not give any
assurances that the systems of other parties upon which the Company
must rely, will be year 2000 compliant on a timely basis. Examples of
systems operated by others that the Company may use and or rely upon
are: FAA Air Traffic Control, Computer Reservation Systems for travel
agent sales and United Airlines' reservation, passenger check in and
ticketing systems. The Company's business, financial condition and or
results of operations could be materially adversely affected by the
failure of its systems and applications or those operated by others.
17. Subsequent Events
In January 1998, holders of approximately $5.9 million face amount of
the 7% Convertible Subordinated Notes ("Notes") exercised their
option to convert the Notes into 330,413 shares of the Company's
common stock. On March 3, 1998, the Company notified the remaining
holders of the Notes that the Company was reducing the conversion
price in order to induce the Note holders to redeem their Notes for
common stock. The Note holders have until April 8, 1998 to accept the
Company's inducement. The Company will record a non-operating one time
charge for the fair value of the cost of the inducement. If all
holders of the Notes accept the Company's inducement, the fair value
of the cost of the inducement would be approximately $2.3 million.
In January 1998, the Company entered into a contract to purchase fuel
from United Aviation Fuels Company ("UAFC"), a wholly-owned subsidiary
of United Airlines during the period February through September 1998.
The Company has committed to purchase 33,000 barrels of fuel per month
during the term of this contract at a delivered price excluding taxes
and into plane fees of 52.2 cents per gallon. In March 1998, the
Company extended the contract through December 1998, committing to
purchase 33,000 barrels per month, October through December, at a
delivered price excluding taxes and into plane fees of 50.35 cents per
gallon. Fuel purchased under this arrangement represents approximately
46% of the Company's anticipated 1998 fuel requirements.
On March 4, 1998, the Company agreed to a one-year extension until
March 31, 1999 of its code sharing agreements with United Airlines,
Inc.
On March 4, 1998, the Company converted five conditional orders for
CRJ's into firm deliveries. With this change, the Company will take
delivery of nine CRJ's in 1998 and an additional nine in 1999. The
Company also has options for 25 additional CRJ's. The Company took
delivery under operating leases, one CRJ in January and one in March,
1998.
18. Recent Accounting
Pronouncements
Recently, the American Institute of Certified Public Accountants
issued a proposed statement of position on accounting for start-up
costs, including preoperating costs related to the introduction of new
fleet types by airlines. The proposed accounting guidelines would
require companies to expense start-up costs as incurred. The FASB
recently approved the proposed guidelines and they will take effect
for fiscal years beginning after December 15, 1998. The Company has
deferred certain start-up costs related to the introduction of the
CRJs and is amortizing such costs to expense ratably over four years.
The Company will be required to expense any unamortized amounts
remaining as of January 1, 1999. The Company estimates the remaining
unamortized balance for deferred start-up costs will be approximately
$1.4 million on January 1, 1999.
19. Selected
Quarterly
Financial Dat
(Unaudited)
<TABLE>
(in thousands, except per share amounts)
Quarter Ended
<CAPTION>
March 31, June 30, September 30, December 31,
1997 1997 1997 1997
<S> <C> <C> <C> <C>
Operating revenues $41,114 $53,220 $54,864 $56,246
Operating income 1,037 9,968 9,054 8,884
Net income 703 5,885 4,844 3,068
Net income per share
Basic $ 0.08 $ 0.69 $ 0.68 $ 0.43
Diluted $ 0.08 $ 0.67 $ 0.51 $ 0.34
Weighted average shares
outstanding 8,501 8,510 7,093 7,197
</TABLE>
<TABLE>
Quarter Ended
<CAPTION>
March 31, June 30, September 30, December 31,
1996 1996 1996 1996
<S> <C> <C> <C> <C>
Operating revenues $37,857 $50,366 $49,541 $44,720
Operating income 1,118 9,203 7,674 2,268
Net income 862 8,464 7,131 2,701
Net income per share
Basic $ 0.10 $ 1.00 $ 0.84 $ 0.32
Diluted $ 0.10 $ 0.96 $ 0.81 $ 0.31
Weighted average shares
outstanding 8,355 8,467 8,477 8,479
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Reference is hereby made to the Company's Form 8K Item 4. filed October
29, 1997.
PART III
The information required by this Part III (Items 10, 11, 12
and 13) is hereby incorporated by reference from the Company's definitive proxy
statement which is expected to be filed pursuant to Regulation 14A of the
Securities Exchange Act of 1934 not later than 120 days after the end of the
fiscal year covered by this report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
The Consolidated Financial Statements listed in the
index in Part II, Item 8, are filed as part of this
report.
2. Consolidated Financial Statement Schedules
Reference is hereby made to the Consolidated
Financial Statements and the Notes thereto included
in this filing in Part II, Item 8.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C>
3.1 (note 6) Restated Certificate of Incorporation of the Company.
3.1(a) (note 4) Certificate of Correction to the Restated Certificate of Incorporation.
3.2 (note 4) Restated By-laws of the Company.
4.1 (note 7) Specimen Common Stock Certificate.
4.2 (note 7) Stockholders' Agreement, effective as of October 15, 1991, among the Company, the stockholders and
the holder of warrants of the Company named on the signature pages thereto and a trust established
pursuant to the Atlantic Coast Airlines, Inc. Employee Stock Ownership Plan, together with Amendment
and Second Amendment thereto dated as of February 24, 1992 and May 1, 1992 respectively.
4.3 (note 7) Registration Rights Agreement, dated as of September 30, 1991,among the Company and the stockholders
named on the signature pages thereto(the "Stockholders Registration Rights Agreement").
4.4 (note 7) Form of amendment to the Stockholders Registration Rights Agreement.
4.17 (note 3) Indenture, dated as of July 2, 1997, between the Company and First Union National Bank of Virginia
4.18 (note 3) Registration Rights Agreement, dated as of July 2, 1997, by and among the Company, Alex. Brown & Sons
Incorporated and the Robinson-Humphrey Company, Inc.
10.1 (note 7) Atlantic Coast Airlines, Inc. 1992 Stock Option Plan.
10.2 (note 4) Restated Atlantic Coast Airlines, Inc. Employee Stock Ownership Plan, effective October 11, 1991, as
amended through December 31, 1996.
10.4 (note 4) Restated Atlantic Coast Airlines 401(k) Plan, as amended through February 3, 1997.
10.4(a) (note 1) Amendment to the Atlantic Coast Airlines 401(k) Plan effective May 1, 1997
10.6 (notes 7 & 8) United Express Agreement, dated October 1, 1991, among United Airlines, Inc., Atlantic Coast Airlines
and the Company, together with Amendment No. 1, dated as of April 1, 1993.
10.6(a) (note 1) Third Amendment to United Express Agreement, dated March 3, 1998, among United Airlines, Inc.,
Atlantic Coast Airlines and the Company.
10.7 (notes 7 & 8) Agreement to Lease British Aerospace Jetstream-41 Aircraft, dated December 23, 1992, between British
Aerospace, Inc. and Atlantic Coast Airlines.
10.12(b) (note 5) Amendment and Restated Severance Agreement, dated as of October 18, 1995 between the Company and
Kerry B. Skeen.
10.12(c) (note 4) First Amendment To Severance Agreement For Kerry B. Skeen effective as of October 16, 1996.
10.12(h) (note 4) Form of Severance Agreement. The Company has entered into substantially identical agreements with
Thomas J. Moore and with Michael S. Davis, both dated as of January 1, 1997, and with Paul H. Tate,
dated as of February 1, 1998.
10.13(a) (note 4) Form of Indemnity Agreement.The Company has entered into substantially identical agreements with the
individual members of its Board of Directors.
10.20 (note 6) Stock Purchase Agreement, dated the 30th day of December 1994, by and among JSX Capital Corporation,
Atlantic Coast Airlines, and Atlantic Coast Airlines, Inc.
10.21 (note 6) Acquisition Agreement, dated as of December 30, 1994, by and among Jetstream Aircraft, Inc., JSX
Capital Corporation, and Atlantic Coast Airlines.
10.21(a) (note 4) Amendment Number One to Acquisition Agreement, dated as of June 17, 1996, by and among Jetstream
Aircraft, Inc., JSX Capital Corporation, and Atlantic Coast Airlines.
10.23 (note 4) Loan and Security Agreement, dated as of October 12, 1995, between Atlantic Coast Airlines and
Shawmut Capital Corporation.
10.23(a) (note 1) First Amendment to Loan and Security Agreement dated June 1, 1997 among the Company, Atlantic Coast
Airlines, and Fleet Capital Corporation.
10.23(b) (note 1) Second Amendment to Loan and Security Agreement dated December 1, 1997 among the Company, Atlantic
Coast Airlines, and Fleet Capital Corporation.
10.24 (note 5) Stock Incentive Plan of 1995.
10.25 (note 5) Form of Incentive Stock Option Agreement. The Company enters into this agreement with employees who
have been granted incentive stock options pursuant to the Stock Incentive Plans.
10.26 (note 5) Form of Non-Qualified Stock Option Agreement. The Company enters into this agreement with employees
who have been granted non-qualified stock options pursuant to the Stock Incentive Plans.
10.27 (note 5) Split Dollar Agreement, dated as of December 29, 1995, between the Company and Kerry B. Skeen.
10.27(a) (note 4) Form of Split Dollar Agreement.The Company has entered into substantially identical agreements with
Thomas J. Moore and with Michael S.Davis,both dated as of July 1, 1996, and with Paul H. Tate, dated
as of February 1, 1998.
10.29 (note 5) Agreement of Assignment of Life Insurance Death Benefit As Collateral,dated as of December 29, 1995,
between the Company and Kerry B. Skeen.
10.29(a) (note 4) Form of Agreement of Assignment of Life Insurance
Death Benefit As Collateral. The Company has entered into
substantially identical agreements with Thomas J. Moore and with
Michael S. Davis, both dated as of July 1, 1996, and with Paul H.
Tate, dated as of February 1, 1998.
10.31 (note 4) Summary of Senior Management Bonus Program. The Company has adopted a plan in substantially the form
as outlined in this exhibit for 1998 and 1997.
10.32 (note 1) Summary of "Share the Success" Profit Sharing Plan. The Company has adopted a plan in substantially
this form for 1998, 1997 and 1996.
10.40 (notes 4 & 8) Purchase Agreement between Bombardier Inc. and Atlantic Coast Airlines Relating to the Purchase of
Canadair Regional Jet Aircraft dated
January 8, 1997.
10.50(a) (note 1) Form of Purchase Agreement, dated September 19, 1997, among the Company, Atlantic Coast Airlines,
Morgan Stanley & Co. Incorporated and First
National Bank of Maryland, as Trustee.
10.50(b) (note 1) Form of Pass Through Trust Agreement, dated as of September 25, 1997, among the Company, Atlantic
Coast Airlines, and First National Bank of Maryland, as Trustee.
10.50(c) (note 1) Form of Pass Through Trust Certificate.
10.50(d) (note 1) Form of Participation Agreement, dated as of September 30, 1997, Atlantic Coast Airlines, as Lessee
and Initial Owner Participant, State Street Bank and Trust Company of Connecticut, National
Association, as Owner Trustee, the First National Bank of Maryland, as Indenture Trustee,
Pass-Through Trustee, and Subordination Agent, including, as exhibits thereto, Form of Lease
Agreement, Form of Trust Indenture and Security Agreement, and Form of Trust Agreement.
10.50(e) (note 1) Guarantee, dated as of September 30, 1997, from the Company.
10.60 (note 4) Form of Lease Agreement between Atlantic Coast Airlines and Finova Capital Corporation. The Company
has entered into four substantially identical agreements during 1996 for four J-41 aircraft.
10.80 (note 1) Ground Lease Agreement Between The Metropolitan Washington Airports Authority And Atlantic Coast
Airlines dated as of June 23, 1997
10.90 (notes 1 & 8) Schedule and Exhibits to ISDA Master Agreement between the Company and Bombardier Inc. dated as of
July 11, 1997.
11.1 Computation of Per Share Income.
21.1 (note 7) Subsidiaries of the Company.
23.1 (note 1) Consent of KPMG Peat Marwick.
23.2 (note 1) Consent of BDO Seidman.
<FN>
Notes
(1) To be filed as an Amendment to this Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
(2) Filed as an Exhibit to the Amendment to the Annual Report on form 10-K/A filed on November 25, 1997, incorporated
herein by reference.
(3) Filed as an Exhibit to the Quarterly Report on Form 10-Q for the three month period ended June 30, 1997, incorporated
herein by reference.
(4) Filed as an Amendment to the Annual Report on Form 10-K for the fiscal year ended December 31, 1996, incorporated
herein by reference.
(5) Filed as an Exhibit to the Annual report on Form 10-K for the fiscal year ended December 31, 1995, incorporated herein
by reference.
(6) Filed as an Exhibit to the Annual Report on Form 10-K for the fiscal year ended December 31,1994, incorporated herein
by reference.
(7) Filed as an Exhibit to Form S-1, Registration No. 33-62206, effective July 20, 1993, incorporated herein by reference.
(8) Portions of this document have been omitted pursuant to a request for confidential treatment that has been granted.
Reports on Form 8-K.
--------------------------------------------- ------------------------------------------------------------
Date Subject
--------------------------------------------- ------------------------------------------------------------
October 6, 1997 Item 5. Other Events: Announcement of closing the sale
of $111.6 million of Pass Through Trust Certificates.
October 29, 1997 Item 4. Change in Registrant's Certifying Accountants.
--------------------------------------------- ------------------------------------------------------------
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on
March 16, 1998.
ATLANTIC COAST AIRLINES, INC.
/S/
By: _________________________
C. Edward Acker
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 16, 1998.
Name Title
/S/ Chairman of the Board of Directors
- ---------------------------------------------------
C. Edward Acker
/S/ Director, President
- --------------------------------------------------- and Chief Executive Officer
Kerry B. Skeen (principal executive officer)
/S/ Director, Executive Vice President
- --------------------------------------------------- and Chief Operating Officer
Thomas J. Moore
/S/ Senior Vice President, Treasurer and
- --------------------------------------------------- Chief Financial Officer
Paul H. Tate (principal financial officer)
/S/ Vice President, Financial Planning and Controller
- --------------------------------------------------- (principal accounting officer)
David W. Asai
/S/ /S/
- --------------------------------------------------- -----------------------------------------------------------
John Sullivan Susan M. Coughlin
Director Director
/S/ /S/
- --------------------------------------------------- -----------------------------------------------------------
Robert Buchanan James Kerley
Director Director
/S/ /S/
- --------------------------------------------------- -----------------------------------------------------------
Joseph Elsbury James Miller
Director Director
</FN>
</TABLE>
<TABLE>
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE INCOME
(in thousands, except for earnings per share data)
1995 1996 1997
<CAPTION>
Basic Diluted Basic Diluted Basic Diluted
- ------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Share calculation:
Average number of common shares
outstanding 8,342 8,342 8,481 8,481 7,824 7,824
Common stock equivalents due to
assumed exercise of options - 414 - 311 - 350
Common stock equivalents due to
assumed conversion of - 546 - 128 - -
preferred stock
Common stock equivalents due to
assumed conversion of - 568 - - - 1,582
convertible debt
------------- ------------- ------------- ------------- ------------- -------------
Total common shares and common
stock equivalents 8,342 9,871 8,481 8,920 7,824 9,756
- ------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Adjustments to net income:
Net income $ 12,902 $ 12,902 $ 19,158 $ 19,158 $ 14,500 $ 14,500
Less: Preferred dividend
requirements based on average (335) - (64) - - -
number of preferred shares
Less: Interest expense net of tax - 237 - - - 1,187
- ------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
Net income available to common $ 12,567 $ 13,139 $ 19,094 $ 19,158 $ 14,500 $ 15,686
shareholders
Income per share $ 1.51 $ $ $ $ 1.85 $ 1.61
1.33 2.25 2.15
- ------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000904020
<NAME> ATLANTIC COAST AIRLINES, INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1.000
<CASH> 39,167
<SECURITIES> 10,737
<RECEIVABLES> 21,890
<ALLOWANCES> (269)
<INVENTORY> 2,477
<CURRENT-ASSETS> 76,857
<PP&E> 49,364
<DEPRECIATION> (8,726)
<TOTAL-ASSETS> 148,992
<CURRENT-LIABILITIES> 31,680
<BONDS> 73,855
0
0
<COMMON> 40,471
<OTHER-SE> (5,666)
<TOTAL-LIABILITY-AND-EQUITY> 148,992
<SALES> 202,540
<TOTAL-REVENUES> 205,444
<CGS> 176,501
<TOTAL-COSTS> 176,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,450
<INCOME-PRETAX> 26,839
<INCOME-TAX> 12,339
<INCOME-CONTINUING> 14,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,500
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.61
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 10.4(a)
AMENDMENT TO THE
ATLANTIC COAST AIRLINES 401(k) PLAN
Effective May 1 1997 Atlantic Coast Airlines 401(k) Plan -- Adoption Agreement
Section E3 is hereby amended to incorporate the following:
E3 EMPLOYER'S MATCHING CONTRIBUTION (Plan Section 4.1)
Determination of Matching Contribution
[ ] N/A. There shall be no matching contributions.
[X] The Employer shall make matching contirbtions equal to 25% of the
Participant's salary reductions.
[ ] The Employer may make a discretionary matching contribution equal
to a percentage of the Participant's salary reductions.
Limits on Matching Contribution
[ ] N/A. There will not be a limit on the matching contribution.
[X] In determining matching contributions, only salary reductions up to 4% of
a Participant's Compensation will be matched.
[ ] The matching contribution allocated to a Participant for any plan year shall not
exceed $_____.
Participants Eligible for Matching Contributions
[ ] N/A. There will not be a matching contribution.
[ ] Matching contibutions shall be made to all Participants.
[ ] Matching contributions shall be made to only Non-Highly Compensated
Employees.
[X] Matching contributions shall be made to only Non--Union Employees and Pilots.
Service requirement for plan years beginning after 1989
[ ] N/A. There will not be a matching contribution.
[ ] A Year of Service shall be required to share in a matching contribution.
[ ] 500 Hours of Service shall be required to share in a matching contirbution.
[ X] A Year of Service shall not be required to share in a matching
contribution.
Service requirement for plan years beginning before 1990
[X] N/A, New Plan, or same as years beginning after 1989.
[ ] A Year of Service shall be required to share in a matching contribution.
[ ] A Year of Service shall not be required to share in a matching
contribution.
Vesting of Matching Contributions
[X] Matching contributions shall be subject to the vesting schedule for
Employer Contributions.
[ ] Matching contributions shall be 100% vested at all times.
[ ] Other _____________________
Deferral Percentage Tests
[ ] N/A. There will not be matching contribution.
[X] Matching contributions shall not be used in satisfying the deferral
percentage tests.
[ ] Matching contributions may be used in satisfying the deferral percentage
tests. (If used, full vesting and restrictions on withdrawals will apply, and the match will
be deemed an Elective Contribution).
Accepted By: ____________/s/______________
Atlantic Coasts Airlines
Date: _______June 28, 1997________________
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 10.6(a)
March 3, 1998
United Air Lines, Inc.
P.O. Box 66100
Chicago, IL 60666
Attn: Tom Hanley
Re: Third Amendment to United Express Agreement between United Air Lines, Inc. ("United"), Atlantic
Coast Airlines and Atlantic Coast Airlines, Inc. (collectively, "ACAI") dated October 1, 1991
as amended as of April 1, 1993 and as of October 14, 1994 (said agreement, as amended, the
"United Express Agreement")
Dear Tom:
This letter is intended to confirm our understanding with respect to
matters contained herein and, when countersigned by you, will constitute an
amendment to the United Express Agreement.
The parties agree that the term of the United Express Agreement be and
hereby is extended such that the United Express Agreement will continue in
effect through March 31, 1999 unless it is terminated at an earlier date
pursuant to one or more of the provisions contained therein.
United further agrees that ACAI is authorized to operate up to 23
regional jet aircraft, 50-seat capacity, as United Express under the terms of
the United Express Agreement. ACAI agrees that it will work with United to
facilitate aircraft 23 to be transferred to another United Express operator as
part of the initial allotment of 30 regional jets provided by the United ALPA
agreement. In that case, a 23rd aircraft would be made available to ACAI as the
first aircraft in the next allotment. The deployment of any regional jet
operated by ACAI must be approved on a city pair by city pair basis.
We would appreciate United's signature below to confirm its agreement
to the terms outlined herein.
Very truly yours,
ATLANTIC COAST AIRLINES, INC.
ATLANTIC COAST AIRLINES
By:_____________________________
Kerry B. Skeen,
President & Chief Executive Officer
Accepted and Agreed:
UNITED AIR LINES, INC.
By:____________________
Date: March 3, 1998
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.23(a)
FIRST AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment"),
dated as of the 1st day of June, 1997, made by and between
FLEET CAPITAL CORPORATION, a Rhode Island corporation (successor by
merger with Fleet Capital Corporation, a Connecticut corporation, which was
formerly known as Shawmut Capital Corporation) (the "Lender"),
ATLANTIC COAST AIRLINES, a California corporation (the "Borrower"), and
ATLANTIC COAST AIRLINES, INC., a Delaware corporation (the "Parent";
the Borrower and the Parent being collectively called the "Loan Parties");
to the Loan and Security Agreement, dated October 12, 1995 (the "Loan
Agreement"). All capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Loan Agreement.
RECITALS
RECITALS RECITALS
A. Pursuant to the Loan Agreement, and upon the terms and subject to
the conditions contained therein, the Lender has made available to the Borrower
a $20,000,000 revolving line of credit evidenced by the Loan Agreement.
B. The Industrial Development Authority of Loudoun County, Virginia
(the "Issuer") pursuant to an Indenture of Trust, dated of even date herewith
("Indenture"), between the Issuer and FMB Trust Company, National Association,
as trustee (the "Bond Trustee"), has agreed to issue $9,425,000 in aggregate
principal amount of the Issuer's Variable Rate Demand/Fixed Rate Revenue Bonds
(Atlantic Coast Airlines Project) Series 1997 (the "Bonds").
C. Pursuant to a Financing Agreement (the "Bond Loan Agreement"), dated
of even date herewith, between the Issuer and the Borrower, the proceeds of the
sale of the Bonds will be used by the Borrower for the purpose of financing the
cost of construction of a maintenance facility and associated access roadway,
vehicle parking and maneuvering areas and aircraft paving aprons on land
controlled by the Metropolitan Washington Airports Authority (the "Authority")
and forming part of the Washington Dulles International Airport which is leased
by the Authority to the Borrower pursuant to a Ground Lease Agreement, dated
June 23, 1997 (the "Lease").
<PAGE>
24
D. Pursuant to a Letter of Credit and Reimbursement Agreement, dated of
even date herewith (the "Reimbursement Agreement"), among Fleet National Bank
(the "Bank"), the Lender and the Borrower, the Borrower has requested the Bank
to issue its irrevocable, transferable direct-pay letter of credit in
substantially the form of Exhibit A to the Reimbursement Agreement (the "Bond
Letter of Credit"), in the original undrawn amount of $9,579,932.
E. In order to induce the Bank to issue the Bond Letter of Credit, the
Bank has required that the Lender join in the execution of the Reimbursement
Agreement and guaranty the reimbursement and other obligations owing by the
Borrower to the Bank thereunder.
F. The Loan Parties have each requested that the Lender join in the
execution of the Reimbursement Agreement and guaranty the reimbursement and
other obligations of the Borrower thereunder, and the Lender has agreed to such
request, provided, among other things, the Loan Agreement and the other Loan
Documents are amended as herein provided.
G. To accomplish the foregoing purposes, the parties hereto are
mutually desirous of amending the Loan Agreement as set forth herein .
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the Loan Parties and the Lender hereby agree as follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended as follows:
1.1 Credit Facility. Section 1, Credit Facility, is amended by adding the following Section 1.4 at
--------------- ---------------
the end thereof:
"1.4. Letters of Credit; Letter of Credit Guaranties.
1.4.1 Issuance of Letters of Credit and Letter of
Credit Guaranties. Lender agrees, for so long as no Default or Event of
Default exists and subject to the provisions of Section 9 below, to
issue its, or cause to be issued its Affiliate's, Letters of Credit and
Letter of Credit Guaranties, provided that the aggregate amount of the
Letter of Credit Obligations outstanding at any time shall not exceed
$10,500,000 and, without the prior written consent of Lender, no Letter
of Credit or Letter of Credit Guaranty may have an expiration date that
is after the last day of the Original Term or the then applicable
Renewal Term.
<PAGE>
1.4.2 Reimbursement Obligations. All indebtedness,
liabilities or obligations whatsoever arising or incurred in connection
with any Letter of Credit or Letter of Credit Guaranty shall be
incurred solely as an accommodation to Borrower and for Borrower's
account. Borrower shall reimburse Lender for the total amount of all
sums paid by Lender under the terms of any Letter of Credit or Letter
of Credit Guaranty, any drawing or demand under any Letter of Credit or
Letter of Credit Guaranty, or any additional or further liability which
may accrue against Lender in connection with a Letter of Credit or
Letter of Credit Guaranty, immediately upon the date of payment by
Lender (either with the proceeds of a Revolver Loan obtained hereunder
or otherwise). If Borrower shall fail to reimburse Lender as provided
herein, the unreimbursed amount of such payment by Lender shall bear
interest, compounded monthly, at a per annum rate equal to the same
rate applicable to the Revolver Loans until such amount is paid in
full. The reimbursement obligations of Borrower hereunder shall be
absolute and unconditional under all circumstances irrespective of any
rights of set-off, counterclaim or defense to payment Borrower may
claim or have against Lender, the beneficiary of the Letter of Credit
or the Letter of Credit Guaranty drawn upon or any other Person,
including, without limitation, (i) any defense based on any failure of
Borrower to receive consideration, (ii) the legality, validity,
regularity or unenforceability of the Letter of Credit or Letter of
Credit Guaranty or any agreement or instrument related thereto, (iii)
any amendment or waiver of any consent to departure from the terms of
the Letter of Credit or any Letter of Credit Guaranty or any agreement
or instrument related thereto, (iv) any statement, draft or other
document presented under a Letter of Credit or Letter of Credit
Guaranty proving to be forged, fraudulent, invalid or insufficient in
any respect, or any statement therein being untrue or inaccurate in any
respect whatsoever, except if resulting from Lender's gross negligence
in accepting any such forged or fraudulent draft or document, (v) the
surrender or impairment of any Collateral, or (vi) the existence of any
claim, setoff, defense or other right which Borrower may have against
the beneficiary of a Letter of Credit or Letter of Credit Guaranty or
any other Person, whether in connection with any of the agreements or
documents related thereto or otherwise.
<PAGE>
1.4.3 Rights and Remedies. In the event of Borrower's failure
to reimburse Lender for the total amount of all sums paid by Lender
under the terms of any Letter of Credit or Letter of Credit Guaranty,
any drawing or demand under any Letter of Credit or Letter of Credit
Guaranty or any additional or further liability which may accrue
against Lender in connection therewith, Lender, in addition to its
rights under the Code and under this Agreement, shall be fully
subrogated to the rights of the issuer of the Letter of Credit under
the agreement made with Borrower relating to the issuance of such
Letter of Credit, each such agreement being incorporated herein by
reference, and Lender shall be entitled to exercise all such rights and
remedies thereunder and under law in such regard as fully as if it were
the issuer of the Letter of Credit. If any Letter of Credit is drawn
upon to discharge any obligation of Borrower to the beneficiary of such
Letter of Credit, in whole or in part, Lender shall be fully subrogated
to the rights of such beneficiary with respect to the obligation of
Borrower to such beneficiary to the extent discharged with the proceeds
of such Letter of Credit.
1.4.4 Indemnification. Borrower hereby unconditionally agrees
to indemnify Lender and hold Lender harmless from any and all losses,
claims or liabilities arising from any transactions or occurrences
relating to the Letters of Credit or the Letter of Credit Guaranties
issued, established, opened or accepted for Borrower's account, and any
drafts or acceptances thereunder, and all Letter of Credit Obligations
incurred in connection therewith. This indemnity shall survive the
payment in full of all amounts payable to Lender hereunder and the
termination of this Agreement.
1.4.5 Termination. In the event that this Agreement is
terminated for any reason by either party as herein provided, in
addition to Lender's other rights under this Agreement, unless all
outstanding Letters of Credit and Letter of Credit Guaranties are
terminated or cancelled and Lender and its Affiliates released from all
liability thereunder, Lender shall be entitled to pay and discharge all
Letter of Credit Obligations with respect to all outstanding Letters of
Credit and Letter of Credit Guaranties which are not terminated or
cancelled, whether such Letter of Credit Obligations are absolute or
contingent, and all sums paid by Lender in connection therewith shall
be deemed to have been loaned by Lender to Borrower as a Revolver Loan,
shall be secured by all of the Collateral and shall bear interest and
be payable at the same rate and in the same manner as Revolver Loans."
1.2 Letter of Credit and Letter of Credit Guaranty Fees. Section 2.2, Fees, is amended by
adding the following Sections 2.2.3 and 2.2.4 at the end thereof:
"2.2.3. Letter of Credit and Letter of Credit Guaranty Fees. Borrower shall pay the
following fees for all Letters of Credit and Letter of Credit Guaranties issued by Lender and
its Affiliates pursuant to Section 1.4.1 hereof:
(i) Upon issuance of the Bond Letter of Credit and
the Bond Letter of Credit Guaranty, fees to Bank in the
amounts and on the dates as set forth in Section 2.03 of the
Reimbursement Agreement;
(ii) Upon issuance of each other Letter of Credit and
Letter of Credit Guaranty:
<PAGE>
Consolidated Adjusted Net
Earnings From Operations Per Annum Fee
(a) an issuance fee to Lender for the
account of both Lender and its Affiliate that issues
such other Letter of Credit equal to the greater of
(a) $500 or (b) three percent (3%) per annum (or such
lesser percentage as Lender shall, in the exercise of
its sole discretion, agree in writing at or before
the date of issuance) of the undrawn amount of such
Letter of Credit, payable in advance upon the
issuance of each other Letter of Credit and Letter of
Credit Guaranty and on each extension of the stated
termination date thereof for so long as such other
Letter of Credit and Letter of Credit Guaranty is
outstanding; and
(b) the reasonable and customary charges
from time to time of the issuer of such other Letter
of Credit with respect to the issuance, notification,
amendment, transfer, administration, cancellation and
conversion of, and drawings under, such other Letter
of Credit, all of which shall be payable to Lender
for the account of such issuer.
All issuance fees in connection with each Letter of Credit and
Letter of Credit Guaranty as set forth in Sections 2.2.3 (i)(a) and
(ii)(a) hereof shall be deemed fully earned upon the issuance of the
Letter of Credit and Letter of Credit Guaranty and shall not be subject
to rebate or proration upon the termination of this Agreement for any
reason.
2.2.4 Interest on Unpaid Fees. Any amount of fees payable by
Borrower to Lender that is not paid when due shall bear interest, from
the date such amount of fees was due until the date of payment in full,
at the rate applicable to the Revolver Loans outstanding, payable upon
demand and on the date of payment in full."
1.3 Loan Requests. Section 3.1.1, Loan Requests, is amended by deleting
subsection (ii) in its entirety and by substituting in lieu thereof the
following:
<PAGE>
"(ii) Unless payment is otherwise timely made by Borrower, the
becoming due of any amount required to be paid under this Agreement or
any of the other Loan Documents, or under the Reimbursement Agreement,
whether as principal, accrued interest, fees, expenses or other
charges, including, without limitation, payments required to be made
pursuant to Section 1.4.2 hereof and payments required to be made to
Bank pursuant to Section 2.3 of the Reimbursement Agreement, shall be
deemed irrevocably to be a request by Borrower for a Revolver Loan on
the due date of, and in an aggregate amount required to pay, such
principal, accrued interest, fees, expenses or other charges, and the
proceeds of each such Revolver Loan may be disbursed by Lender by way
of direct payment of the relevant Obligation. Within a reasonable time
after the payment by Lender of any expenses or other charges that are
not of a routine or administrative nature, Lender shall give Borrower
notice thereof and send to Borrower (if available to Lender) any
invoice or other supporting documentation for such fee or other
charge."
1.4 Cash Collateral Account. Section 3.2, Payments, is amended by adding a new Section 3.2.4,
Cash Collateral Account, as follows:
"3.2.4 Cash Collateral Account. If at any time the Net
Accounts Availability, when added to the amount of funds then on
deposit in the Cash Collateral Account, is less than the amount of the
Availability Reserve, then Borrower shall immediately pay to Lender, on
Lender's demand, an amount equal to the difference to be held by Lender
in the Cash Collateral Account as security for the Obligations. If at
any time the amount of funds on deposit in the Cash Collateral Account,
when added to the Net Accounts Availability at such time, is more than
the Availability Reserve, then Lender shall release to Borrower that
portion of the funds then on deposit in the Cash Collateral Account
equal to such excess, if, and only to the extent that, immediately
before and after giving effect to such release, no Default, Event of
Default or Overadvance Condition has occurred and continues to exist."
1.5 Term of Agreement. Section 4.1, Term of Agreement, is amended in its entirety to read as
------------------ ------------------
follows:
"4.1 Term of Agreement. Subject to Lender's right to cease
making Loans to Borrower upon or after the occurrence of any Default or
Event of Default, this Agreement shall be in effect from the Closing
Date through and including September 30, 2000 (the "Original Term"),
and this Agreement shall automatically renew itself for one (1) year
periods thereafter (each a "Renewal Term"), unless terminated as
provided in Section 4.2 hereof."
1.6 Termination Charges. Section 4.2.4, Termination Charges, is amended in its entirety to read
as follows:
<PAGE>
"4.2.4 Termination Charges. On the effective date of termination of
--------------------
this Agreement for any reason, Borrower shall pay to Lender
(in addition to the then outstanding principal, accrued
interest and other charges owing under the terms of this
Agreement and any of the other Loan Documents) as liquidated
damages for the loss of the bargain and not as a penalty, an
amount equal to the product obtained by multiplying the
highest of the Average Monthly Loan Balance during the
immediately preceding 12-month period ending with the month
immediately preceding the date of such termination, times
-----
one percent (1%) if termination occurs at any time during
the Original Term on or before September 30, 1998, and
one-half of one percent (0.50%) if termination occurs at any
time thereafter during the Original Term or during any
Renewal Term; provided, however, in the event that Borrower
-------- -------
pays any amounts to Lender pursuant to Section 2.7 of this
Agreement as a result of a determination by Lender that such
payment is required thereunder, Borrower may, within ninety
(90) days after Lender's giving Borrower written demand for
payment of any such amount, terminate this Agreement without
the payment of any termination fee; and provided further in
--- -------- -------
the event that the credit rating of Bank as established by
Standard and Poor's, Inc. shall at any time while the Bond
Letter of Credit is outstanding fall below an "a" rating,
and, as a result of such reduced credit rating, the variable
interest rate on the Bonds thereafter remarketed by the
Remarketing Agent shall be increased, as confirmed by the
written certification of the Remarketing Agent delivered to
Lender, Borrower may, within one hundred twenty (120) days
after the increase of the interest rate on the Bonds
remarketed by the Remarketing Agent, terminate this
Agreement and the foregoing termination charge shall be one
percent (1%) of the Average Monthly Revolver Loan Balance
during the immediately preceding 12-month period ending with
the month immediately preceding the date of such
termination. If termination occurs on the last day of the
Original Term or any Renewal Term, no termination charge
shall be payable."
1.7 Affirmative Covenants. Section 8.1, Affirmative Covenants, is amended by adding a new
Section 8.1.9 at the end thereof as follows:
"8.1.9 Completion of Improvements. Cause the construction of
the Improvements to be carried on continuously and to complete the
Improvements not later than the time required therefor as required by
the terms of the Lease. The Improvements will be constructed
substantially in accordance with the plans and specifications, all
applicable ordinances and statutes and in accordance with the
requirements of all regularly constituted authorities having
jurisdiction over the same. The Improvements will be constructed
entirely on the Realty and will not encroach upon or overhang any
easement or right of way, nor upon any land not leased under the Lease,
and the Improvements when erected shall be wholly within the building
restriction lines, however established, and will not violate applicable
use or other restrictions contained in prior conveyances or applicable
protective covenants or restrictions. Borrower will promptly correct
any structural defect in the Improvements or any departure in any
material respect from the plans and specifications not previously
approved by Lender. Upon the completion of the construction of all of
the Improvements:
(i) Borrower shall furnish to Lender an approved
written certification of completion from Borrower's architect
in the form previously approved by Lender and such architect;
<PAGE>
(ii) Borrower shall furnish such certificates of
public officials, utility companies, and others as Lender may
reasonably request certifying that the Improvements located on
the Realty is connected to public sewer, public water and
public electricity lines;
(iii) Borrower shall furnish to Lender a copy of the
certificate (or certificates) of occupancy, compliance or
completion issued by the governmental authority having
jurisdiction over the Realty with respect to all of the
Improvements to be constructed upon the Realty;
(iv) Borrower shall furnish to Lender for Lender's
approval, a current "as-built" survey of the Realty and the
Improvements which shall show no matters which would
materially and adversely affect the operation of the
Improvements as a maintenance facility or materially and
adversely affect the value of the Improvements;
(v) Borrower shall have fully paid all costs and
expenses of the construction and development of the
Improvements and Borrower shall furnish to Lender a
satisfactory endorsement to Lender's title insurance policy
through the date of completion of the Improvements and the
payment in full of all costs and expenses of construction in
providing coverage against materialman's and mechanics' liens
and against matters of survey; and
(vi) Borrower shall furnish to Lender certified
copies of Borrower's casualty insurance policies with respect
to the Improvements located on the Realty, together with loss
payable endorsements on Lender's standard form of loss payee
endorsement naming Lender as loss payee in accordance with the
provisions of this Agreement."
1.8 Specific Financial Covenants. Section 8.3, Specific Financial Covenants, is amended in its
entirety to read as follows:
"8.3. Specific Financial Covenants. During the term of this
Agreement, and thereafter for so long as there are any Obligations to
Lender, each Loan Party covenants that, unless otherwise consented to
by Lender in writing, it shall comply with the following financial
covenants:
<PAGE>
8.3.1 Consolidated Adjusted Tangible Net Worth. The
Consolidated Adjusted Tangible Net Worth of the Loan Parties
shall not be less than the amount shown below as of the date
and for the period set forth below:
<PAGE>
Consolidated Adjusted
Date or Period Tangible Net Worth
<PAGE>
Fiscal quarter ended March 31, $30,000,000
1997
Fiscal quarter ended June 30, 1997 $34,250,000
Fiscal quarter ended September $38,000,000
30, 1997
Fiscal year ended December 31, $39,000,000
1997
Fiscal quarter ended March 31, $36,500,000
1998
Fiscal quarter ended June 30, 1998 $42,750,000
Fiscal quarter ended September $48,750,000
30, 1998
Fiscal year ended December 31, $53,250,000
1998
Fiscal quarter ended March 31, $51,000,000
1999
Fiscal quarter ended June 30, 1999 $56,500,000
<PAGE>
Consolidated Adjusted
Date or Period Tangible Net Worth
Fiscal quarter ended September $63,000,000
30, 1999
Fiscal year ended December 31, $65,000,000
1999 and end of each fiscal
quarter of each fiscal year
thereafter
<PAGE>
Provided, however, that the minimum amount of
Consolidated Adjusted Tangible Net Worth required to be
maintained by the Loan Parties as set forth above shall be
reduced to the extent that any of the proceeds of the
Subordinated Debt Offering are used contemporaneously from the
issuance thereof for the redemption of any Securities of the
Parent which are excluded from the definition of a
Distribution and therefore permitted to be made by the Loan
Parties pursuant to Section 8.2.5 of this Agreement.
8.3.2 Profitability. The Consolidated Adjusted Net
Earnings from Operations of the Loan Parties shall not be less
than the amount shown below for the period corresponding
thereto:
<PAGE>
Consolidated Adjusted Net
Period Earnings From Operations
First fiscal quarter ended March $ 700,000
31, 1997
First two fiscal quarters ended $ 5,100,000
June 30, 1997
First three fiscal quarters ended $ 8,750,000
September 30, 1997
Consolidated Adjusted Net
Period Earnings From Operations
<PAGE>
Fiscal year ended December 31, 1997
$10,000,000First fiscal quarter ($ 2,750,000)
ended March 31, 1998 and first
fiscal quarter ended of each
fiscal year thereafter
First two fiscal quarters ended $ 3,750,000
June 30, 1998 and the first two
fiscal quarters ended of each
fiscal year thereafter
First three fiscal quarters ended $10,000,000
September 30, 1998 and the first
three fiscal quarters ended of
each fiscal year thereafter
Fiscal year ended December 31, $13,000,000
1998 and each fiscal year
thereafter
<PAGE>
8.3.3 Consolidated Debt Service Coverage Ratio. The
Consolidated Debt Service Coverage Ratio of the Loan Parties shall not
be less that the ratio shown below for the period corresponding
thereto:
<PAGE>
Consolidated Debt Service
Period Coverage Ratio
Fiscal quarter ended March 31, 1997 1.50 to 1.0
First two fiscal quarters ended 1.75 to 1.0
June 30, 1997
First three fiscal quarters ended 2.50 to 1.0
September 30, 1997
Fiscal year ended December 31, 1997 2.50 to 1.0
<PAGE>
Consolidated Debt Service
Period
Coverage RatioFirst fiscal Negative 5.00 to 1.0
---------------
quarter ended March 31, 1998 and
the first fiscal quarter of each
fiscal year thereafter
First two fiscal quarters ended 2.00 to 1.0
June 30, 1998 and the first two
fiscal quarters of each fiscal
year thereafter
First three fiscal quarters ended 2.50 to 1.0
September 30, 1998 and the first
three fiscal quarters of each
fiscal year thereafter
Fiscal year ended December 31, 2.50 to 1.0
1998 and each fiscal year
thereafter
<PAGE>
8.3.4 Capital Expenditures. The Loan Parties shall not make
Capital Expenditures (including, without limitation, by way of
capitalized leases) which, in the aggregate exceed the amount shown
below for the period corresponding thereto:
<PAGE>
Period Capital Expenditures
Fiscal year ended December 31, 1997 $12,000,000
Fiscal year December 31, 1998 $ 7,000,000
Fiscal year December 31, 1998 and $ 9,500,000
each fiscal year thereafter
<PAGE>
provided, however, there shall be excluded from the foregoing
calculation the aggregate amount of Capital Expenditures made by
Borrower with the proceeds of the Bonds; and provided further that any
Capital Expenditures permitted to be incurred during the fiscal year
ending December 31, 1997 or any subsequent fiscal year and which are
not incurred during such fiscal year may be carried over and incurred
in the following fiscal year (but not in any subsequent fiscal year).
<PAGE>
1.9 Conditions Precedent. Section 9, Conditions Precedent, is amended as follows:
(i) Section 9.2, Conditions Precedent to All Revolver Loans,
is amended by deleting the first paragraph thereof in its entirety and by
substituting in lieu thereof the following:
"9.2 Conditions Precedent to All Revolver Loans, Letters of
Credit and Letter of Credit Guaranties. Notwithstanding any of the
provisions of this Agreement or the other Loan Documents, and without
affecting in any manner the rights of Lender under the other sections
of this Agreement, it is understood and agreed that Lender will have no
obligation to make any Revolver Loan (including the initial Revolver
Loan) or issue or cause its Affiliate to issue any Letter of Credit or
Letter of Credit Guaranty unless and until, in addition to the
conditions set forth in Sections 9.1 and 9.3, each of the following
conditions has been and continue to be satisfied:"
(ii) Section 9.3, Waiver of Conditions Precedent, is amended
by deleting in line 2 the phrase "Sections 9.1 and 9.2 hereof" and by
substituting in lieu thereof the phrase "Sections 9.1, 9.2 and 9.4 hereof".
(iii) A new Section 9.4, Conditions Precedent to Issuance of
Bond Letter of Credit Guaranty, is added as follows:
"9.4. Conditions Precedent to Issuance of Bond Letter of
Credit Guaranty. Notwithstanding any other provision of this Agreement
or the other Loan Documents, and without affecting in any manner the
rights of Lender under the other sections of this Agreement, it is
understood and agreed that Lender shall have no obligation under
Section 1.4 of this Agreement to issue or cause its Affiliate to issue
the Bond Letter of Credit or the Bond Letter of Credit Guaranty on the
Bond Letter of Credit Closing Date unless and until, in addition to
each of the conditions elsewhere set forth in this Section 9, each of
the following conditions shall have been satisfied, all in form and
substance satisfactory to Lender and its counsel;
9.4.1 Documentation. Lender shall have received the
following documents, each to be in form and substance satisfactory to
Lender and its counsel:
<PAGE>
(i) A closing certificate signed by an
officer of each of the Loan Parties, dated as of the Bond
Letter of Credit Closing Date, stating that (a) the
representations and warranties of the Loan Parties set forth
in this Agreement and the other Loan Documents are true and
correct on and as of such date, (b) each of the Loan Parties
is on such date in compliance with all of the terms and
provisions set forth in this Agreement and the other Loan
Documents, and (c) no Default or Event of Default exists;
(ii) Copies of each of the Bond Documents duly executed by the
parties thereto;
(iii) The Deed of Trust, duly recorded with
all fees and taxes thereon, if any, paid;
(iv) A policy of title insurance, including,
without limitation, revolving credit, variable rate,
comprehensive, zoning and last dollar endorsements, issued by
a title insurance company satisfactory to Lender, with all
premiums thereon paid, insuring that the Deed of Trust
constitutes a valid and enforceable first priority Lien upon
Borrower's leasehold estate in the Realty encumbered thereby,
free and clear of all title defects and encumbrances
whatsoever other than Permitted Liens applicable thereto;
(v) A foundation survey of the Realty
showing no deed, building line, easement or any other property
covenant or ordinance violation whatsoever;
(vi) A phase 1 environmental site assessment
relating to the Realty, together with a reliance letter
addressed to Lender allowing Lender to rely on such
assessment;
(viii) UCC financing statements, duly
executed by Borrower and filed in all jurisdictions necessary
or appropriate to perfect the Lien of Lender in the personal
property encumbered by the Deed of Trust;
(ix) A certificate of the Secretary of
Borrower, certifying (i) that attached thereto is a true and
complete copy of the resolutions adopted by the board of
directors of Borrower authorizing the execution, delivery and
performance of the First Amendment to this Agreement and the
other Loan Documents executed in connection therewith, and the
consummation of the transactions contemplated by the Bond
Documents, and (ii) as to the incumbency and genuineness of
the signatures of each officer of Borrower executing the First
Amendment to this Agreement and the other Loan Documents
contemplated thereby;
<PAGE>
(x) A certificate of the Secretary of
Parent, certifying (i) that attached thereto is a true and
complete copy of the resolutions adopted by the board of
directors of Parent authorizing the execution, delivery and
performance of the First Amendment to this Agreement and the
other Loan Documents executed in connection therewith, and the
consummation of the transactions contemplated by the Bond
Documents, and (ii) as to the incumbency and genuineness of
the signatures of each officer of Parent executing the First
Amendment to this Agreement and the other Loan Documents
contemplated thereby;
(xi) Receipt by Lender of an opinion of counsel to the Loan
Parties; and
(xii) Such other instruments, documents,
certificates, opinions or assurances as Lender or its counsel
may reasonably request in connection with the issuance of the
Bond Letter of Credit Guaranty or to evidence or confirm
compliance by Borrower with the conditions of this Agreement."
1.10 Events of Default. Section 10, Events of Default, Rights and
Remedies on Default, is amended as follows:
(i) Section 10.1.1, Payment of Loans, is amended in its entirety to read as follows:
"10.1.1 Payment of Loans and Amounts for Cash Collateral
Account. Borrower shall fail to make any payment of principal, interest
or premium, if any, owing on the Loans, or any amounts to be paid into
the Cash Collateral Account pursuant to Section 3.2.4 hereof, within
two (2) Business Days of the due date thereof (whether due at stated
maturity, on demand, upon acceleration or otherwise)."
(ii) A new Section 10.1.19, Reimbursement Agreement, is added at the end of Section 10.1 as
------------------------
follows:
"10.1.19 Default Under Reimbursement Agreement. There shall occur any
"Event of Default" under the Reimbursement Agreement as such term is defined in Section 6.01
thereof."
(iii) Section 10.3, Other Remedies, is amended by adding the
following Section 10.3.6 at the end thereof:
<PAGE>
"10.3.6 Upon the occurrence and during the
continuance of an Event of Default, Lender may also, at its option,
with respect to the face amount of all Letters of Credit and Letter of
Credit Guaranties then outstanding, require Borrower to deposit with
Lender funds equal to such undrawn face amount, and if Borrower fails
promptly to make such deposit, Lender may advance such amount as a
Revolver Loan. Any such deposit or advance shall be held by Lender in
the Cash Collateral Account as a reserve to fund future payments on the
outstanding Letters of Credit or Letter of Credit Guaranties. At such
time as all Letters of Credit and Letter of Credit Guaranties have
expired or have been cancelled or terminated, any amounts remaining in
the Cash Collateral Account shall be applied against any outstanding
Obligations, or, to the extent all Obligations have been indefeasibly
paid in full, returned to Borrower."
1.11 Notices. Section 11.8 is modified as follows:
(i) In line three thereof, the phrase "or by facsimile" is deleted; and
(ii) All notices to the Borrower and the Parent shall be sent in the manner set forth in
Section 11.8 as modified hereby and addressed as follows:
If to Borrower: Atlantic Coast Airlines
515-A Shaw Road
Sterling, Virginia 20166
Attention: Director of Treasury Management
If to Parent: Atlantic Coast Airlines, Inc
515-A Shaw Road
Sterling, Virginia 20166
Attention: Senior Vice President and General Counsel
With a copy to: Hazel & Thomas
3110 Fairview Park Drive
Suite 1400
Falls Church, Virginia 22042
Attention: Carol C. Honigberg, Esq.
1.12 Indemnity by Lender. A new Section 11.15, Indemnity by Lender, is added as follows:
<PAGE>
"11.15 Indemnity by Lender. Lender hereby agrees to
indemnify Borrower against any liability, loss, damage or expense which
Borrower may suffer or occur as a result of Lender's breach of any of
its warranties and representations set forth in Section 4.02 of the
Reimbursement Agreement or Lender's failure to comply with any of the
covenants set forth in Section 5.03 of the Reimbursement Agreement and
Bank's exercise of its rights under Section 6.02 of the Reimbursement
Agreement as a result thereof."
1.13 Definitions. Appendix A, General Definitions, is amended as follows:
(i) The following definitions are amended in their entirety:
"Availability Reserve - On any date of determination thereof,
an amount equal to the sum of (i) any amounts of past due rent or other
charges (other than project rental as specified in the Lease) owing at
such time by Borrower to the Authority under the Lease; (ii) any
amounts which Borrower is obligated to pay pursuant to the provisions
of the Loan Documents but does not pay when due and which Lender elects
to pay pursuant to any of the Loan Documents for the account of
Borrower; (iii) the estimated cost of services ordered by Borrower from
United under the United Express Emergency Response Agreement; (iv) the
Fixed Bond Letter of Credit Guaranty Reserve at such date; (v) the
Increasing Bond Letter of Credit Guaranty Reserve at such date; (vi)
the amount of all Letter of Credit Obligations outstanding at such date
except for those with respect to the Bond Letter of Credit and the Bond
Letter of Credit Guaranty; and (vii) such reserves established by
Lender in such amounts, and with respect to such matters, events,
conditions or contingencies as to which Lender, in its credit judgment
based upon its usual and customary credit and collateral
considerations, determines reserves should be established from time to
time, including, without limitation, with respect to (1) improper
billings, other billing and settlement errors which occur from time to
time under the ACH Procedures Manual, and (2) other sums chargeable
against Borrower's Loan Account as Revolver Loans under any section of
the Agreement.
Average Monthly Loan Balance - the amount obtained by adding
the aggregate unpaid balance of all Loans and Letter of Credit
Obligations outstanding at the end of each day during the month in
question and by dividing that sum by the number of days in such month.
Bank - Fleet National Bank, and its successors and assigns.
Borrowing Base - as at any date of determination thereof, an
amount equal to the lesser of:
(i) the amount of the Revolver Loan Facility less the amount of
the Letter of Credit Obligations outstanding at such date; or
(ii) the sum of:
<PAGE>
(a) the Accounts Borrowing Base at such
date;
MINUS
(b) the Availability Reserve at such
date.
Consolidated Debt Service Coverage Ratio - with respect to any
Person for any period of determination, the ratio of (i) Consolidated
Cash Flow for such period to (ii) payments of Indebtedness for Money
Borrowed required to be paid by such Person during such period;
provided, however, payments made on the $11,000,000 Indebtedness for
Money Borrowed owed to Bombardier Air for the funding of a deposit for
the acquisition of CRJ regional jet aircraft, to the extent made from
the proceeds of the Subordinated Debt Offering, shall not be deemed a
payment by the Loan Parties of Indebtedness for Money Borrowed and
shall be excluded from the foregoing calculation.
Security Documents - the Deed of Trust, each Guaranty
Agreement, and all other instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations."
(ii) The following definitions are added in the appropriate alphabetical sequence:
Accounts Borrowing Base - at any date of determination
thereof, an amount equal to sixty-five percent (65%) of the net amount
of Eligible Accounts outstanding at such date. For the purposes of
calculating the Accounts Borrowing Base, the net amount of Eligible
Accounts at any time shall be the face amount of such Eligible Accounts
less any and all returns, rebates, discounts (which may, at Lender's
option, be calculated on shortest terms), sales taxes, credits,
allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time (including current amounts
owing by Borrower to United under the United Express Agreements).
Available Amount - as such term is defined in the
Reimbursement Agreement.
Average Monthly Revolver Loan Balance - the amount
obtained by adding the aggregate unpaid balance of all Loans and all
Letter of Credit Obligations except for the Letter of Credit
Obligations arising under the Bond Letter of Credit Guaranty, in each
case which are outstanding at the end of each day during the month in
question and by dividing that sum by the number of days in such month.
<PAGE>
Bond Documents - collectively, the Bond Loan
Agreement, the Bonds, the Indenture, the Reimbursement Agreement, and
all guaranties, agreements, opinions, certificates or assurances
executed in connection therewith.
Bond Letter of Credit - as defined in the Recitals
contained in the First Amendment to the Agreement.
Bond Letter of Credit Guaranty - the guaranty by
Lender of the reimbursement and other obligations owing by Borrower to
Bank in respect of the Bond Letter of Credit as set forth in the
Reimbursement Agreement.
Bond Letter of Credit Closing Date - the date on
which all of the conditions set forth in Section 9.4 of the Agreement
are satisfied and Lender issues the Bond Letter of Credit Guaranty in
favor of Bank.
Bond Loan Agreement - as defined in the Recitals
contained in the First Amendment to the Agreement.
Bonds - as defined in the Recitals contained in the
First Amendment to the Agreement.
Cash Collateral - cash deposited with Lender in
accordance with the Agreement as security for the Letter of Credit
Obligations to the extent provided in the Agreement.
Cash Collateral Account - an interest-bearing account
established by Lender on its books and to which Lender shall credit all
Cash Collateral deposited with Lender in accordance with the Agreement.
Deed of Trust - the Credit Line Leasehold Deed of
Trust and Security Agreement executed by Borrower on or about the Bond
Letter of Credit Closing Date in favor of the trustees named therein
for the benefit of Lender, as it may be amended, modified, supplemented
or restated from time to time, by which Borrower has granted and
conveyed to the trustees for the benefit of Lender, as security for the
Obligations, Liens upon Borrower's leasehold estate in the Realty
leased by Borrower from the Authority pursuant to the Lease.
Fixed Bond Letter of Credit Guaranty Reserve - for so
long as the Bond Letter of Credit and the Bond Letter of Credit
Guaranty is outstanding, a reserve established by Lender in the amount
of $4,479,932, or such lesser amount as Lender, in the exercise of its
sole and unfettered discretion, may establish from time to time.
<PAGE>
Improvements - the construction of a maintenance
facility and associated access roadway, vehicle parking and maneuvering
areas and aircraft paving aprons on the Realty.
Increasing Bond Letter of Credit Guaranty Reserve -
for so long as the Bond Letter of Credit and the Bond Letter of Credit
Guaranty is outstanding, a reserve established by Lender which shall on
the Bond Letter of Credit Closing Date be equal to zero, but shall
thereafter increase on the first day of each month, commencing on the
first day of the month following the Bond Letter of Credit Closing
Date, by an amount equal to $53,750, and shall thereafter decrease by
the amount of any Voluntary Redemptions of the Bonds, but in no event
shall the amount of the Increasing Bond Letter of Credit Guaranty
Reserve be less than zero nor, when added to the amount of the Fixed
Bond Letter of Credit Guaranty Reserve, exceed the Available Amount.
Indenture - as defined in the Recitals contained in
the First Amendment to the Agreement.
Issuer - as defined in the Recitals contained in the
First Amendment to the Agreement.
Lease - as defined in the Recitals contained in the
First Amendment to the Agreement.
Letter of Credit - the Bond Letter of Credit and any
other letter of credit issued by any of Lender's Affiliates for the
account of Borrower.
Letter of Credit Guaranty - the Bond Letter of Credit
Guaranty and any other guaranty issued by Lender for the account of
Borrower by which Lender shall guarantee the payment by Borrower of its
reimbursement obligations under a Letter of Credit.
Letter of Credit Obligations - that portion of the
Obligations constituting Borrower's obligation to reimburse Lender for
all amounts paid by Lender under or with respect to a Letter of Credit
Guaranty.
<PAGE>
Net Accounts Availability - at any date of the
determination thereof, the sum of (i) the Accounts Borrowing Base, less
(ii) the aggregate amount of the Loans and the Letter of Credit
Obligations outstanding at such date except for those with respect to
the Bond Letter of Credit and the Bond Letter of Credit Guaranty.
Realty - the tract or parcels of real property leased
by Borrower from the Authority pursuant to the Lease, together with the
Improvements and the fixtures attached thereto.
Reimbursement Agreement - as defined in the Recitals
contained in the First Amendment to the Agreement.
Remarketing Agent - shall have the meaning ascribed
to such term in the Indenture.
Subordinated Debt Offering - the $50,000,000
aggregate principal amount ($57,500,000 aggregate principal amount if
the initial purchasers' over-allotment option is exercised) of the
Parent's Convertible Subordinated Notes, payable in semi-annual
interest payments and with a final maturity date of July 1, 2004, and
subordinated in right of payment to certain of the Parent's senior
indebtedness as more particularly described in the indenture under
which the notes are issued, which are expected to be issued by the
Parent by August 31, 1997.
Voluntary Redemptions - optional redemptions of the
Bonds made by Borrower pursuant to Sections 3.1(g) and (h) of the
Indenture."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Loan Parties each hereby represents and warrants to the Lender
that:
2.1 Compliance with the Loan Agreement and Other Loan Documents. As of
the execution of this Amendment, each of the Loan Parties is in compliance with
all of the terms and provisions set forth in the Loan Agreement and in the other
Loan Documents to be observed or performed by each of the Loan Parties, except
where the failure of the Loan Parties to comply has been waived in writing by
the Lender.
<PAGE>
2.2. Representations in Loan Agreement and other Loan Documents. The
representations and warranties of the Loan Parties set forth in the Loan
Agreement and the other Loan Documents are true and correct in all material
respects except for changes in the nature of a Loan Party's business or
operations that would render the information in any exhibit attached to the Loan
Agreement either inaccurate, incomplete or misleading, so long as the Lender has
consented to such changes or such changes are not expressly prohibited by the
Loan Agreement.
2.3. No Event of Default. No Default or Event of Default exists.
ARTICLE III
MODIFICATION OF LOAN DOCUMENTS; ACKNOWLEDGMENT OF OBLIGATIONS
3.1 Modification of Loan Document The Loan Agreement and each of the
other Loan Documents are amended to provide that any reference to the Loan
Agreement in the Loan Agreement or any of the other Loan Documents shall mean
the Loan Agreement as amended by this Amendment, and as it is further amended,
restated, supplemented or modified from time to time. The provisions of that
certain letter from the Lender to the Borrower, dated June 13, 1997, are deemed
superseded and replaced by this Amendment and are of no further force and
effect.
3.2. Acknowledgments by the Loan Parties. To induce the Lender to enter
into this Amendment, each Loan Party acknowledges and agrees with the Lender
that as of June 1, 1997, the aggregate principal balance owing on the Revolving
Loans outstanding under the Loan Agreement was in the sum of zero, and the
aggregate amount of Letters of Credit and Letter of Credit Guaranties
outstanding was in the sum of $531,000 and that all such Obligations outstanding
are owed to the Lender without any offset, deduction, defense or counterclaim of
any nature in favor of either Loan Party.
ARTICLE IV
GENERAL
4.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof. As used in the Loan Agreement, "hereinafter", "hereto",
"hereof" or words of similar import, shall, unless the context otherwise
requires, mean the Loan Agreement as amended by this Amendment.
<PAGE>
4.2 Applicable Law. This Amendment shall be governed by and construed
in accordance with the internal laws and judicial decisions of the State of
North Carolina.
4.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one and the same instrument.
4.4 Expenses. The Borrower shall reimburse the Lender for all
reasonable fees and expenses (legal or otherwise) incurred by the Lender in
connection with the preparation, negotiation, execution and delivery of this
Amendment and all other agreements and documents referred to herein or
contemplated hereby.
4.5. Headings. The headings in this Amendment are for the purpose of reference only and shall not
affect the construction of this Amendment.
4.6 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE LOAN PARTIES AND THE LENDER EACH WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AMENDMENT, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered on the date first above written.
Borrower:
ATLANTIC COAST AIRLINES
By:________________________________________
Title:__________________________________
ATTEST:
- ----------------------------
_________ - Secretary
[CORPORATE SEAL]
<PAGE>
Parent:
ATLANTIC COAST AIRLINES, INC.
By:________________________________________
Title:__________________________________
ATTEST:
- ----------------------------
_________ - Secretary
[CORPORATE SEAL]
Accepted in Charlotte, North Carolina
Lender:
FLEET CAPITAL CORPORATION
By:_______________________________________
Title:___________________________________
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 10.23(b)
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment"),
dated as of the 31st day of December, 1997, made by and between
FLEET CAPITAL CORPORATION, a Rhode Island corporation (successor by
merger with Fleet Capital Corporation, a Connecticut corporation, which was
formerly known as Shawmut Capital Corporation) (the "Lender"),
ATLANTIC COAST AIRLINES, a California corporation (the "Borrower"), and
ATLANTIC COAST AIRLINES, INC., a Delaware corporation (the "Parent";
the Borrower and the Parent being collectively called the "Loan Parties");
to the Loan and Security Agreement, dated October 12, 1995, as
previously amended by First Amendment thereto, dated June 1, 1997 (the "Loan
Agreement"). All capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Loan Agreement.
RECITALS
RECITALS RECITALS RECITALS
A. Pursuant to the Loan Agreement, and upon the terms and subject to
the conditions contained therein, the Lender has made available to the Borrower
a $20,000,000 revolving line of credit evidenced by the Loan Agreement.
B. The Loan Parties have requested that the Loan Agreement be further
amended to (a) increase the aggregate amount of the Letter of Credit Obligations
which may be outstanding at any time from the sum of $10,500,000 to the sum of
$13,500,000, and (b) reduce the amount of the Fixed Bond Letter of Credit
Guaranty Reserve, and the Lender has agreed to such requests, provided, among
other things, the Loan Agreement and the other Loan Documents are amended as
herein provided.
C. To accomplish the foregoing purposes, the parties hereto are
mutually desirous of further amending the Loan Agreement as set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the Loan Parties and the Lender hereby agree as follows:
<PAGE>
36
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended as follows:
1.1 Letters of Credit; Letter of Credit Guaranties. Section 1.4.1,
Issuance of Letters of Credit and Letter of Credit Guaranties, is amended in its
entirety to read as follows:
"1.4.1. Issuance of Letters of Credit and Letter of Credit
Guaranties. Lender agrees, for so long as no Default or Event of
Default exists and subject to the provisions of Section 9 below, to
issue its, or cause to be issued its Affiliate's, Letters of Credit and
Letter of Credit Guaranties, provided that the aggregate amount of the
Letter of Credit Obligations outstanding at any time shall not exceed
$13,500,000 and, without the prior written consent of Lender, no Letter
of Credit or Letter of Credit Guaranty may have an expiration date that
is after the last day of the Original Term or the then applicable
Renewal Term."
1.2 Letter of Credit and Letter of Credit Guaranty Fees. Section 2.2.3,
Letter of Credit and Letter of Credit Guaranty Fees, is amended in its entirety
to read as follows:
"2.2.3. Letter of Credit and Letter of Credit Guaranty Fees. Borrower shall
pay the following fees for all Letters of Credit and Letter of Credit Guaranties
issued by Lender and its Affiliates pursuant to Section 1.4.1 hereof:
(i) Upon issuance of the Bond Letter of Credit and
the Bond Letter of Credit Guaranty, fees to Bank in the
amounts and on the dates as set forth in Section 2.03 of the
Reimbursement Agreement;
(ii) Upon issuance of each other Letter of Credit and
Letter of Credit Guaranty:
<PAGE>
(a) an issuance fee to Lender for the
account of both Lender and its Affiliate that issues
such other Letter of Credit equal to (1) in the case
of those three (3) Letters of Credit, numbers
9721204, 9721205 and 9721206, issued by Bank on
December 31, 1997 in favor of NationsBanc Leasing
Corporation as beneficiary in the original undrawn
amounts of $750,000, $750,000 and $875,000,
respectively, and the Letter of Credit Guaranties
issued by Lender with respect thereto, one and
one-quarter percent (1.25%) per annum of the undrawn
amount of each such Letter of Credit, and (2) in the
case of each other Letter of Credit and Letter of
Credit Guaranty, the greater of (a) $500 or (b) one
and one-half percent (1.5%) per annum of the undrawn
amount of such other Letter of Credit, in each case
payable in advance upon the issuance of each other
Letter of Credit and Letter of Credit Guaranty and on
each extension of the stated termination date thereof
for so long as such other Letter of Credit and Letter
of Credit Guaranty is outstanding; and
(b) the reasonable and customary charges
from time to time of the issuer of such other Letter
of Credit with respect to the issuance, notification,
amendment, transfer, administration, cancellation and
conversion of, and drawings under, such other Letter
of Credit, all of which shall be payable to Lender
for the account of such issuer.
All issuance fees in connection with each Letter of Credit and
Letter of Credit Guaranty as set forth in Sections 2.2.3 (i)(a) and
(ii)(a) hereof shall be deemed fully earned upon the issuance of the
Letter of Credit and Letter of Credit Guaranty and shall not be subject
to rebate or proration upon the termination of this Agreement for any
reason."
1.3 Fixed Bond Letter of Credit Guaranty Reserve. The definition of "Fixed Bond
Letter of Credit Guaranty Reserve" set forth in Appendix A, General Definitions, to the Loan Agreement,
is amended in its entirety to read as follows:
"Fixed Bond Letter of Credit Guaranty Reserve - for so long as
the Bond Letter of Credit and the Bond Letter of Credit Guaranty is
outstanding, a reserve established by Lender in the amount of
$1,980,000."
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Loan Parties each hereby represents and warrants to the Lender
that:
<PAGE>
2.1 Compliance with the Loan Agreement and Other Loan Documents. As of
the execution of this Amendment, each of the Loan Parties is in compliance with
all of the terms and provisions set forth in the Loan Agreement and in the other
Loan Documents to be observed or performed by each of the Loan Parties, except
where the failure of the Loan Parties to comply has been waived in writing by
the Lender.
2.2. Representations in Loan Agreement and other Loan Documents. The
representations and warranties of the Loan Parties set forth in the Loan
Agreement and the other Loan Documents are true and correct in all material
respects except for changes in the nature of a Loan Party's business or
operations that would render the information in any exhibit attached to the Loan
Agreement either inaccurate, incomplete or misleading, so long as the Lender has
consented to such changes or such changes are not expressly prohibited by the
Loan Agreement.
2.3. No Event of Default. No Default or Event of Default exists.
ARTICLE III
MODIFICATION OF LOAN DOCUMENTS; ACKNOWLEDGMENT OF OBLIGATIONS
3.1 Modification of Loan Document The Loan Agreement and each of the
other Loan Documents are amended to provide that any reference to the Loan
Agreement in the Loan Agreement or any of the other Loan Documents shall mean
the Loan Agreement as amended by this Amendment, and as it is further amended,
restated, supplemented or modified from time to time.
3.2. Acknowledgments by the Loan Parties. To induce the Lender to enter
into this Amendment, each Loan Party acknowledges and agrees with the Lender
that as of the opening of business on December 31, 1997, the aggregate principal
balance owing on the Revolving Loans outstanding under the Loan Agreement was in
the sum of zero, and the aggregate amount of Letters of Credit and Letter of
Credit Guaranties outstanding was in the sum of $12,485,932.00 and that all such
Obligations outstanding are owed to the Lender without any offset, deduction,
defense or counterclaim of any nature in favor of either Loan Party.
ARTICLE IV
GENERAL
4.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof. As used in the Loan Agreement, "hereinafter", "hereto",
"hereof" or words of similar import, shall, unless the context otherwise
requires, mean the Loan Agreement as amended by this Amendment.
4.2 Applicable Law. This Amendment shall be governed by and construed
in accordance with the internal laws and judicial decisions of the State of
North Carolina.
<PAGE>
Consolidated Adjusted Net
Earnings From Operations Per Annum Fee
4.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one and the same instrument.
4.4 Expenses. The Borrower shall reimburse the Lender for all
reasonable fees and expenses (legal or otherwise) incurred by the Lender in
connection with the preparation, negotiation, execution and delivery of this
Amendment and all other agreements and documents referred to herein or
contemplated hereby.
4.5. Headings. The headings in this Amendment are for the purpose of reference only and
shall not affect the construction of this Amendment.
4.6 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE LOAN PARTIES AND THE LENDER EACH WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AMENDMENT, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered on the date first above written.
Borrower:
ATLANTIC COAST AIRLINES
By:________________________________________
Title:__________________________________
ATTEST:
- ----------------------------
_________ - Secretary
[CORPORATE SEAL]
Parent:
ATLANTIC COAST AIRLINES, INC.
By:________________________________________
Title:__________________________________
ATTEST:
- ----------------------------
_________ - Secretary
[CORPORATE SEAL]
Accepted in Charlotte, North Carolina
Lender:
FLEET CAPITAL CORPORATION
By:_______________________________________
Title:___________________________________
<PAGE>
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.32(a)
Atlantic Coast Airlines
Summary of Bonus Plans
Amended 3/23/98
"Share the Success": Hourly
applies to hourly workers actively employed by ACA for two full calendar quarters meeting a
hours-worked requirement
payable quarterly
payouts require that company reach minimum quarterly financial targets for
quarter if profit margin target achieved, each employee automatically
receives $150 employee receives $50 for each month that ACA meets or
exceeds each of certain operational goals
(flight completion, on-time departures, mishandled baggage)
$25 if certain lesser threshold is achieved
"Share the Success": Salaried
applies to exempt employees
payable annually
payouts up to 30% of salary depending on management level
payouts depend on two factors: operating profit margin and operational performance (completion
factor, on-time departures, mishandled baggage)
for each factor, payouts depend on whether company attains the "threshold achievement" or the
higher "target achievement"
payout highest if, in addition certain operating profit achieved
potential maximum payout represents varying percentage of salary depending on management level
<PAGE>
58
SS_NYL4/246328
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.50(a)
ATLANTIC COAST AIRLINES, ISSUER
ATLANTIC COAST AIRLINES, INC., GUARANTOR
PURCHASE AGREEMENT
September 19, 1997
Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036-8293
Dear Sirs:
Atlantic Coast Airlines, a California corporation (the
"Company"), in connection with the financing of (i) the debt portion of ten
leveraged aircraft leases and (ii) the purchase of four aircraft, proposes that
First National Bank of Maryland, as trustee (the "Trustee"), issue and sell to
you (the "Placement Agent") its Pass Through Certificates, Series 1997-1 in the
aggregate principal amounts and with the interest rates and final distribution
dates set forth on Schedule I hereto (the "Certificates") on the terms and
conditions stated herein. The aggregate principal amount of Certificates due on
each such final distribution date is referred to as a "Pass Through Certificate
Designation".
The Certificates will be issued pursuant to four separate pass
through trust agreements each to be dated as of September 25, 1997 (collectively
the "Pass Through Trust Agreements") among Atlantic Coast Airlines, Inc., a
Delaware corporation (the "Guarantor"), the Company and the Trustee. The Pass
Through Trust Agreements are related to the creation and administration of
Atlantic Coast Air Pass Through Trust Series 1997-1A (the "Class A Trust"),
Atlantic Coast Airlines Pass Through Trust Series 1997-1B (the "Class B Trust"),
Atlantic Coast Airlines Pass Through Trust Series 1997-1C (the "Class C Trust")
and Atlantic Coast Airlines Pass Through Trust Series 1997-1D (the "Class D
Trust", and together with the Class A Trust, the Class B Trust and the Class C
Trust, the "Trusts"). Certain amounts of interest payable on the Certificates to
be issued by the Class A Trust, the Class B Trust and the Class C Trust will be
entitled to the benefits of a separate liquidity facility for each such Trust.
ING Bank N.V. (the "Liquidity Provider") will enter into three separate
revolving credit agreements (each, a "Liquidity Facility") to be dated as of
September 25, 1997 for the benefit of the holders of the Certificates issued by
the Class A Trust, the Class B Trust and the Class C Trust, respectively. The
Liquidity Provider and the holders of the Certificates will be entitled to the
benefits of an Intercreditor Agreement to be dated as of September 25, 1997 (the
"Intercreditor Agreement") among the Trusts, First National Bank of Maryland, as
Subordination Agent (the "Subordination Agent"), and the Liquidity Provider.
The Certificates will be offered without being registered
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance
on exemptions therefrom.
In connection with the sale of the Certificates, the Guarantor
and the Company have prepared a preliminary offering memorandum (the
"Preliminary Memorandum") and will prepare a final offering memorandum (the
"Final Memorandum" and, with the Preliminary Memorandum, each a "Memorandum")
setting forth or including a description of the terms of the Certificates, the
terms of the offering and a description of the Company and its business.
Capitalized terms not otherwise defined in this Agreement
shall have the meanings specified therefor in the Pass Through Trust Agreements
or in the Indentures referred to in the Pass Through Trust Agreements; provided
that as used in this Agreement, the term "Operative Agreements" shall include
the Pass Through Trust Agreements.
1. Representations and Warranties. The Guarantor and the Company represent and
warrant to, and agree with, you that as of the date hereof:
(a) The Preliminary Memorandum does not contain and the Final
Memorandum, in the form used by the Placement Agent to confirm sales and on the
Closing Date, will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 1(a) do not apply to
statements or omissions in either Memorandum based upon information relating to
the Placement Agent furnished to the Guarantor or the Company in writing by the
Placement Agent through you expressly for use therein.
(b) Each of the Guarantor and the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in each
Memorandum and to perform its obligations under this Agreement and the Operative
Agreements to which it is, or is to be, a party; each of the Guarantor and the
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Guarantor and its subsidiaries, taken as a whole (a "Material Adverse
Effect").
(c) This Agreement has been duly authorized, executed and
delivered by the Guarantor and the Company.
(d) On or prior to the Closing Date, the issuance of the
Certificates will be duly authorized by the Trustee. When executed,
authenticated, issued and delivered in the manner provided for in the related
Pass Through Trust Agreement and sold and paid for as provided in this
Agreement, each of the Certificates will be valid and binding obligations of the
Trustee entitled to the benefits of the related Pass Through Trust Agreement,
enforceable against the Trustee in accordance with its terms, except as limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law).
(e) On or prior to the Closing Date, the issuance of the
Equipment Notes will be authorized by the related Owner Trustee or the Company,
as the case may be. When duly executed and delivered by the related Owner
Trustee, or the Company, as the case may be, and duly authenticated by the
Indenture Trustee in accordance with the terms of the related Indenture, each of
the Equipment Notes will be duly issued under such related Indenture and will
constitute the valid and binding obligations of such Owner Trustee or the
Company, as the case may be, and the holders thereof will be entitled to the
benefits of such related Indenture, except as limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
(f) The Operative Agreements to which the Guarantor and/or the
Company is, or is to be, a party, have each been duly authorized by the
Guarantor or the Company, as the case may be, are or will be substantially in
the form heretofore supplied to you and, when duly executed and delivered by the
Guarantor or Company, as the case may be, will constitute valid and binding
obligations of the Guarantor or Company, as the case may be, except (i) as
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law) and (ii) in the case of each Lease and each Indenture, as
the case may be, as limited by applicable laws which may affect the remedies
provided in such Lease or such Indenture, as the case may be, which laws,
however, do not make the remedies provided in such Lease inadequate for the
practical realization of the rights and benefits provided thereby. On the
Delivery Date, the related Leases and other Operative Agreements to which the
Guarantor and/or the Company is, or is to be, a party will constitute the valid
and binding obligations of the Guarantor and/or the Company, as the case may be,
except (i) as limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law) and (ii) in the case of each Lease and each
Indenture, as limited by applicable laws which may affect the remedies provided
in such Lease or such Indenture, as the case may be, which laws, however, do not
make the remedies provided in such Lease inadequate for the practical
realization of the rights and benefits provided thereby. The Certificates, the
Equipment Notes, the Indentures, and the Leases and other Operative Agreements
to which the Guarantor and/or the Company is, or is to be, a party will conform
in all material respects to the descriptions thereof in the Final Memorandum.
(g) The execution and delivery by the Guarantor and/or the
Company of this Agreement and the Operative Agreements to which the Guarantor
and/or the Company is, or is to be, a party, the consummation by the Guarantor
and the Company of the transactions contemplated in this Agreement and such
Operative Agreements, and compliance by the Guarantor and the Company with the
terms of this Agreement and such Operative Agreements will not contravene (i)
the certificate of incorporation or by-laws of the Guarantor and/or the Company,
as the case may be, (ii) any provision of applicable law or any agreement or
other instrument binding upon the Guarantor or any of its subsidiaries or (iii)
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Guarantor or any subsidiary other than, in the case of
clauses (ii) and (iii) above, such contraventions that would not individually or
in the aggregate have a Material Adverse Effect, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the valid authorization, execution, delivery and
performance by the Guarantor and/or the Company of this Agreement and the
Operative Agreements to which the Guarantor and/or the Company is, or is to be,
a party, or the consummation by the Guarantor or the Company of the transactions
contemplated by this Agreement and such Operative Agreements, except such as may
be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Certificates and the Equipment Notes
and except for filings or recordings with the Federal Aviation Administration
(the "FAA") and under the Uniform Commercial Code as in effect in Utah and
Virginia, which filings or recordings shall have been made, or duly presented
for filing, on or prior to the date of issuance of the Equipment Notes for any
Aircraft or the Delivery Date therefor, as may be applicable.
(h) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Guarantor and its subsidiaries, taken as a whole, from that set forth in the
Preliminary Memorandum.
(i) There are no legal or governmental proceedings pending or
threatened to which the Guarantor or any of its subsidiaries is a party or to
which any of the properties of the Guarantor or any of its subsidiaries is
subject other than proceedings accurately described in all material respects in
each Memorandum and proceedings that would not have a Material Adverse effect,
or on the power or ability of the Guarantor or the Company to perform its
obligations under this Agreement or any of the Operative Agreement, to which it
is, or is to be, a party, or to consummate the transactions contemplated by the
Final Memorandum.
(j) Except as described in the Final Memorandum, neither the
Guarantor nor the Company is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which it is a party or by which it may be bound or to which any of
its properties may be subject, except for such defaults that would not have a
Material Adverse Effect.
(k) Except as disclosed in the Final Memorandum, the Guarantor
and its subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from liens,
encumbrances and defects except where the failure to have such title would not
have a Material Adverse Effect; and except as disclosed in the Final Memorandum,
the Guarantor and its subsidiaries hold any leased real or personal property
under valid and enforceable leases with no exceptions that would have a Material
Adverse Effect.
(l) Except as disclosed in the Final Memorandum, no labor
dispute with the employees of the Guarantor or any of its subsidiaries exists or
to the knowledge of the Guarantor or any of its subsidiaries is imminent that
might have a Material Adverse Effect.
(m) Neither the Guarantor, the Company nor any affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate")
of the Guarantor or the Company has directly, or through any agent, (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be integrated
with the sale of the Certificates in a manner that would require the
registration under the Securities Act of the Certificates or (ii) engaged in any
form of general solicitation or general advertising in connection with the
offering of the Certificates (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act.
(n) None of the Guarantor, the Company, its Affiliates or any
person acting on its or their behalf (other than the Placement Agent) has
engaged in any directed selling efforts (as that term is defined in Regulation S
under the Securities Act ("Regulation S")) with respect to the Certificates and
the Guarantor, the Company and its Affiliates and any person acting on its or
their behalf (other than the Placement Agent) have complied with the offering
restrictions requirement of Regulation S.
(o) The Guarantor is subject to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
(p) The Certificates satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(q) It is not necessary in connection with the offer, sale and
delivery of the Certificates to the Placement Agent in the manner contemplated
by this Agreement to register the Certificates under the Securities Act or to
qualify any of the Indentures or Pass Through Trust Agreements under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(r) None of the Guarantor, the Company nor any of the Trusts
is an "investment company", within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"); and none of the Trusts, after
giving effect to the offering and sale of the Certificates and the application
of the proceeds thereof as described in the Final Memorandum, will be an
"investment company" as defined in the Investment Company Act.
(s) The accountants that examined and issued an auditors
report with respect to the consolidated financial statements of the Guarantor
and its consolidated subsidiaries included in the Final Memorandum are
independent public accountants within the meaning of the Securities Act and the
regulations thereunder.
(t) The consolidated financial statements included in the
Final Memorandum present fairly the consolidated financial position of the
Guarantor and its consolidated subsidiaries as of the dates indicated and the
consolidated results of operations and cash flows or changes in financial
position of the Guarantor and its consolidated subsidiaries for the periods
specified. Such financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. The financial statement schedules, if any,
included in the Final Memorandum present fairly the information required to be
stated therein.
(u) The Guarantor and its subsidiaries (i) are in compliance
in all material respects with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (iii) are in compliance with all terms
and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a Material Adverse Effect.
(v) To the best of the Guarantor's and the Company's
knowledge, after due inquiry, no disposal, release or discharge of hazardous or
toxic substances or wastes, pollutants or contaminants has occurred on, in, at
or about any of the facilities of the Guarantor or its subsidiaries; no actions
or claims based on any Environmental Law, which actions or claims reasonably
would be likely, singly or in the aggregate, to have a Material Adverse Effect,
are pending or, to the best of the Guarantor's and the Company's knowledge,
threatened against the Guarantor or its subsidiaries.
(w) The Guarantor and its subsidiaries have complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida).
(x) The Company is a "citizen of the United States" (as
defined in Section 40102(a)(15) of Title 49 of the United States Code, as
amended) and is an air carrier operating under a certificate of public
convenience and necessity issued by the Secretary of Transportation pursuant to
Section 41102 of Title 49, United States Code. There is in force with respect to
the Company an air carrier operating certificate issued by the Federal Aviation
Administration pursuant to 14 C.F.R. Part 119. All of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable and are owned by the Guarantor, free and clear
of any pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind.
(y) The Guarantor and its subsidiaries possess adequate
certificates, authorities and permits issued by appropriate governmental
agencies or bodies necessary to conduct, in all material respects, the business
now operated by them and have not received any notice of proceedings relating to
the revocation or modification of any such certificate, authority or permit that
reasonably would be likely to, individually or in the aggregate, have a Material
Adverse Effect.
(z) No Appraiser is an affiliate of the Guarantor or the
Company or, to the knowledge the Guarantor or of the Company, has a substantial
interest, direct or indirect, in the Guarantor or the Company. To the knowledge
of the Guarantor or the Company, none of the officers and directors of any of
such appraisers are connected with the Guarantor or the Company or any of its
affiliates as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
The representations and warranties contained in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date.
2. Offering. You have advised the Guarantor and the Company
that the Placement Agent will make an offering of the Certificates purchased by
the Placement Agent hereunder on the terms to be set forth in the Final
Memorandum as soon as practicable after this Agreement is entered into as in
your judgment is advisable.
3. Purchase and Delivery. The Guarantor and the Company hereby
agree to cause the Trustee to sell to the Placement Agent, and the Placement
Agent, upon the basis of the representations and warranties herein contained,
but subject to the conditions hereinafter stated, agrees to purchase from the
Trustee the principal amount of Certificates of each Pass Through Certificate
Designation set forth in Schedule I hereto at a purchase price of 100% of the
principal amount thereof.
Payment for the Certificates shall be made against delivery of
the Certificates at a closing (the "Closing") to be held at the office of
Shearman & Sterling, 599 Lexington Avenue, New York, New York, at 10:00 A.M.,
local time, on September 25, 1997, or at such other time on the same or such
other date, not later than September 30, 1997, as shall be designated in writing
by you. The time and date of such payment are herein referred to as the Closing
Date. Delivery of the Certificates shall be made to your account at The
Depository Trust Company against payment by the Placement Agent of the purchase
price thereof to or upon the order of the Trustee by wire transfer. The
Certificates shall be in definitive or global form and registered in the name of
Cede & Co. or in such other names, and in such denominations as you may request
in writing at least one full business day in advance of the Closing Date in
definitive or global form. The Company agrees to have the Certificates available
for inspection, checking and packaging by you in New York, New York not later
than 1:00 P.M. on the business day prior to the Closing Date.
As compensation to the Placement Agent for its commitment and
obligations hereunder in respect of the Certificates, including its undertaking
to distribute the Certificates, each Owner Trustee will pay to the Placement
Agent an amount equal to that percentage of the aggregate principal amount of
each Pass Through Certificate Designation (to the extent that such Designation
relates to Equipment Notes to be issued by such Owner Trustee or the Company,
respectively) purchased by it as set forth in Schedule I; provided that if any
Owner Trustee fails to pay such amounts when due, the Company will pay such
amounts. Such payment shall be made by Federal funds check or other immediately
available funds.
4. Conditions to Closing. The obligations of the Placement
Agent under this Agreement to purchase the Certificates will be subject to the
following conditions:
(a) Subsequent to the date of this Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Guarantor's or the Company's securities, including the Certificates, by
any "nationally recognized statistical rating organization," as such
term is defined for purposes of Rule 436(g)(2) under the Securities
Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition, financial
or otherwise, or in the earnings, business or operations, of the
Guarantor and its subsidiaries, taken as a whole, from that set forth
in the Preliminary Memorandum that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to market
the Certificates on the terms and in the manner contemplated in the
Final Memorandum.
(b) You shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Guarantor and
the Company, to the effect set forth in clause (a)(i) above and to the effect
that the representations and warranties of the Guarantor and the Company
contained in this Agreement are true and correct as of the Closing Date and that
the Guarantor and the Company have complied with all of the agreements and
satisfied all of the conditions on their part to be performed or satisfied on or
before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date (i) opinions
of Gibson, Dunn & Crutcher and Troutman Sanders LLP, independent counsel for the
Guarantor and the Company, each dated the Closing Date, to the effect set forth
in Exhibit A and B, respectively, (ii) opinion of General Counsel of the
Guarantor and the Company, dated the Closing Date, to the effect set forth in
Exhibit C and (iii) an opinion of Ober, Kaler, Grimes & Shriver, independent
counsel for the Trustee, dated the Closing Date, to the effect set forth in
Exhibit D.
(d) You shall have received on the Closing Date an opinion of
Shearman & Sterling, counsel for the Placement Agent, dated the Closing Date, in
form and substance satisfactory to you.
(e) You shall have received on each of the date hereof and the
Closing Date a letter, dated the date hereof or the Closing Date, as the case
may be, in form and substance satisfactory to you, from the Guarantor's and the
Company's independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Final Memorandum.
(f) The Guarantor and the Company shall have furnished to you
and to counsel for the Placement Agent, in form and substance satisfactory to
you, such other documents, certificates and opinions as such counsel may
reasonably request in order to pass upon the matters referred to in Section 3(d)
and in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any covenant by
the Guarantor or the Company theretofore to be performed, or the compliance with
any of the conditions herein contained.
(g) Each of the Appraisers shall have furnished to the
Placement Agent a letter from such Appraiser, addressed to the Guarantor and the
Company and dated the Closing Date, confirming that such Appraiser and each of
its directors and officers (i) is not an affiliate of the Guarantor, the Company
or any of its affiliates, (ii) does not have any substantial interest, direct or
indirect, in the Guarantor, the Company or any of its affiliates and (iii) is
not connected with the Guarantor, the Company or any of its affiliates as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
(h) On the Closing Date, the Certificates shall be rated "A-"
in the case of the Certificates of the Class A Trust, "BBB" in the case of the
Certificates of the Class B Trust, "BB-" in the case of the Certificates of the
Class C Trust and "BB-" in the case of the Certificates of the Class D Trust, by
Standard & Poor's Ratings Service; and "A3" in the case of the Certificates of
the Class A Trust, "Baa3" in the case of the Certificates of the Class B Trust,
"Ba2" in the case of the Certificates of the Class C Trust and "B1" in the case
of the Certificates of the Class D Trust by Moody's Investors Services, Inc.
5. Covenants of the Company. In further consideration of the
agreements of the Placement Agent contained in this Agreement, the Guarantor and
the Company covenant as follows:
(a) To furnish to you, without charge, during the period
mentioned in paragraph (c) below, as many copies of the Final
Memorandum, any documents incorporated by reference therein and any
supplements and amendments thereto as you may reasonably request and to
use its best efforts to deliver such copies to you by 12 noon (New York
time) on the second business day following the execution of this
Agreement.
(b) Before amending or supplementing either Memorandum, to
furnish to you a copy of each such proposed amendment or supplement and
not to use any such proposed amendment or supplement to which you
reasonably object.
(c) If, during such period after the date hereof and prior to
the date on which all of the Certificates shall have been sold by the
Placement Agent, any event shall occur or condition exist as a result
of which it is necessary in your judgment to amend or supplement the
Final Memorandum in order to make the statements therein, in the light
of the circumstances when such Memorandum is delivered to a purchaser,
not misleading, or if, with the opinion of counsel to the Placement
Agent it is necessary to amend or supplement such Memorandum to comply
with applicable law, forthwith to prepare and furnish, at their own
expense, to the Placement Agent, either amendments or supplements to
such Memorandum so that the statements in such Memorandum as so amended
or supplemented will not, in the light of the circumstances when such
Memorandum is delivered to a purchaser, be misleading or so that such
Memorandum, as so amended or supplemented, will comply with applicable
law.
(d) To endeavor to qualify the Certificates for offer and sale
under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.
(e) To cause the Financing Agreements to be duly executed and
delivered by each of the parties thereto on or before the Closing Date
or such later date as may be agreed by the Guarantor, the Company and
the Placement Agent (which later date shall in no case be later than
October 2, 1997); the representations and warranties of the Guarantor
and the Company contained in each of the Financing Agreements shall be
true and correct as of the date of execution and delivery thereof
(except to the extent that they relate solely to an earlier date in
which case they shall be true and correct as of such earlier date) and
the Placement Agent shall have received a certificate of a Vice
President of each of the Guarantor and the Company, dated as of the
Closing Date (or such later date, as the case may be), to such effect.
The Company agrees to furnish to the Placement Agent, promptly after
the Closing Date (or such later date, as the case may be) and the
applicable Delivery Date as defined in the applicable Financing
Agreement, a copy of each opinion required to be delivered under the
applicable Financing Agreement addressed to the Placement Agent and of
such other documents furnished in connection with the fulfillment of
the conditions precedent therein as the Placement Agent or counsel for
the Placement Agent may reasonably request.
(f) Whether or not any sale of such Certificates is
consummated, to pay all expenses incident to the performance of their
obligations under this Agreement, including: (i) the preparation of
each Memorandum and all amendments and supplements thereto, (ii) the
preparation, issuance and delivery of the Certificates, (iii) the fees
and disbursements of the Company's counsel and accountants and the
Indenture Trustee, the Subordination Agent, the Trustees and their
counsel, (iv) the qualification of such Certificates under securities
or Blue Sky laws in accordance with the provisions of Section 5(d),
including filing fees and the fees and disbursements of counsel for the
Placement Agent in connection therewith and in connection with the
preparation of any Blue Sky or legal investment memoranda, (v) the
printing and delivery to the Placement Agent in quantities as
hereinabove stated of copies of the Memorandum and any amendments or
supplements thereto, (vi) any fees charged by rating agencies for the
rating of such Certificates, (vii) all document production charges and
expenses of counsel to the Placement Agent (but not including their
fees for professional services) in connection with the preparation of
this Agreement, (viii) the fees and expenses, if any, incurred in
connection with the admission of such Certificates for trading in
PORTAL or any other appropriate market system, (ix) the costs and
expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the Certificates,
including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants
engaged in connection with the road show presentations with the prior
approval of the Company, travel and lodging expense of the
representatives and officers of the Company and any such consultants,
and the cost of any aircraft chartered in connection with the road
show, and (x) all other costs and expenses incident to the performance
of the obligations of the Guarantor and the Company hereunder for which
provision is not otherwise made in this Section.
(g) Neither the Guarantor, the Company nor any Affiliate will
sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) which could
be integrated with the sale of the Certificates in a manner which would
require the registration under the Securities Act of such Certificates.
(h) Not to solicit any offer to buy or offer or sell the
Certificates by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(i) While any of the Certificates remain outstanding, to make
available, upon request, to any seller of such Certificates the
information specified in Rule 144A(d)(4) under the Securities Act,
unless the Guarantor is then subject to Section 13 or 15(d) of the
Exchange Act.
(j) None of the Guarantor, the Company, their Affiliates or
any person acting on its or their behalf (other than the Placement
Agent) will engage in any directed selling efforts (as that term is
defined in Regulation S) with respect to the Certificates, and the
Company and their Affiliates and each person acting on its or their
behalf (other than the Placement Agent) will comply with the offering
restrictions of Regulation S.
(k) For a period of five years after the Closing Date, to make
available to the Placement Agent copies of all annual reports,
quarterly reports and current reports filed by the Guarantor with the
Securities and Exchange Commission (the "Commission") on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall
be furnished by the Company to the holders of Certificates or the
Guarantor to its security holders generally; provided that at such time
the Guarantor has securities registered under Section 12(b) or 12(g) of
the Exchange Act.
(l) During the period of two years after the Closing Date,
upon request, to furnish to the Placement Agent and any holder of
Certificates a copy of the restrictions on transfer applicable to the
Certificates.
(m) During the period of two years the Closing Date, not to,
and not to permit any of their affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Certificates that have been
reacquired by any of them.
(n) During the period of two years after the Closing Date, not
to be or become an open-end investment company, unit investment trust
or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act, or a
closed-end investment company required to be registered, but not
registered, under the Investment Company Act.
(o) In connection with the offering, until the Placement Agent
shall have notified the Guarantor and the Company of the completion of
the resale of the Certificates, neither the Company nor any of its
affiliates has bid for or purchased or will bid for or purchase, either
alone or with one or more other persons, for any account in which it or
any of its affiliates has a beneficial interest any Certificates; and
neither it nor any of its affiliates will make bids or purchases for
the purpose of creating actual, or apparent, active trading in, or of
raising the price of, the Certificates.
(p) Between the date of this Agreement and the Closing Date,
neither the Guarantor nor the Company will without your prior written
consent offer, sell, or enter into any agreement to sell, any public
debt securities registered under the Securities Act or any debt
securities which may be resold in a transaction exempt from the
registration requirements of the Securities Act in reliance on Rule
144A thereunder and which are marketed through the use of a disclosure
document containing substantially the same information as a prospectus
for similar debt securities registered under the Securities Act (other
than the Certificates).
(q) If requested by you, to use their best efforts to permit
the Certificates to be designated PORTAL securities in accordance with
the rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the PORTAL Market;
unless so requested by you, the Guarantor or the Company will not take
any action to permit the Certificates to be designated PORTAL
securities without your prior consent, which shall not be unreasonably
withheld.
6. Offering of Certificates; Restrictions on Transfer. (a) The
Placement Agent represents and warrants that it is a qualified institutional
buyer as defined in Rule 144A under the Securities Act (a "QIB"). The Placement
Agent, agrees with the Company that (i) it will not solicit offers for, or offer
or sell, such Certificates by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Certificates only
from, and will offer such Certificates only to, persons that it reasonably
believes to be (A) in the case of offers inside the United States, (x) QIBs or
(y) other institutional accredited investors (as defined in Rule 501(a) (1),
(2), (3) or (7) under the Securities Act) ("institutional accredited investors")
that, prior to their purchase of the Certificates, deliver to the Placement
Agent a letter containing the representations and agreements set forth in
Appendix III to the Final Memorandum and (B) in the case of offers outside the
United States, to persons other than U.S. persons ("foreign purchasers", which
term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)) that, in each case, in purchasing such Certificates are
deemed to have represented and agreed as provided in the Final Memorandum under
the caption "Transfer Restrictions."
(b) The Placement Agent, represents, warrants, and agrees with
respect to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in
any jurisdiction by the Guarantor or the Company that would permit a
public offering of the Certificates, or possession or distribution of
either Memorandum or any other offering or publicity material relating
to the Certificates, in any country or jurisdiction where action for
that purpose is required;
(ii) it will comply with all applicable laws and regulations
in each jurisdiction in which it acquires, offers, sells or delivers
Certificates or has in its possession or distributes either Memorandum
or any such other material, in all cases at its own expense;
(iii) the Certificates have not been and will not be
registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Securities Act
or pursuant to an exemption from the registration requirements of the
Securities Act;
(iv) it has offered the Certificates and will offer and sell
the Certificates (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the
offering of the Certificates and the Closing Date, only in accordance
with Rule 903 of Regulation S or another exemption from the
registration requirements of the Securities Act. Accordingly, neither
the Placement Agent, its Affiliates nor any persons acting on its or
their behalf have engaged or will engage in any directed selling
efforts (within the meaning of Regulation S) with respect to the
Certificates, and any the Placement Agent, its Affiliates and any such
persons have complied and will comply with the offering restrictions
requirements of Regulation S;
(v) it has not offered or sold and will not offer or sell any
Certificates to persons in the United Kingdom prior to the expiring of
the period six months from the issue date of the Certificates except to
persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 (the "Regulations"); (B) has complied and will comply
with all applicable provisions of the Financial Services Act 1986 and
the Regulations with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom; and
(C) has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue
of the Certificates to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on;
(vi) it understands that the Certificates have not been and
will not be registered under the Securities and Exchange Law of Japan,
and represents that it has not offered or sold, and agrees that it will
not offer or sell, any Certificates, directly or indirectly in Japan or
to any resident of Japan except (A) pursuant to an exemption from the
registration requirements of the Securities and Exchange Law of Japan
and (B) in compliance with any other applicable requirements of
Japanese law.
Terms used in this Section 6 have the meanings given to them by Regulation S.
7. Indemnification and Contribution. (a) The Guarantor and the
Company, jointly and severally, agree to indemnify and hold harmless the
Placement Agent, and each person, if any, who controls the Placement Agent
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, or is under common control with, or is controlled by, the
Placement Agent, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Placement Agent or any such controlling or affiliated
person in connection with defending or investigating any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in either Memorandum (as amended or supplemented if the Guarantor or
the Company shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to the
Placement Agent furnished to the Guarantor or the Company in writing by the
Placement Agent through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any Preliminary Memorandum
shall not inure to the benefit of the Placement Agent or any person controlling
the Placement Agent if a copy of the Final Memorandum (as then amended or
supplemented if the Guarantor or the Company shall have furnished any amendments
or supplements thereto) was not sent or given by or on behalf of the Placement
Agent to the person asserting any such losses, claims, damages or liabilities,
if required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Certificates to such person, and if the Final
Memorandum (as so amended or supplemented) would have cured the defect giving
rise to such losses, claims, damages or liabilities, unless such failure is the
result of noncompliance by the Guarantor or the Company with Section 5(a)
hereof.
(b) The Placement Agent agrees to indemnify and hold harmless
the Guarantor and the Company, each of their directors, their officers and each
person, if any, who controls the Guarantor or the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Guarantor and the Company to the
Placement Agent, but only with reference to information relating to the
Placement Agent furnished to the Guarantor or the Company in writing by the
Placement Agent through you expressly for use in either Memorandum or any
amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated in writing by Morgan Stanley & Co. Incorporated in the case of
parties indemnified pursuant to paragraph (a) above and by the Guarantor or the
Company in the case of parties indemnified pursuant to paragraph (b) above. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Guarantor and the Company, on the one hand, and the
Placement Agent, on the other hand, from the offering of such Certificates or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
the Guarantor and of the Company on the one hand and the Placement Agent on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Guarantor and the Company
on the one hand and the Placement Agent on the other hand in connection with the
offering of such Certificates shall be deemed to be in the same respective
proportions as the net proceeds from the offering of such Certificates (before
deducting expenses) received by the Trusts and the total discounts and
commissions received by the Placement Agent in respect thereof bear to the
aggregate offering price of such Certificates. The relative fault of the
Guarantor and the Company on the one hand and of the Placement Agent on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Guarantor or the Company or by the Placement Agent and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The Guarantor, the Company and the Placement Agent agree
that it would not be just or equitable if contribution pursuant to this Section
7 were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (d) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, the Placement Agent shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Certificates resold by it in the initial placement of such
Certificates were offered to investors exceeds the amount of any damages that
the Placement Agent has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The indemnity and contribution
provisions contained in this Section 7 and the representations and warranties of
the Guarantor and the Company contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of the Placement Agent or
any person controlling the Placement Agent or by or on behalf of the Guarantor
or the Company, its officers or directors or any person controlling the
Guarantor or the Company and (iii) acceptance of and payment for any of the
Certificates. The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
8. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event singly or
together with any other such event makes it, in your judgment, impracticable to
market the Certificates on the terms and in the manner contemplated in the Final
Memorandum. If this Agreement is terminated by the Placement Agent in accordance
with the provisions of this Section 8, the Guarantor and the Company shall
reimburse the Placement Agent for all its reasonable out-of-pocket expenses,
including the fees and disbursements of counsel for the Placement Agent.
9. All notices and other communications under this Agreement
shall be in writing, and, if sent to the Placement Agent, shall be mailed,
delivered or sent by facsimile transmission to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Attention: Bruce Paone
Facsimile number: (212) 761-0786
or, if sent to the Guarantor or the Company, will be mailed, delivered or sent by facsimile transmission
to it at:
Atlantic Coast Airlines
515 A Shaw Road
Dulles, VA 20166
Attention: General Counsel
Facsimile number: (703) 925-6294
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Ave., N.W.
Washington, DC 20036
Attention: Ronald O. Mueller, Esq.
Facsimile number: (202) 530-9316
10. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
If this Agreement shall be terminated by the Placement Agent
because of any failure or refusal on the part of the Guarantor or the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Guarantor or the Company shall be unable to perform its
obligations under this Agreement, the Guarantor and the Company will, jointly
and severally, reimburse the Placement Agent for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
the Placement Agent in connection with this Agreement or the offering
contemplated hereunder.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
<PAGE>
Please confirm your agreement to the foregoing by signing in
the space provided below for that purpose and returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.
Very truly yours,
ATLANTIC COAST AIRLINES, INC.
By
ATLANTIC COAST AIRLINES
By
Agreed, September 19, 1997
Morgan Stanley & Co.
Incorporated
By
<PAGE>
3
SS_NYL4/246328
SS_NYL4/246328
SS_NYL4/246328
SCHEDULE I
<PAGE>
3
SS_NYL4/246328
Pass Through Aggregate Final
Certificate Principal Interest Distribution
Designation Amounts Rate Date
1997-1A $57,714,000 7.20% 1/1/2014
1997-1B 24,734,000 7.35 1/1/2011
1997-1C 23,333,000 8.75 1/1/2007
1997-1D 5,805,000 7.97 1/1/2000
---------
Total: $111,586,000
Fees payable to the Placement Agent:
$1,180,766 (1.058 % of the aggregate principal amount of the Certificates; includes $125,000
advisory fee pursuant to Engagement Letter of September 9, 1997)
<PAGE>
A-1
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.50(b)
PASS THROUGH TRUST AGREEMENT
<PAGE>
61
179212.3/NYL2
This PASS THROUGH TRUST AGREEMENT, dated as of September 25,
1997, among ATLANTIC COAST AIRLINES, a California corporation (the "Company"),
ATLANTIC COAST AIRLINES, INC., a Delaware corporation (the "Guarantor"), and THE
FIRST NATIONAL BANK OF MARYLAND, a national banking association, as Trustee, is
made with respect to the formation of Atlantic Coast Airlines 1997-1A Pass
Through Trust and the issuance of 7.20% Atlantic Coast Airlines 1997-1A Pass
Through Certificates representing fractional undivided interests in the Trust.
WITNESSETH:
WHEREAS, pursuant to each Indenture, (i) in the case of each
of the six Canadair Regional Jet Series 200-ER aircraft ("CRJs") which will be
leased to the Company pursuant to the related Lease (the "Leased CRJs"), the
related Owner Trustee proposes to issue on a nonrecourse basis four series of
Equipment Notes to finance the purchase of the Leased CRJs referred to in such
Indenture, (ii) in the case of each of four British Aerospace Jetstream J-41
aircraft ("J-41s") which will be leased to the Company pursuant to the related
Lease (the "Leased J-41s", together with the Leased CRJs, the "Leased
Aircraft"), the related Owner Trustee proposes to issue on a nonrecourse basis
three series of Equipment Notes to finance the purchase of the Leased J-41s
referred to in such Indenture and (iii) in the case of each of the four J-41s
which are owned by the Company (the "Owned Aircraft"), the Company proposes to
issue on a recourse basis three series of Equipment Notes, to finance such Owned
Aircraft;
WHEREAS, the Trustee, upon execution and delivery of this
Agreement, hereby declares the creation of this Trust (the "1997-1A Trust") for
the benefit of the Certificateholders, and the initial Certificateholders, as
the grantors of the 1997-1A Trust, by their respective acceptances of the
Certificates, join in the creation of this 1997-1A Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust will
evidence fractional undivided interests in the Trust and will convey no rights,
benefits or interests in respect of any property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Financing Agreements to be entered into by the Trustee
substantially concurrently with the execution and delivery of this Agreement,
the Trustee on behalf of the 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 Certificates issued
hereunder and shall hold such Equipment Notes in trust for the benefit of the
Certificateholders;
WHEREAS, all of the conditions and requirements necessary to
make this Agreement, when duly executed and delivered, a valid, binding and
legal instrument, enforceable in accordance with its terms and for the purposes
herein expressed, have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof have been in
all respects duly authorized; and
WHEREAS, to facilitate the sale of Equipment Notes to, and the
purchase of Equipment Notes by, the Trustee on behalf of the 1997-1A Trust, (i)
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
pursuant hereto and as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended and (ii) the Guarantor
have each duly authorized the execution and delivery of this Agreement with
respect to all such Certificates and are undertaking to perform certain
administrative and ministerial duties hereunder and is also undertaking to pay
the fees and expenses of the Trustee;
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 Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms used herein that are defined in this Article
have the meanings assigned to them in this Article, and include the
plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference herein have the meanings
assigned to them therein;
(3) all references in this Agreement to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this
Agreement;
(4) 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, Subsection or other subdivision; and
(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".
Act: With respect to any Certificateholder has the meaning specified in Section 1.04.
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. For purposes
of this definition, "control", when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
Agent Members: Has the meaning specified in Section 3.05(a).
Aircraft: Means the Leased Aircraft and the Owned Aircraft.
Authorized Agent: Means any Paying Agent or Registrar for the Certificates.
Avoidable Tax: Means a state or local tax (i) upon (w) the
Trust, (x) the Trust Property, (y) Certificateholders or (z) the
Trustee for which the Trustee is entitled to seek reimbursement from
the Trust Property, and (ii) which would be avoided if the Trustee were
located in another state, or jurisdiction within a state, within the
United States. A tax shall not be an Avoidable Tax if the Company or
any Owner Trustee shall agree to pay, and shall pay, such tax.
Book-Entry Certificates: With respect to the Certificates,
means a beneficial interest in the Certificates, ownership and
transfers of which shall be made through book entries as described in
Section 3.04.
Business Day: Means any day other than a Saturday, a Sunday or
a day on which commercial banks are required or authorized to close in
Baltimore, Maryland, New York, New York, or, so long as any Certificate
is outstanding, the city and state in which the Trustee or any Loan
Trustee maintains its Corporate Trust Office or receives and disburses
funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Certificates executed and authenticated by the
Trustee, substantially in the form of Exhibit A hereto.
Certificate Account: Means the account or accounts created and maintained pursuant
to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a Certificate is
registered in the Register.
Clearing Agency: Means an organization registered as a "clearing agency" pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended.
Clearing Agency Participant: Means a broker, dealer, bank,
other financial institution or other Person for whom from time to time
a Clearing Agency effects, directly or indirectly, book-entry transfers
and pledges of securities deposited with the Clearing Agency.
Company: Means Atlantic Coast Airlines, a California corporation, or its successor in
interest.
Controlling Party: Means the party entitled to act as such pursuant to the terms of
the Intercreditor Agreement.
Corporate Trust Office: With respect to the Trustee or any
Loan Trustee, means the office of such trustee in the city at which at
any particular time its corporate trust business shall be principally
administered.
Cut-off Transfer Date: Means October 2, 1997.
Depositary: Means The Depository Trust Company, its nominees and their respective
successors.
Direction: Has the meaning specified in Section 1.04(c).
Distribution Date: Means each Regular Distribution Date or Special Distribution Date.
Equipment Notes: Means the "secured certificates" issued pursuant to the Indentures.
Escrow Account: Has the meaning specified in Section 2.01(b).
Escrowed Funds: Has the meaning specified in Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means the occurrence of an Indenture Default
under any Indenture pursuant to which Equipment Notes held by the Trust
were issued.
Financing Agreements: Means each of the Participation
Agreements and the Note Purchase Agreement listed on Schedule 2 hereto,
as the same may be amended, supplemented or otherwise modified from
time to time in accordance with its terms.
Financing Documents: With respect to any Equipment Note, means
the related Indenture, Financing Agreement and, to the extent
applicable, the Lease and the other relevant documents referred to in
the definitions of "Operative Agreements" contained in the related
Indenture.
Fractional Undivided Interest: Means the fractional undivided interest in the Trust
that is evidenced by a Certificate.
Global Certificates: Has the meaning assigned to such term in Section 3.01.
Guarantor: Means Atlantic Coast Airlines, Inc., a Delaware corporation, or its
successors in interest.
Indentures: Means each Indenture and Security Agreement listed
on Schedule 1 hereto, in each case as the same may be amended or
supplemented or otherwise modified from time to time in accordance with
its terms.
Indenture Default: With respect to any Indenture, means any Indenture Event of
Default (as such term is defined in such Indenture) thereunder.
Initial Purchaser: Means Morgan Stanley & Co. Incorporated.
Initial Regular Distribution Date: Means the first Regular Distribution Date on which
a Scheduled Payment is to be made.
Institutional Accredited Investor: Means an institutional
investor that is an "accredited investor" within the meaning set forth
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act.
Intercreditor Agreement: Means the Intercreditor Agreement
dated September 25, 1997 among the Trustee, the Other Trustees, the
Liquidity Provider, the liquidity providers, if any, relating to the
Certificates issued under (and as defined in) the Other Pass Through
Trust Agreements, and The First National Bank of Maryland, as
Subordination Agent thereunder, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Issuance Date: Means the date of the issuance of the Initial Certificates.
Lease: Means, with respect to each Leased Aircraft, the lease
between an Owner Trustee, as the lessor, and the Company, as the
lessee, referred to in the related Indenture, as each such lease may be
amended or supplemented in accordance with its respective terms; and
Leases means all such leases.
Leased Aircraft: Has the meaning specified in the first recital to this Agreement.
Letter of Representations: Means the agreement dated the Issuance Date among the
Company, the Trustee and the initial Clearing Agency.
Liquidity Facility: Means the Irrevocable Revolving Credit
Agreement dated September 25, 1997 relating to the Certificates,
between the Liquidity Provider and the Subordination Agent, as amended,
replaced, supplemented or otherwise modified from time to time in
accordance with its terms and the terms of the Intercreditor Agreement.
Liquidity Provider: Means, initially, ING Bank N.V., and any replacement or
successor therefor appointed in accordance with the Liquidity Facility and the Intercreditor
Agreement.
Loan Trustee: With respect to any Equipment Note or the
Indenture applicable thereto, means 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.
Non-U.S. Person: Means a Person that is not a U.S. Person, as defined in Regulation S.
Officer's Certificate: Means a certificate signed, (a) in the
case of the Guarantor or the Company, by (i) the President or any
Executive Vice President or Senior Vice President of the Guarantor or
the Company, signing alone or (ii) any Vice President of the Guarantor
or the Company signing together with the Secretary, the Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Guarantor or
the Company 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.
Offshore Certificates Exchange Date: Has the meaning specified in Section 3.01.
Offshore Global Certificates: Has the meaning assigned to such term in Section 3.01.
Offshore Physical Certificates: Has the meaning assigned to such term in Section 3.01.
Opinion of Counsel: Means a written opinion of legal counsel
who (a) in the case of counsel for the Guarantor or the Company may be
(i) a senior attorney in rank of the officers of the Guarantor or the
Company a principal duty of which is furnishing advice as to legal
matters or (ii) such other counsel designated by the Guarantor or 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 Pass Through Trust Agreement: Means each of the three
other Atlantic Coast Airlines 1997-1 Pass Through Trust Agreements
relating to Atlantic Coast Airlines 1997-1B Pass Through Trust,
Atlantic Coast Airlines 1997-1C Pass Through Trust and Atlantic Coast
Airlines 1997-1D Pass Through Trust, each dated the date hereof; and
Other Pass Through Trust Agreements means all such agreements.
Other Trustee: Means the trustee under each of the Other Pass
Through Trust Agreements, and any successor or other trustee appointed
as provided therein; and Other Trustees means all such trustees.
Outstanding: With respect to Certificates, means, as of the date of determination,
all Certificates theretofore authenticated and delivered under this Agreement, except:
(i) Certificates theretofore cancelled by the Registrar or delivered to
the Trustee or the Registrar for cancellation;
(ii) All of the Certificates if money in the full
amount required to make the final distribution with respect
thereto pursuant to Section 11.01 hereof has been theretofore
deposited with the Trustee in trust for the Holders of such
Certificates as provided in Section 4.01 pending distribution
of such money to such Certificateholders pursuant to such
final distribution payment; and
(iii) Certificates in exchange for or in lieu of
which other Certificates have been authenticated and delivered
pursuant to this Agreement.
Owned Aircraft: Has the meaning specified in the first recital to this Agreement.
Owner Participant: With respect to any Equipment Note relating
to a Leased Aircraft, means the "Owner Participant" as referred to in
the Indenture pursuant to which such Equipment Note is issued and any
permitted successor or assign of such Owner Participant; and Owner
Participants at any time of determination means all of the Owner
Participants thus referred to in the Indentures.
Owner Trustee: With respect to any Equipment Note relating to
a Leased Aircraft, means the "Owner Trustee", as referred to in the
Indenture pursuant to which such Equipment Note is issued, not in its
individual capacity but solely as trustee; and Owner Trustees means all
of the Owner Trustees party to any of the Indentures.
Participation Agreement: With respect to any Leased Aircraft,
means the related Participation Agreement listed on Schedule 2 hereto,
as the same may be amended, supplemented or otherwise modified from
time to time in accordance with its terms; and Participation Agreements
means all such agreements.
Paying Agent: Means the paying agent maintained and appointed for the Certificates
pursuant to Section 7.12.
Permanent Offshore Global Certificates: Has the meaning specified in Section 3.01.
Permitted Investments: Means obligations of the United States
of America or agencies or instrumentalities thereof for the payment of
which the full faith and credit of the United States of America is
pledged, maturing in not more than 60 days or such lesser time as is
necessary for payment of any Special Payments on a Special Distribution
Date or any mutual fund the portfolio of which is limited to such
obligations, including any proprietary mutual fund of The First
National Bank of Maryland for which such bank or an affiliate is
investment advisor or to which such bank provides other services and
receives reasonable compensation for such services.
Person: Means any person, including any individual,
corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or government or any
agency or political subdivision thereof.
Physical Certificates: Has the meaning specified in Section 3.01.
Pool Balance: Means, as of any date, (i) the original
aggregate face amount of the Certificates 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, as of any date, the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance as
at such date by (ii) the original aggregate face amount of the
Certificates. 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 and the distribution
thereof to be made on such Distribution Date.
Postponed Notes: Means the Equipment Notes to be held in the Trust as to which a
Postponement Notice shall have been delivered pursuant to Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of the
Company (1) requesting that the Trustee temporarily postpone purchase
pursuant to one or more of the Financing Agreements of certain of the
Equipment Notes to a date which is later than the Issuance Date, (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 Cut-Off Transfer Date
for payment by the Trustee of such purchase price and issuance of the
related Equipment Note, or (b) indicating that such new Transfer Date
(which shall be on or prior to the Cut-off Transfer Date) will be set
by subsequent written notice not less than one Business Day prior to
such new Transfer Date.
Private Placement Legend: Has the meaning specified in Section 3.02.
QIB: Means a qualified institutional buyer as defined in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be
distributed on any Regular Distribution Date, other than the final
distribution, 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, the 15th day (whether or not a Business Day) preceding
such Special Distribution Date.
Register and Registrar: Mean the register maintained and the registrar appointed
pursuant to Sections 3.04 and 7.12.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of the Certificates, means each date
designated as a Regular Distribution Date in this Agreement, until
payment of all the Scheduled Payments to be made under the Equipment
Notes held in the Trust have been made; 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.
Regulation S: Means Regulation S under the Securities Act or
any successor regulation thereto.
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
Agreement.
Responsible Officer: With respect to the Trustee, any Loan
Trustee and any Owner Trustee, means any officer in the Corporate Trust
Division 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.
Rule 144A: Means Rule 144A under the Securities Act and any
successor regulation thereto.
Scheduled Payment: With respect to any Equipment Note, means
any payment of principal and interest on such Equipment Note or any
payment of interest on the Certificates with funds drawn under the
Liquidity Facility (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) due from the
obligor thereon 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, 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.
Securities Act: Means the United States Securities Act of 1933, as amended from time
to time, or any successor thereto.
Special Distribution Date: Means each date on which a Special
Payment is to be distributed as specified in this Agreement; 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.
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
2.01(b) or (iii) the amounts required to be distributed pursuant to the
penultimate paragraph of Section 2.01(b).
Special Payments Account: Means the account or accounts created and maintained
pursuant to Section 4.01(b).
Specified Investments: Means (i) obligations of, or guaranteed
by, the United States Government or agencies thereof, (ii) open market
commercial paper of any corporation incorporated under the laws of the
United States of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or its
equivalent by Standard & Poor's Rating Group, (iii) certificates of
deposit issued by commercial banks organized under the laws of the
United States or of any political subdivision thereof having a combined
capital and surplus in excess of $500,000,000 which banks or their
holding companies have a rating of A or its equivalent by Moody's
Investors Service, Inc. or Standard & Poor's Rating Group; provided,
however, that the aggregate amount at any one time so invested in
certificates of deposit issued by any one bank shall not exceed 5% of
such bank's capital and surplus, (iv) U.S. dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (iii) or any subsidiary thereof, (v)
repurchase agreements with any financial institution having combined
capital and surplus of at least $500,000,000 with any of the
obligations described in clauses (i) through (iv) as collateral and
(vi) any mutual fund the portfolio of which is limited to investments
of the types specified in the preceding clauses (i) through (v),
including any proprietary mutual fund of The First National Bank of
Maryland for which such bank or an affiliate is investment advisor or
to which such bank provides other services and receives reasonable
compensation for such services; 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 in the Intercreditor Agreement.
Temporary Offshore Global Certificates: Has the meaning specified in Section 3.01.
Transfer Date: Has the meaning assigned to the term "Delivery Date" in each Financing
Agreement.
Triggering Event: Has the meaning assigned to such term in the Intercreditor
Agreement.
Trust: Means the trust created by this Agreement, the estate of which consists of the
Trust Property.
Trust Indenture Act: Except as otherwise provided in Section 9.06, means the United
States Trust Indenture Act of 1939 as in force at the date hereof.
Trust Property: Means (i) the Equipment Notes held as the
property of the Trust, all monies at any time paid thereon and all
monies due and to become due thereunder, (ii) the rights of the Trust
under any Intercreditor Agreement, including all monies receivable in
respect of such rights, (iii) all monies receivable under the Liquidity
Facility and (iv) funds from time to time deposited in the Escrow
Account, the Certificate Account and the Special Payments Account and
any proceeds from the sale by the Trustee pursuant to Article VI hereof
of any such Equipment Note.
Trustee: Means The First National Bank of Maryland, or its successor in interest, and
any successor or other trustee appointed as provided herein.
Trustee's Lien: Has the meaning specified in Section 7.17.
U.S. Global Certificate: Has the meaning specified in Section 3.01.
U.S. Physical Certificates: Has the meaning specified in Section 3.01.
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 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 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 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 Agreement (other than a certificate
provided pursuant to Section 8.04(d)) shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions in
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;
(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.
Any Opinion of Counsel stated to be based on the opinion of
other counsel shall be accompanied by a copy of such other opinion.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
Section 1.04. Acts of Certificateholders. (a) Any direction,
consent, waiver or other action provided by this Agreement to be given or taken
by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in
person or by an agent or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required pursuant to this Agreement, to the Company or any Loan
Trustee. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Certificateholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Company and any Loan Trustee, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the certificate of any notary public
or other officer of any jurisdiction authorized to take acknowledgments of deeds
or administer oaths that the Person executing such instrument acknowledged to
him the execution thereof, or by an affidavit of a witness to such execution
sworn to before any such notary or such other officer and where such execution
is by an officer of a corporation or association or a member of a partnership,
on behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the
requisite Fractional Undivided Interests of Certificates Outstanding have given
any direction, consent or waiver (a "Direction") under this Agreement,
Certificates owned by the Company, the Guarantor, any Owner Trustee, any Owner
Participant or any Affiliate of any such Person 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 Outstanding, such Certificates shall not be so disregarded as
aforesaid, and (ii) if any amount of Certificates so owned by any such Person
have been pledged in good faith, such Certificates shall not be disregarded as
aforesaid if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and that the pledgee
is not the Company, the Guarantor, any Owner Trustee, any Owner Participant or
any Affiliate of any such Person.
(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 entitled to give any consent, request, demand, authorization,
direction, notice, waiver or other Act. Such record date shall be the record
date specified in such Officer's Certificate, which shall be a date not more
than 30 days prior to the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such consent, request, demand,
authorization, direction, notice, waiver or other Act may be given before or
after such record date, but only the Certificateholders of record 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 have authorized or agreed or consented to such
consent, request, demand, authorization, direction, notice, waiver or other Act,
and for that purpose the Outstanding Certificates shall be computed as of such
record date; provided that no such consent, request, demand, authorization,
direction, notice, waiver or other Act by the 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, consent, waiver or other action by the
Certificateholder of any Certificate shall bind the Certificateholder of every
Certificate issued upon the transfer thereof or in exchange therefor or in lieu
thereof, whether or not notation of such action is made upon such Certificate.
(f) Except as otherwise provided in Section 1.04(c),
Certificates 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.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute and deliver the
Intercreditor Agreement and each of the Financing Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the Company. Upon
oral or written request of the Company or the Company's counsel acting on behalf
of the Company and the satisfaction of the closing conditions specified in each
of the Financing Agreements, the Trustee shall execute, deliver and authenticate
Certificates equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each of the Financing
Agreements on the Transfer Date, and evidencing the entire ownership interest in
the Trust. 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
such Equipment Notes and, concurrently therewith, the Trustee shall purchase,
pursuant to the terms and conditions of the Financing Agreements, the Equipment
Notes at a purchase price equal to the amount of such consideration so received.
Except as provided in Sections 3.04 and 3.07 hereof, the Trustee shall not
execute, authenticate or deliver Certificates 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 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 (the "Escrow Account") to be maintained as a part
of the Trust an amount equal to the purchase price of such Postponed Notes (the
"Escrowed Funds"). The Escrowed Funds so deposited shall be invested by the
Trustee at the written direction of the Company in Specified Investments (i)
maturing no later than any scheduled Transfer Date relating to the 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 any
Postponed Notes will not be issued, with respect to the portion of the Escrowed
Funds relating to such Postponed Notes, maturing on the next applicable Special
Distribution Date, if such investments are reasonably available for purchase.
The Trustee shall make withdrawals from the Escrow Account only as provided in
this Agreement. Upon request of the Company on one or more occasions and the
satisfaction of the closing conditions specified in the applicable Financing
Agreements on or prior to the related Cut-off Transfer 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 of the Company in Specified Investments
maturing as provided in the preceding paragraph.
Any earnings on Specified Investments received from time to
time by the Trustee shall be promptly distributed to the Company. The Company
shall pay to the Trustee for deposit to the Escrow Account an amount equal to
any losses on such Specified Investments as incurred.
On the Initial Regular Distribution Date, the Company will pay
(in immediately available funds) to the Trustee an amount equal to the interest
that would have accrued on any Postponed Notes, if any, purchased after the
Issuance Date if such Postponed Notes had been purchased on the Issuance Date,
from the Issuance Date to, but not including, the date of the purchase of such
Postponed Notes by the Trustee.
If the Company notifies the Trustee prior to the Cut-off
Transfer Date that any Postponed Notes will not be issued on or prior to the
Cut-off Transfer Date for any reason, on the next Special Distribution Date
occurring more than 20 days following the date of such notice (i) the Company
shall pay to the Trustee for deposit in the 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 the Certificates from the Issuance Date to, but not
including, such Special Distribution Date and (ii) the Trustee shall transfer an
amount equal to that amount of Escrowed Funds that would have been used to
purchase the Postponed Notes designated in such notice and the amount paid by
the Company pursuant to the immediately preceding clause (i) to the related
Special Payments Account for distribution as a Special Payment in accordance
with the provisions hereof.
If, on the Cut-off Transfer Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to in the
immediately preceding paragraph) has been used to purchase Postponed Notes, on
the next Special Distribution Date occurring more than 20 days following the
Cut-off Transfer Date (i) the Company shall pay to the Trustee for deposit in
the 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 the Certificates from the Issuance Date to, but
not including, such Special Distribution Date and (ii) the Trustee shall
transfer such unused Escrowed Funds and the amount paid by the Company pursuant
to the immediately preceding clause (i) to such Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee, upon the
execution and delivery of this Agreement, acknowledges its acceptance of all
right, title and interest in and to the Equipment Notes acquired pursuant to
Section 2.01 hereof and the Financing Agreements and declares that the Trustee
holds and will hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all then present
and future Certificateholders, upon the trusts herein set forth. Subject to
Section 7.14, the Trustee shall take all actions reasonably necessary to effect
the registration of all such Equipment Notes in the name of the Subordination
Agent. By its payment for and acceptance of each Certificate issued to it under
this Agreement, each initial Certificateholder as grantor of the Trust thereby
joins in the creation and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is constituted
solely for the purpose of making the investment in the Equipment Notes, 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).
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates. (a) The Certificates shall be known as the "7.20% 1997-1A Pass
Through Certificates" of the Trust. Each Certificate will represent a fractional
undivided interest in the Trust and shall be substantially in the form set forth
as Exhibit A hereto, with such appropriate insertions, omissions, substitutions
and other variations as are required or 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 or as may, consistently herewith, be determined by the
officers executing such Certificates, as evidenced by their execution of the
Certificates. Any portion of the text of any Certificate may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the
Certificate.
(b) The Certificates shall be issued only in fully registered
form without coupons and only in denominations of $100,000 or integral multiples
of $1,000 in excess thereof, except that one Certificate may be issued in a
denomination of less than $100,000. Each Certificate shall be dated the date of
its authentication. The aggregate Fractional Undivided Interest of Certificates
shall not at any time exceed $57,714,000.
(c) Certificates offered and sold in reliance on Rule 144A
shall be issued initially in the form of a single permanent global Certificate
in registered form, substantially in the form set forth as Exhibit A hereto (the
"U.S. Global Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be registered in the name
of a nominee for the Depositary and deposited with the Trustee, as custodian for
the Depositary. The aggregate principal amount of the U.S. Global Certificate
may from time to time be increased or decreased by adjustments made on the
records of the Depositary or its nominee, or of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
(d) Certificates offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of a single
temporary global Certificate in registered form, substantially in the form set
forth as Exhibit A hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter provided. The Temporary
Offshore Global Certificate will be registered in the name of a nominee of the
Depositary for credit to the account of the Agent Members acting as depositaries
for Euroclear and Cedel and deposited with the Trustee as custodian for the
Depositary. At any time on or after November 5, 1997 (the "Offshore Certificates
Exchange Date"), upon receipt by the Trustee of a certificate substantially in
the form of Exhibit B hereto, a single permanent global Certificate in
registered form substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary Offshore Global
Certificate, the "Offshore Global Certificates"), duly executed and
authenticated by the Trustee as hereinafter provided, shall be registered in the
name of a nominee for the Depositary and deposited with the Trustee, as
custodian for the Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal amount of any
Temporary Offshore Global Certificate in an amount equal to the principal amount
of the beneficial interest in such Temporary Offshore Global Certificate
transferred. The U.S. Global Certificate and the Offshore Global Certificates
are sometimes referred to as the "Global Certificates".
(e) Certificates offered and sold to Institutional Accredited
Investors shall be issued in the form of permanent certificated Certificates in
registered form in substantially the form set forth as Exhibit A hereto (the
"U.S. Physical Certificates"). Certificates issued pursuant to Section 3.05(b)
in exchange for interests in any Offshore Global Certificate shall be in the
form of permanent certificated Certificates in registered form substantially in
the form set forth in Exhibit A (the "Offshore Physical Certificates"). The
Offshore Physical Certificates and U.S. Physical Certificates are sometimes
collectively herein referred to as the "Physical Certificates".
(f) The definitive Certificates shall be in registered form
and shall be typed, printed, lithographed or engraved or produced by any
combination of these methods or may be produced in any other manner, all as
determined by the officers executing such Certificates, as evidenced by their
execution of such Certificates.
Section 3.02. Restrictive Legends. (a) Subject to Section 3.06, each Global
Certificate (other than the Permanent Offshore Global Certificate) and each U.S. Physical Certificate
shall bear the following legend (the "Private Placement Legend") on the face thereof:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE
LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY ATLANTIC COAST AIRLINES
("ACA") OR ANY AFFILIATE OF ACA, RESELL OR OTHERWISE TRANSFER THIS
CERTIFICATE EXCEPT (A) TO ACA OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE
PRINCIPAL AMOUNT OF SUCH CERTIFICATES THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER
TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY ACA OR AN AFFILIATE OF ACA, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND ACA
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Global Certificate shall also bear the following legend on the face
thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE 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
HEREON 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.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
Section 3.03. Authentication of Certificates. (a) The Trustee
shall duly execute, authenticate and deliver Certificates in authorized
denominations equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to the Financing
Agreements and evidencing the entire ownership of the Trust.
(b) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder.
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 of this Agreement a register (the "Register") for the
Certificates in which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the Certificates
and of transfers and exchanges of the Certificates as herein provided. The
Trustee shall initially be the registrar (the "Registrar") for the purpose of
registering the Certificates and transfers and exchanges of the Certificates as
herein provided. A Certificateholder may transfer a Certificate by written
application to the Registrar stating the name of the proposed transferee and
otherwise complying with the terms of this Agreement, including providing a
written certificate or other evidence of compliance with any restrictions on
transfer. No such transfer shall be effected until, and such transferee shall
succeed to the rights of a Certificateholder only upon, final acceptance and
registration of the transfer by the Registrar in the Register. Prior to the
registration of any transfer by a Certificateholder as provided herein, the
Trustee shall treat the person in whose name the Certificate is registered as
the owner thereof for all purposes, and the Trustee shall not be affected by
notice to the contrary. Furthermore, the Depositary shall, by acceptance of a
Global Certificate, agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system maintained by the
Depositary (or its agent), and that ownership of a beneficial interest in the
Certificate shall be required to be reflected in a book entry. When Certificates
are presented to the Registrar with a request to register the transfer or to
exchange them for an equal face amount of Certificates of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges in accordance with the terms,
conditions and restrictions hereof, the Trustee shall execute and authenticate
Certificates at the Registrar's request. No service charge shall be made for any
registration of transfer or exchange of the Certificates, but the Trustee may
require payment by the transferor of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or other similar governmental charges payable upon exchanges
pursuant to Section 3.10 or 9.07).
Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of, or participants
in, the Depositary ("Agent Members") shall have no rights under this Agreement
with respect to any Global Certificate held on their behalf by the Depositary,
or the Trustee as its custodian, and the Depositary may be treated by the
Trustee and any agent of the Trustee as the absolute owner of such Global
Certificate for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Trustee or any agent of the Trustee from giving effect
to any written certification, proxy or other authorization furnished by the
Depositary or shall impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Certificate. Upon the issuance of any Global Certificate, the
Registrar or its duly appointed agent shall record a nominee of the Depositary
as the registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be limited to
transfers of such Global Certificate in whole, but not in part, to nominees of
the Depositary, its successor or such successor's nominees. Beneficial interests
in the U.S. Global Certificate and any Offshore Global Certificate may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 3.06. Beneficial interests in the U.S. Global
Certificate or an Offshore Global Certificate shall be delivered to all
beneficial owners in the form of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, if (i) the Company notifies the Trustee in
writing that the Depositary is unwilling or unable to discharge properly its
responsibilities as Depositary for the U.S. Global Certificate or such Offshore
Global Certificate, as the case may be, and the Company is unable to locate a
qualified successor depositary within 90 days of such notice or (ii) after the
occurrence of an Event of Default, beneficial owners of the U.S. Global
Certificate or Offshore Global Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust, by Act
of such Certificateholders delivered to the Company and the Trustee, advise the
Company, the Trustee and the Depositary through its Clearing Agency Participants
in writing that the continuation of a book-entry system through the Depositary
is no longer in the best interests of the Certificateholders, then the Trustee
shall notify all owners of beneficial interests in the U.S. Global Certificate
or an Offshore Global Certificate, through the Depositary, of the occurrence of
any such event and the availability of definitive Certificates.
(c) Any beneficial interest in one of the Global Certificates
that is transferred to a Person who takes delivery in the form of an interest in
the other Global Certificate will, upon such transfer, cease to be an interest
in such Global Certificate and become an interest in the other Global
Certificate and, accordingly, will thereafter be subject to all transfer
restrictions, if any, and other procedures applicable to beneficial interests in
such other Global Certificate for as long as it remains such an interest.
(d) [Intentionally omitted.]
(e) In connection with the transfer of the entire U.S. Global
Certificate or an entire Offshore Global Certificate to the beneficial owners
thereof pursuant to paragraph (b) of this Section 3.05, such U.S. Global
Certificate or Offshore Global Certificate, as the case may be, shall be deemed
to be surrendered to the Trustee for cancellation, and the Trustee shall
execute, authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in such U.S. Global
Certificate or Offshore Global Certificate, as the case may be, an equal
aggregate principal amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.
(f) Any U.S. Physical Certificate delivered in exchange for an
interest in the U.S. Global Certificate pursuant to paragraph (b) of this
Section 3.05 shall, except as otherwise provided by paragraph (f) of Section
3.06, bear the Private Placement Legend.
(g) Any Offshore Physical Certificate delivered in exchange
for an interest in an Offshore Global Certificate pursuant to paragraph (b) of
this Section shall, except as otherwise provided by paragraph (f) of Section
3.06, bear the applicable legend regarding transfer restrictions set forth in
Section 3.02(a).
(h) The registered holder of the U.S. Global Certificate or
any Offshore Global Certificate may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. The following provisions shall apply to
the Certificates:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of any
proposed transfer of a Certificate to any Institutional Accredited Investor
which is not a QIB (excluding transfers to or by Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Certificate, whether or not such Certificate bears the Private
Placement Legend, if (x) the requested transfer is at least two years
after the later of the original issue date of the Certificates and the
last date on which such Certificate was held by the Company or any
affiliate thereof or (y) the proposed transferee has delivered to the
Registrar a letter substantially in the form of Exhibit D hereto and
the aggregate principal amount of the Certificates being transferred is
at least $100,000.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Certificate, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date of the transfer and a decrease in the principal amount
of such U.S. Global Certificate in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Certificate to be
transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver to the transferor or at its direction, one or
more U.S. Physical Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect to the
registration of any proposed transfer of a Certificate to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of U.S.
Physical Certificates or an interest in any Temporary Offshore Global
Certificate, the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Certificate stating, or has otherwise advised the
Trustee and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Certificate
stating, or has otherwise advised the Trustee and the Registrar in
writing, that it is purchasing the Certificate for its own account or
an account with respect to which it exercises sole investment
discretion and that it, or the Person on whose behalf it is acting with
respect to any such account, is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the
Trust and/or the Company as it has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents referred
to in clause (i) above and instructions given in accordance with the
Depositary's and the Registrar's procedures therefor, the Registrar
shall reflect on its books and records the date of such transfer and an
increase in the principal amount of the U.S. Global Certificate in an
amount equal to the principal amount of the U.S. Physical Certificates
or interests in the Temporary Offshore Global Certificate, as the case
may be, being transferred, and the Trustee shall cancel such Physical
Certificates or decrease the amount of such Temporary Offshore Global
Certificate so transferred.
(c) [Intentionally omitted.]
(d) Transfers of Interests in the Permanent Offshore Global
Certificate or Offshore Physical Certificates. The Registrar shall register any
transfer of interests in the Permanent Offshore Global Certificate or Offshore
Physical Certificates without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall
apply with respect to any registration of any transfer of a Certificate to a Non-U.S. Person:
(i) Prior to the Offshore Certificates Exchange Date, the
Registrar shall register any proposed transfer of a Certificate to a
Non-U.S. Person upon receipt of a certificate substantially in the form
set forth as Exhibit C hereto from the proposed transferor.
(ii) On and after the Offshore Certificates Exchange Date, the
Registrar shall register any proposed transfer to any Non-U.S. Person
if the Certificate to be transferred is a U.S. Physical Certificate or
an interest in the U.S. Global Certificate, upon receipt of a
certificate substantially in the form of Exhibit C from the proposed
transferor. The Registrar shall promptly send a copy of such
certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the documents, if
any, required by paragraph (ii) and (y) instructions in accordance with
the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date of such transfer and a
decrease in the principal amount of such U.S. Global Certificate in an
amount equal to the principal amount of the beneficial interest in such
U.S. Global Certificate to be transferred, and (B) upon receipt by the
Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the
Offshore Global Certificate in an amount equal to the principal amount
of the U.S. Physical Certificate or the U.S. Global Certificate, as the
case may be, to be transferred, and the Trustee shall cancel the
Physical Certificate, if any, so transferred or decrease the amount of
such U.S. Global Certificate.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Certificates not bearing the Private Placement Legend, the
Registrar shall deliver Certificates that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Certificates bearing the
Private Placement Legend, the Registrar shall deliver only Certificates that
bear the Private Placement Legend unless either (i) the circumstances
contemplated by paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or
(ii) there is delivered to the Registrar an Opinion of Counsel to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Certificate bearing the
Private Placement Legend, each Holder of such a Certificate acknowledges the
restrictions on transfer of such Certificate set forth in this Agreement and
agrees that it will transfer such Certificate only as provided in this
Agreement. The Registrar shall not register a transfer of any Certificate unless
such transfer complies with the restrictions on transfer of such Certificate set
forth in this Agreement. In connection with any transfer of Certificates, each
Certificateholder agrees by its acceptance of the Certificates to furnish the
Registrar or the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act; provided that
neither the Trustee nor the Registrar shall be required to determine the
sufficiency of any such certifications, legal opinions or other information.
Until such time as no Certificates remain Outstanding, the
Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 3.05 or this Section 3.06. The
Trustee, if not the Registrar at such time, shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Registrar
or the Registrar receives evidence to its satisfaction of the destruction, loss
or theft of any Certificate and (b) there is delivered to the Registrar and the
Trustee such security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the Registrar or the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates, 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 3.07, 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 3.07
shall constitute conclusive evidence of the appropriate Fractional Undivided
Interest in the 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 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 3.08. 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 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 3.09. 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, 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 3.10. Limitation of Liability for Payments. All
payments and distributions made to Certificateholders 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 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 to the extent available for distribution to
such Certificateholder as provided in this Agreement.
Section 3.11. Temporary Certificates. Until definitive
Certificates are ready for delivery, the Trustee shall authenticate temporary
Certificates. Temporary Certificates shall be substantially in the form of
definitive Certificates but may have insertions, substitutions, omissions and
other variations determined to be appropriate by the officers executing the
temporary Certificates, as evidenced by their execution of such temporary
Certificates. If temporary Certificates are issued, the Trustee will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the 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 authorized denominations. Until so
exchanged, the temporary Certificates shall be entitled to the same benefits
under this Agreement as definitive Certificates.
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 a Certificate Account as one or more non-interest-bearing
accounts. The Trustee shall hold the Certificate Account in trust for the
benefit of the Certificateholders, 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, the Trustee upon receipt thereof shall
immediately deposit the aggregate amount of such Scheduled Payment into the
Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders 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 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, the Trustee, upon receipt thereof, shall immediately
deposit the aggregate amount of such Special Payments into the Special Payments
Account.
(c) The Trustee shall present to the Loan Trustee to which an
Equipment Note relates such Equipment Note on the date of its stated final
maturity or, in the case of any Equipment Note which is to be redeemed in whole
pursuant to the relevant Indenture, on the applicable redemption date under such
Indenture.
Section 4.02. Distributions from Certificate Account and
Special Payments Account. (a) On each Regular Distribution Date or as soon
thereafter as the Trustee has confirmed receipt of the payment of the Scheduled
Payments due on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to Section 4.01(a). There
shall be so distributed to each Certificateholder of record on the Record Date
with respect to such Regular Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder) of the total amount in the
Certificate Account, except that, with respect to Certificates registered on the
Record Date in the name of the nominee of the Depositary (initially, such
nominee to be Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such nominee.
(b) On each Special Distribution Date with respect to any
Special Payment or as soon thereafter as the Trustee has confirmed receipt of
any Special Payments, the Trustee shall distribute out of the Special Payments
Account the entire amount of such Special Payment deposited therein pursuant to
Section 4.01(b). There shall be so distributed to each Certificateholder of
record on the Record Date with respect to such Special Distribution Date (other
than as provided in Section 11.01 concerning the final distribution) by check
mailed to such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the aggregate Fractional Undivided
Interest in the Trust held by such Certificateholder) of the aggregate amount in
the Special Payments Account on account of such Special Payment, except that,
with respect to Certificates registered on the Record Date in the name of the
nominee of the Depositary (initially, such nominee to be Cede & Co.), such
distribution shall be made by wire transfer in immediately available funds to
the account designated by such nominee.
(c) The Trustee shall, at the expense of the Company, cause
notice of each Special Payment to be mailed to each Certificateholder at his
address as it appears in the Register. In the event of redemption, prepayment or
purchase of Equipment Notes held in the Trust, such notice shall be mailed not
less than 20 days prior to the date any Special Payment is scheduled to be
distributed. In the case of any other Special Payments, such notice shall be
mailed as soon as practicable after the Trustee has confirmed that it has
received funds for such Special Payment, stating the Special Distribution Date
for such Special Payment which shall occur not less than 20 days after the date
of such notice and as soon as practicable thereafter. Notices mailed by the
Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor (except as
otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000 face
amount Certificate (taking into account any payment to be made by the
Company pursuant to Section 2.01(b)) and the amount thereof
constituting principal, premium, if any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a
Regular Distribution Date, 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, prepayment 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 the Trust is
cancelled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder at its address as it
appears on the Register.
Section 4.03. Statements to Certificateholders. (a) On each
Distribution Date, the Trustee will include with each distribution to
Certificateholders of a Scheduled Payment or Special Payment, as the case may
be, a statement setting forth the following information (per $1,000 face amount
Certificate as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor.
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 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 Certificates.
(b) Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Trustee
shall furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) with respect to the 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 report 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.
Section 4.04. Investment of Special Payment Moneys. Any money
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not to be promptly distributed shall, to the extent
practicable, be invested in Permitted Investments by the Trustee as directed in
writing by the Company pending distribution of such Special Payment pursuant to
Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such
Permitted Investments having maturities not later than the date that such moneys
are required to be used to make the payment required under Section 4.02 on the
applicable Special Distribution Date and the Trustee shall hold any such
Permitted Investments until maturity. The Trustee shall have no liability with
respect to any investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee. All income and
earnings from such investments shall be distributed on such Special Distribution
Date as part of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company,
at its own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or
merge into any other corporation or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:
(a) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance,
transfer or lease substantially all of the assets of the Company as an
entirety shall be organized and validly existing under the laws of the
United States of America or any state thereof or the District of
Columbia and a "citizen of the United States" (as defined in Section
40102(a)(15) of Title 49 of the United States Code) holding an air
carrier operating certificate issued by the Federal Aviation
Administration, or any successor agency thereto (the "FAA"), pursuant
to Chapter 447 of Title 49, United States Code, authorizing the
operation in air transportation of aircraft capable of carrying 10 or
more individuals or 6,000 pounds or more of cargo pursuant to Part 121
of the FAA's regulations (14 CFR Part 121);
(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 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 this Agreement, the Other
Pass Through Trust Agreements, the Financing Agreements, and each other
Financing Document to be performed or observed by the Company;
(c) immediately after giving effect to such transaction, no
Event of Default or event which is, or after notice or passage of time,
or both, would be, such an Event of Default shall have occurred and be
continuing; and
(d) the Company shall have delivered to the Trustee an
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 with
the same effect as if such successor corporation or Person had been named as the
Company herein. No such conveyance, transfer or lease of substantially all of
the assets of the Company as an entirety shall have the effect of releasing the
Company or any successor corporation or Person which shall theretofore have
become such in the manner prescribed in this Section 5.02 from its liability in
respect of this Agreement or any Financing Document 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 Default under any Indenture, the Trustee may, to the extent it
is the Controlling Party at such time, direct the exercise of remedies as provided in the Intercreditor
Agreement.
(b) Purchase Rights of Certificateholders. (i) By acceptance
of its Certificate, each Certificateholder agrees that at any time after the
occurrence and during the continuation of a Triggering Event: each Class B
Certificateholder shall have the right to purchase all, but not less than all,
of the 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 join with the
purchasing Class B Certificateholder to purchase all, but not less than all, of
the 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 Certificates
pursuant to this Section 6.01(b).
(ii) By acceptance of its Certificate, each 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 Certificates pursuant to clause (i)
above) to purchase all, but not less than all, of the 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 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 Certificates and the Class B Certificates
pursuant to this Section 6.01(b).
(iii) By acceptance of its Certificate, each Certificateholder
agrees that at any time after the occurrence and during the continuation of a
Triggering Event: each Class D Certificateholder shall have the right (which
shall not expire upon any purchase of the Certificates pursuant to clause (i)
above and the Certificates and the Class B Certificates pursuant to clause (ii)
above) to purchase all, but not less than all, of the Certificates, the Class B
Certificates and the Class C Certificates upon ten days' written notice to the
Trustee, the Class B Trustee, the Class C Trustee and each other Class D
Certificateholder, provided that (A) if prior to the end of such ten-day period
any other Class D Certificateholder notifies such purchasing Class D
Certificateholder that such other Class D Certificateholder wants to participate
in such purchase, then such other Class D Certificateholder may join with the
purchasing Class D Certificateholder to purchase all, but not less than all, of
the Certificates, the Class B Certificates and the Class C Certificates pro rata
based on the Fractional Undivided Interest in the Class D Trust held by each
such Class D Certificateholder and (B) if prior to the end of such ten day
period any other Class D Certificateholder fails to notify the purchasing Class
D Certificateholder of such other Class D Certificateholder's desire to
participate in such a purchase, then such other Class D Certificateholder shall
lose its right to purchase the Certificates, the Class B Certificates and the
Class C Certificates pursuant to this Section 6.01(b).
The purchase price with respect to the Certificates shall be
equal to the Pool Balance of the Certificates, 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 under this
Agreement, the Intercreditor Agreement or any other Financing Document or on or
in respect of the Certificates; provided, however, that no such purchase of
Certificates shall be effective unless the purchaser shall certify to the
Trustee that contemporaneously with such purchase, such purchaser is purchasing,
pursuant to the terms of this Agreement and the Other Pass Through Trust
Agreements, the Certificates, the Class B Certificates and the Class C
Certificates which are senior to the Class of Certificates (as defined in the
Intercreditor Agreement) held by such purchaser. Each payment of the purchase
price of the Certificates 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. Each Certificateholder agrees by its acceptance of its Certificate that
it will, subject to Section 3.04 hereof, upon payment from such Class B
Certificateholder(s), Class C Certificateholder(s) or Class D
Certificateholder(s) of the purchase price set forth in the first sentence of
this paragraph, forthwith sell, assign, transfer and convey to the purchaser
thereof (without recourse, representation or warranty of any kind except for its
own acts), all of the right, title, interest and obligation of such
Certificateholder in, this Agreement, the Intercreditor Agreement, the Liquidity
Facility, the Financing Documents and all Certificates held by such
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 purchaser shall assume all of
such Certificateholder's obligations under this Agreement, the Intercreditor
Agreement, the Liquidity Facility and the Financing Documents. The Certificates
will be deemed to be purchased on the date payment of the purchase price is made
notwithstanding the failure of the Certificateholders to deliver any
Certificates (whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i) the only rights
of the Certificateholders will be to deliver the Certificates to the purchaser
and receive the purchase price for the Certificates and (ii) if the purchaser
shall so request, such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to the purchaser 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 purchaser
thereof.
As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class B Certificate", "Class B
Certificateholder", "Class B Trust", "Class B Trustee", "Class C Certificate",
"Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D
Certificate", "Class D Certificateholder", "Class D Trust" and "Class D
Trustee", shall have the respective meanings assigned to such terms in the
Intercreditor Agreement.
Section 6.02. Incidents of Sale of Equipment Notes. Upon any
sale of all or any part of the Equipment Notes made either under the power of
sale given under this Agreement or otherwise for the enforcement of this
Agreement, the following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment
Notes. Any Certificateholder, the Trustee in its individual or any
other capacity or any other Person may bid for and purchase any of the
Equipment Notes, and upon compliance with the terms of sale, may hold,
retain, possess and dispose of such Equipment Notes in their own
absolute right without further accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt
of the Trustee or of the officer making such sale shall be a sufficient
discharge to any 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
received by the Trustee from the Subordination Agent pursuant to the
Intercreditor Agreement upon any sale made either under the power of
sale given by this Agreement or otherwise for the enforcement of this
Agreement shall be applied as provided in Section 4.02.
Section 6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit. If there shall be a failure to make payment of the
principal of, premium, if any, or interest on any Equipment Note, or if there
shall be any failure to pay Rent (as defined in the relevant Lease) under any
Lease when due and payable, then the Trustee, in its own name and as trustee of
an express trust, as holder of such Equipment Notes, to the extent permitted by
and in accordance with the terms of the Intercreditor Agreement and the
Financing Documents (subject to the rights of the applicable Owner Trustee or
Owner Participant to cure any such failure in accordance with Section 8.03 of
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 the Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest in the 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 the Trust or pursuant to the terms of the Intercreditor
Agreement, or exercising any trust or power conferred on the Trustee under this
Agreement or the Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder of the
Equipment Notes, provided that
(1) such Direction shall not be in conflict with any rule of
law or with this Agreement and would not involve the Trustee in
personal liability or expense,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Certificateholders 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 the
Intercreditor Agreement, the Certificateholders holding Certificates 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 Default under any 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, or
(2) in the payment of the principal of (premium, if any) or interest on the
Equipment Notes, or
(3) in respect of a covenant or provision hereof which under
Article IX or X cannot be modified or amended without the consent of
each Certificateholder holding an Outstanding Certificate affected
thereby.
Upon any such waiver, such default shall cease to exist with
respect to the Certificates 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 to the relevant Loan Trustee shall
be annulled with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued
under the relevant Indenture to waive the corresponding Indenture Default.
Section 6.06. Right of Certificateholders to Receive Payments
Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding,
including, without limitation, Section 6.07 hereof, but subject to the
Intercreditor Agreement, the right of any Certificateholder to receive
distributions of payments required pursuant to Section 4.02 hereof on the
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 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 evidencing
Fractional Undivided Interests aggregating not less than 25% of the
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
such an 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 evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the
Trust.
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatsoever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of any Indenture on any
property subject thereto, or the rights of the Certificateholders or the holders
of the Equipment Notes, (ii) obtain or seek to obtain priority over or
preference with respect to any other such Certificateholder 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 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 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.
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 that
neither this Section 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 or the Guarantor.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default, the Trustee undertakes to perform
such duties 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 has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, 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 its 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 wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of Subsection (a)
of this Section; 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 Trust 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.
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, the Owner Trustees, the Owner Participants, the
Loan Trustees and the Certificateholders 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
committee or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interests of the Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of time or both
would become, an Event of Default.
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 the
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 Owner Trustee or
any 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 the
Intercreditor Agreement at the request or direction of any of the
Certificateholders pursuant to this Agreement or the 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
request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under
this Agreement or the Intercreditor Agreement or perform any duties
under this Agreement or the Intercreditor Agreement either directly or
by or through agents or attorneys, and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed with due care by it under this Agreement or the
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 evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the 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 the 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, 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 Agreement, any Financing Agreement, any Equipment Notes,
the Certificates or any other Financing Document, except that the Trustee hereby
represents and warrants that this Agreement has been, and the Intercreditor
Agreement, each Financing Agreement and each Certificate will be, executed,
authenticated and delivered by one of its officers who is duly authorized to
execute, authenticate 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, the Guarantor, the 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 hereunder 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 compensation (as set out in a separate fee agreement between the
Trustee and the Company) 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);
(2) except as otherwise expressly provided herein, 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 Agreement or the 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;
(3) to indemnify, or cause to be indemnified, the Trustee for,
and to hold it harmless against, any loss, liability or expense (other
than for or with respect to any tax) incurred without negligence,
willful misconduct or bad faith, on its part, arising out of or in
connection with the acceptance or administration of this Trust,
including the costs and expenses of defending itself against any claim
or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except for any such loss, liability or
expense incurred by reason of the Trustee's breach of its
representations and warranties set forth in Section 7.15. The Trustee
shall notify the Company and the Guarantor promptly of any claim for
which it may seek indemnity. The Company and/or the Guarantor shall
defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel with the consent of the Company and
the Guarantor and the Company and the Guarantor will pay the reasonable
fees and expenses of such counsel. Neither the Company nor the
Guarantor need pay for any settlement made without its consent; and
(4) to indemnify, or cause to be indemnified, the Trustee,
solely in its individual capacity, for, and to hold it harmless
against, any tax (except to the extent the Trustee is reimbursed
therefor pursuant to the next paragraph, provided that no
indemnification shall be available with respect to any tax attributable
to the Trustee's compensation for serving as such) incurred without
negligence, willful misconduct or bad faith, on its part, arising out
of or in connection with the acceptance or administration of this
Trust, including any costs and expenses incurred in contesting the
imposition of any such tax. The Trustee, in its individual capacity,
shall notify the Company and the Guarantor promptly of any claim for
any tax for which it may seek indemnity. The Trustee shall permit the
Company and the Guarantor to contest the imposition of such tax and the
Trustee, in its individual capacity, shall cooperate in the defense.
The Trustee, in its individual capacity, may have separate counsel with
the consent of the Company and the Guarantor and the Company and the
Guarantor will pay the reasonable fees and expenses of such counsel.
Neither the Company nor the Guarantor need pay for any taxes paid, in
settlement or otherwise, without its consent.
The Trustee shall be entitled to reimbursement from, and shall
have a lien prior to the Certificates upon, the Trust Property for any tax
incurred without negligence, bad faith or willful misconduct, on its part,
arising out of or in connection with the acceptance or administration of such
Trust (other than any tax attributable to the Trustee's compensation for serving
as such), including any costs and expenses incurred in contesting the imposition
of any such tax. If the Trustee reimburses itself from the Trust Property of
such Trust for any such tax, it will mail a brief report within 30 days setting
forth the circumstances thereof to all Certificateholders as their names and
addresses appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder 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, the
Trustee shall resign immediately as Trustee 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 Trustee 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 by giving
prior written notice thereof to the Company, the Authorized Agents, the Owner
Trustees and the Loan Trustees. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Company, the Authorized Agents, the
Owner Trustees, the Loan 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 Act of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Trustee, the Company, the Owner Trustees and the Loan Trustees.
(d) If at any time:
(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 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.
(e) If a Responsible Officer of the Trustee shall obtain
actual knowledge of an Avoidable Tax 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 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 in a jurisdiction where there
are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become
incapable of acting as trustee or if a vacancy shall occur in the office of the
Trustee for any cause, the Company shall promptly appoint a successor Trustee.
If, within 90 days after such resignation, removal or incapability, or other
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Company, the Owner Trustees, the Loan Trustees and the retiring
Trustee, and the Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee and
supersede the successor Trustee appointed as provided above. If no successor
Trustee shall have been so appointed as provided above and accepted appointment
in the manner hereinafter provided, any Certificateholder who has been a bona
fide Certificateholder 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.
(g) The successor Trustee 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 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,
the Authorized Agents, the Owner Trustees and the Loan Trustees and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee 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 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.
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 such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates shall have been
executed or authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such successor Trustee had
itself executed or authenticated such Certificates.
Section 7.12. Maintenance of Agencies. (a) There shall at all
times be maintained an office or agency where Certificates 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 may be served. 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. 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 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. Each Registrar shall furnish to the Trustee, at
stated intervals of not more than six months, and at such other times as the
Trustee may request in writing, a copy of the Register maintained by such
Registrar.
(c) Any corporation into which any Authorized Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any Authorized
Agent shall be a party, or any corporation succeeding to the corporate trust
business of any Authorized Agent, shall be the successor of such Authorized
Agent hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any paper or any further act on the
part of the parties hereto or such Authorized Agent or such successor
corporation.
(d) Any Authorized Agent may at any time resign by giving
written notice of resignation to the Trustee, the Company, the Owner Trustees
and the Loan Trustees. The Company may, and at the request of the Trustee shall,
at any time terminate the agency of any Authorized Agent by giving written
notice of termination to such Authorized Agent and to the Trustee. Upon the
resignation or termination of an Authorized Agent or in case at any time any
such Authorized Agent shall cease to be eligible under this Section (when, in
either case, no other Authorized Agent performing the functions of such
Authorized Agent shall have been appointed), the Company shall promptly appoint
one or more qualified successor Authorized Agents, reasonably satisfactory to
the Trustee, to perform the functions of the Authorized Agent which has resigned
or whose agency has been terminated or who shall have ceased to be eligible
under this Section. The Company shall give written notice of any such
appointment made by it to the Trustee, the Owner Trustees and the Loan Trustees;
and in each case the Trustee shall mail notice of such appointment to all
Certificateholders as their names and addresses appear on the Register.
(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. Moneys so deposited and held in trust shall constitute a separate trust
fund for the benefit of the Certificateholders with respect to which such money
was deposited.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.14. Registration of Equipment Notes in Name of
Subordination Agent. The Trustee agrees that all Equipment Notes to be purchased
by the Trust shall be issued in the name of the Subordination Agent or its
nominee and held by the Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the 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 7.15. Representations and Warranties of Trustee. The Trustee hereby
represents and warrants that:
(a) the Trustee is a national banking association organized
and validly existing in good standing under the laws of the United
States of America;
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Agreement, the Intercreditor
Agreement and the Financing Agreements and has taken all necessary
action to authorize the execution, delivery, and performance by it of
this Agreement, the Intercreditor Agreement and the Financing
Agreements;
(c) the execution, delivery and performance by the Trustee of
this Agreement, the Intercreditor Agreement and the Financing
Agreements (i) will not violate any provision of United States federal
law or the law of the state of the United States where it is located
governing the banking and trust powers of the Trustee or any order,
writ, judgment, or decree of any court, arbitrator or governmental
authority applicable to the Trustee or any of its assets, (ii) will not
violate any provision of the articles of association or by-laws of the
Trustee, or (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, the Intercreditor Agreement and the Financing
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 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, the Intercreditor Agreement and the
Financing 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 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. (a)
The Trustee, as trustee of the 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
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, to withhold such
amounts and timely pay the same to the appropriate authority in the name of and
on behalf of the Certificateholders, that it will file any necessary withholding
tax returns or statements when due, and that, as promptly as possible after the
payment thereof, it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Certificateholders 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.
(b) The Trustee may satisfy certain of its obligations with
respect to this Agreement by retaining, at the expense of the Company, a firm of
independent public accountants (the "Accountants") which shall (i) be
responsible for all tax filing requirements and (ii) perform the obligations of
the Trustee in respect of tax filing requirements. The Trustee shall be deemed
to have discharged its tax filing obligations under this Agreement upon its
retention of the Accountants, and, if the Trustee shall have selected in the
Accountants in good faith and without gross negligence, the Trustee shall not
have any liability with respect to the default or misconduct of the Accountants.
(c) The Trustee, at the request of the Company, will make such
United States federal income tax elections as may be necessary to prevent the
Trust from being classified for federal income tax purposes as an association
taxable as a corporation.
Section 7.17. Trustee's Liens. The Trustee in its individual
capacity agrees that it will 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 which is attributable to the
Trustee either (i) in its individual capacity and which is unrelated to the
transactions contemplated by this Agreement, the Intercreditor Agreement, the
Financing Agreements or the Financing 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 or cause to be
furnished to the Trustee within 15 days after each Record Date with respect to a
Scheduled Payment, and at such other times as the Trustee may request in writing
within 30 days after receipt by the Company of any such request, a list, in such
form as the Trustee may reasonably require, of all information in the possession
or control of the Company as to the names and addresses of the
Certificateholders, 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, 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 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 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 the
Certificates, the Trustee shall transmit to the Certificateholders, 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 Guarantor and the Company. The Guarantor and the
Company shall:
(a) file with the Trustee, within 30 days after the Guarantor
or 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 Guarantor or
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 Guarantor or 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
Guarantor and the Company with the conditions and covenants of the
Guarantor and 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;
(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 Guarantor and 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;
(d) furnish to the Trustee, not less often than annually, a
brief certificate from the principal executive officer, principal
financial officer or principal accounting officer as to his or her
knowledge of the Guarantor's and 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); and
(e) make available to any Certificateholder, upon request, the
annual audited and quarterly unaudited financial statements of the
Guarantor which are provided to the Trustee.
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders. Without the consent of the Certificateholders, the Guarantor
and the Company may and the Trustee (subject to Section 9.03) shall, at any time
and from time to time, enter into one or more agreements supplemental hereto or,
if applicable, to the Intercreditor Agreement or the Liquidity Facility in form
and substance satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the
Company or the Guarantor and the assumption by any such successor of
the covenants of the Company or the Guarantor herein contained; or
(2) to add to the covenants of the Company or the Guarantor
for the benefit of the Certificateholders, or to surrender any right or
power in this Agreement conferred upon the Company or the Guarantor; or
(3) to correct or supplement any provision in this Agreement,
the Intercreditor Agreement or the Liquidity Facility which may be
defective or inconsistent with any other provision herein or to make
any other provisions with respect to matters or questions arising under
this Agreement, the Intercreditor Agreement or the Liquidity Facility,
provided that any such action shall not adversely affect the interests
of the Certificateholders; or to cure any ambiguity or correct any
mistake; or
(4) to modify, eliminate or add to the provisions of this
Agreement to such extent as shall be necessary to continue the
qualification of this Agreement (including any supplemental agreement)
under the Trust Indenture Act or under any similar Federal statute
hereafter enacted, and to add to this Agreement such other provisions
as may be expressly permitted by the Trust Indenture Act, excluding,
however, the provisions referred to in Section 316(a)(2) of the Trust
Indenture Act as in effect at the date as of which this instrument was
executed or any corresponding provision in any similar Federal statute
hereafter enacted; or
(5) to evidence and provide for the acceptance of appointment
under this Agreement by the Trustee of a successor Trustee and to add
to or change any of the provisions of this Agreement as shall be
necessary to provide for or facilitate the administration of the Trust,
pursuant to the requirements of Section 7.10;
provided that no such action described in this Section 9.01 shall materially
adversely affect the interests of the Certificateholders.
Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders holding
Certificates evidencing Fractional Undivided Interests aggregating not less than
a majority in interest in the Trust, by Act of said Certificateholders delivered
to the Guarantor, the Company and the Trustee, the Guarantor and the Company may
(with the consent of the Owner Trustees, if any, which consent shall not be
unreasonably withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement, the Intercreditor Agreement, the Liquidity Facility or any
Financing Agreement to the extent applicable to such Certificateholders or of
modifying in any manner the rights and obligations of such Certificateholders
under this Agreement, the Intercreditor Agreement, the Liquidity Facility or any
Financing Agreement; provided, however, that no such supplemental agreement
shall, without the consent of the Certificateholder of each Outstanding
Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing
of, any receipt by the Trustee of payments on the Equipment Notes held
in the Trust or distributions that are required to be made herein on
any Certificate, or change any date of payment of any Certificate, or
change the place of payment where, or the coin or currency in which,
any Certificate 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 except as permitted by this Agreement, or otherwise
deprive such Certificateholder of the benefit of the ownership of the
Equipment Notes in the Trust; or
(3) alter the priority of distributions specified in the Intercreditor Agreement;
or
(4) modify any of the provisions of this Section or Section
6.05, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without
the consent of the Certificateholder of each Certificate affected
thereby.
It shall not be necessary for any Act of Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Act shall approve the substance
thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in
the opinion of the Trustee any document required to be executed by it pursuant
to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity
or indemnity in favor of the Trustee under this Agreement, the Trustee may in
its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements. In
executing, or accepting the additional trusts created by, any supplemental
agreement permitted by this Article or the modifications thereby of the trusts
created by this Agreement, the Trustee shall be entitled to receive, and shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental agreement is authorized or permitted by this
Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the
execution of any agreement supplemental to this Agreement under this Article,
this Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every
Certificateholder theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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 authenticated and delivered after the execution of any
supplemental agreement 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 after proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and
Other Financing Documents. In the event that the Trustee, as holder of any
Equipment Note in trust for the benefit of the Certificateholders or as
Controlling Party, receives a request for a consent to any amendment,
modification, waiver or supplement under any Indenture or other Financing
Document, the Trustee shall forthwith send a notice of such proposed amendment,
modification, waiver or supplement to each Certificateholder registered on the
Register as of the date of such notice. The Trustee shall request from the
Certificateholders a Direction as to (a) whether or not to take or refrain from
taking any action which a holder of such Equipment Note has the option to
direct, (b) whether or not to give or execute any waivers, consents, amendments,
modifications or supplements as a holder of such Equipment Note and (c) how to
vote any Equipment 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, the Trustee shall vote for or give consent to any such
action with respect to such Equipment Note in the same proportion as that of (i)
the aggregate face amounts of all Certificates actually voted in favor of or for
giving consent to such action by such Act of Certificateholders to (ii) the
aggregate face amount of all Outstanding Certificates. 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 on or prior to the 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 the
Intercreditor Agreement, the Trustee may, in its own discretion and at its own
direction, consent and notify the relevant Loan Trustee of such consent to any
amendment, modification, waiver or supplement under the relevant Indenture or
any other Financing Document, if an Event of Default hereunder shall have
occurred and be continuing, or if such amendment, modification or waiver will
not adversely affect the interests of the Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The respective
obligations and responsibilities of the Company, the Guarantor and the Trustee
with respect to the Trust shall terminate upon the distribution to all Holders
of Certificates 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; provided, however, that in no event shall the Trust
continue beyond one hundred ten (110) years following the date of the earliest
execution of this Trust Agreement.
Notice of any termination, specifying the Regular Distribution
Date (or Special Distribution Date, as the case may be) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be mailed promptly, upon
notice to the Trustee, by the Trustee to Certificateholders not earlier than the
60th day and not later than the 20th day next preceding such final distribution
specifying (A) the Regular Distribution Date (or Special Distribution Date, as
the case may be) upon which the proposed final payment of the Certificates will
be made upon presentation and surrender of Certificates 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 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. Upon presentation and surrender of the Certificates in
accordance with such notice, the Trustee shall cause to be distributed to
Certificateholders such final distribution pursuant to Section 4.02.
In the event that all of the Certificateholders 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 to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. No additional interest shall accrue on the Certificates after the
Regular Distribution Date (or Special Distribution Date, as the case may be)
specified in the first written notice. In the event that any money held by the
Trustee for the payment of distributions on the Certificates shall remain
unclaimed for two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to the escheat
period provided under applicable law) after the final distribution date with
respect thereto, the Trustee shall pay to each Loan Trustee the appropriate
amount of money relating to such Loan Trustee and shall give written notice
thereof to the related Owner Trustees, the Owner Participants and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the 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. Certificates Nonassessable and Fully Paid.
Except as set forth in the last sentence of this Section 12.02,
Certificateholders shall not be personally liable for obligations of the Trust,
the Fractional Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates, upon authentication thereof by the Trustee
pursuant to Section 3.03, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly provided herein) to
vote or in any manner otherwise control the operation and management of the
Trust Property, the Trust, or the obligations of the parties hereto, nor shall
anything set forth herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association. Neither the existence of the Trust nor
any provision herein 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. Notices. (a) Unless otherwise specifically
provided herein, all notices required under the terms and provisions of this
Agreement shall be in English and in writing, and any such notice may be given
by 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 or the Guarantor, to:
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia 20166
Attention: Chief Financial Officer
Facsimile: (703) 925-6294
if to the Trustee, to:
The First National Bank of Maryland
25 South Charles Street
Mail Code 101-591
Baltimore, Maryland 21201
Attention: Corporate Trust Department
Facsimile: (410) 244-4626
Telephone: (410) 244-4236
(b) The Company, the Guarantor 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 shall be
mailed by first-class mail to the addresses for Certificateholders shown on the
Register kept by the Registrar. 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.
(d) If a notice or communication is mailed in the manner
provided above within the time prescribed, it is conclusively presumed to have
been duly given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the
Certificateholders, it shall mail a copy to the Trustee and to the Paying Agent
at the same time.
(f) Notwithstanding the foregoing, all communications or
notices to the Trustee shall be deemed to be given only when received by a
Responsible Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy
of any demand, notice or written communication received by the Trustee hereunder
from any Certificateholder, Owner Trustee or Loan Trustee.
Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE CERTIFICATES SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS-OF-LAW PRINCIPLES.
Section 12.05. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Trust, or of the
Certificates or the rights of the Certificateholders thereof.
Section 12.06. 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 12.07. Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by the Trustee, the
Guarantor 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 12.08. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder, and the
Certificateholders, any benefit or any legal or equitable right, remedy or claim
under this Agreement.
Section 12.09. Legal Holidays. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate shall
not be a Business Day, 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 12.10. 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 12.11. Communication by Certificateholders with Other
Certificateholders. Certificateholders may communicate with other
Certificateholders with respect to their rights under this Agreement or the
Certificates pursuant to Section 312(b) of the Trust Indenture Act. The Company,
the Guarantor, 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.
<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.
ATLANTIC COAST AIRLINES
By
Name:
Title:
ATLANTIC COAST AIRLINES, INC.
By
Name:
Title:
THE FIRST NATIONAL BANK OF MARYLAND, as
Trustee
By
Name: Robert D. Brown
Title: Assistant Vice President
<PAGE>
A-1
179212.3/NYL2
179212.3/NYL2
179212.3/NYL2
EXHIBIT A
<PAGE>
A-7
179212.3/NYL2
FORM OF CERTIFICATE
REGISTERED
No. ______________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY ATLANTIC COAST AIRLINES ("ACA") OR ANY
AFFILIATE OF ACA, RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT
(A) TO ACA OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL
AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD
BY ACA OR ANY AFFILIATE OF ACA, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND ACA SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE 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
HEREON 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.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.]*
ANY PERSON ACQUIRING THIS PASS THROUGH CERTIFICATE WILL BE DEEMED TO
REPRESENT AND WARRANT THAT (i) NO ASSETS OF AN EMPLOYEE BENEFIT PLAN
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR AN INDIVIDUAL RETIREMENT ACCOUNT OR PLAN
SUBJECT TO 4975 OF THE CODE, OR ANY TRUST ESTABLISHED UNDER ANY SUCH
PLAN OR ACCOUNT, HAVE BEEN USED TO ACQUIRE OR HOLD ANY OF THE PASS
THROUGH CERTIFICATES OR (ii) THAT ONE OR MORE ADMINISTRATIVE OR
STATUTORY EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES UNDER
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE APPLIES TO ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE SUCH THAT ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE WILL NOT RESULT
IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA AND
SECTION 4975 OF THE CODE.
<PAGE>
[GLOBAL CERTIFICATE]*
ATLANTIC COAST AIRLINES 1997-1A PASS THROUGH TRUST
7.20% Atlantic Coast Airlines Pass Through Certificate
Series 1997-1A
Final Expected Distribution Date: January 1, 2014
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft leased to or owned
by Atlantic Coast Airlines.
$ 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 Atlantic Coast Airlines
1997-1A Pass Through Trust (the "Trust") created pursuant to a Pass Through
Trust Agreement, dated as of September 25, 1997 (the "Agreement"), among The
First National Bank of Maryland (the "Trustee"), Atlantic Coast Airlines, a
corporation incorporated under California law (the "Company") and Atlantic Coast
Airlines, Inc., a corporation incorporated under Delaware law (the "Guarantor"),
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 "7.20% Atlantic Coast Airlines Pass
Through Certificates Series 1997-1A" (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 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 the 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 assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement
and the Intercreditor Agreement, from and to the extent of funds then available
to the Trustee, there will be distributed on each January 1 and July 1 (a
"Regular Distribution Date"), commencing on January 1, 1998, 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.
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 AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: _____________, ATLANTIC COAST AIRLINES
1997-1A PASS THROUGH
TRUST
By: The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Name:
Title:
<PAGE>
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
<PAGE>
A-9
179212.3/NYL2
This is one of the Certificates referred
to in the within-mentioned Agreement.
The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Authorized Officer
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company, the Guarantor or
the Trustee or any of their affiliates. The Certificates are limited in right or
payment, all as more specifically set forth on the face hereof and in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the Trust Property to
make such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to such Certificateholder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantor and the rights of the
Certificateholders under the Agreement at any time by the Guarantor, the Company
and the Trustee with the consent of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust. Any such consent by the Certificateholder of this
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
<PAGE>
A-5
179212.3/NYL2
<PAGE>
A-11
179212.3/NYL2
No service charge will be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and
transfer(s) unto
Insert Taxpayer Identification No.
please print or typewrite name and address including zip code of assignee
the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE GLOBAL AND
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Certificate occurring
prior to __________, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
Date: [Name of Transferor]
NOTE: The signature
must correspond with
the name as written
upon the face of the
within-mentioned
instrument in every
particular, without
alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an executive
officer.
<PAGE>
A-7
179212.3/NYL2
179212.3/NYL2
179212.3/NYL2
EXHIBIT B
<PAGE>
A-13
179212.3/NYL2
FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES
[Date]
[Name and address of Trustee]
Attention: Corporate Trust Department
Re: Atlantic Coast Airlines 1997-1A Pass Through Trust, ___%
Atlantic Coast Airlines Pass Through Certificates Series
1997-1A (the "Certificates")
Dear Sirs:
This letter relates to U.S. $__________ Fractional Undivided
Interest of Certificates represented by a Certificate (the "Legended
Certificate") which bears a legend outlining restrictions upon transfer of such
Legended Certificate. Pursuant to Section 3.01 of the Pass Through Trust
Agreement relating to the Certificates dated as of September 25,1997 (the "Trust
Agreement"), among Atlantic Coast Airlines ("ACA"), Atlantic Coast Airlines,
Inc. ("ACAI") and you, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Certificates could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended. Accordingly, you
are hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical principal amount of Certificates, all in
the manner provided for in the Trust Agreement.
You, ACA and ACAI are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Certificateholder]
By:
Authorized Signature
<PAGE>
C-1
179212.3/NYL2
179212.3/NYL2
179212.3/NYL2
EXHIBIT C
<PAGE>
C-2
179212.3/NYL2
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
[date]
[Name and address of Trustee]
Attention: Corporate Trust Department
Re: Atlantic Coast Airlines 1997-1A Pass Through Trust
(the "Trust"), 7.20% Atlantic Coast Airlines Pass Through
Certificates Series 1997-1A (the "Certificates")
Sirs:
In connection with our proposed sale of $_______ Fractional
Undivided Interest of the Certificates, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the Securities
Act of 1933, as amended, and, accordingly, we represent that:
(1) the offer of the Certificates was not made to a person in the United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we
nor any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period
and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are
applicable thereto, we confirm that such sale has been made in accordance with
the applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may
be.
You, Atlantic Coast Airlines and Atlantic Coast Airlines, Inc.
are entitled to rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters covered
hereby. Terms used in this certificate have the meanings set forth in Regulation
S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
<PAGE>
D-1
EXHIBIT D
<PAGE>
D-3
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
[date]
[Name and address of Trustee]
Attention: Corporate Trust Department
Re: Atlantic Coast Airlines 1997-1A Pass-Through
Trust (the "Trust"), 7.20% Atlantic Coast Airlines
Pass Through Certificates Series 1997-1A
(the "Certificates")
Dear Sirs:
In connection with our proposed purchase of $_______________
aggregate principal amount of the Certificates, we confirm that:
1. We understand that any subsequent transfer of the
Certificates is subject to certain restrictions and conditions set
forth in the Pass Through Trust Agreement dated as of September 25,
1997 relating to the Certificates (the "Pass Through Trust Agreement")
and the undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Certificates except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act").
2. We are purchasing Certificates having an aggregate
principal amount of not less than $100,000 and each account (if any)
for which we are purchasing Certificates is purchasing Certificates
having an aggregate principal amount of not less than $100,000.
3. We understand that the Certificates have not been
registered under the Securities Act, and that the Certificates may not
be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Certificate,
we will do so only (A) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined
therein), (B) to an institutional "accredited investor" (as defined
below) that, prior to such transfer, furnishes to you and Atlantic
Coast Airlines, Inc., a signed letter substantially in the form of this
letter, (C) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (D) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act, or (E)
pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of
the Certificates from us a notice advising such purchaser that resales
of the Notes are restricted as stated herein. We further understand
that the Certificates purchased by us will bear a legend to the
foregoing effect.
4. We understand that, on any proposed resale of any
Certificates, we will be required to furnish to you, Atlantic Coast
Airlines ("ACA") and Atlantic Coast Airlines, Inc. ("ACAI") such
certifications, legal opinions and other information as you, ACA and
ACAI may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the
Certificates purchased by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Certificates and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
6. We are acquiring the Certificates purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
You, ACA and ACAI are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
<PAGE>
179212.3/NYL2
<PAGE>
179212.3/NYL2
PASS THROUGH TRUST AGREEMENT
Dated as of September 25, 1997
among
ATLANTIC COAST AIRLINES,
ATLANTIC COAST AIRLINES, INC.
and
THE FIRST NATIONAL BANK OF MARYLAND
as Trustee
Atlantic Coast Airlines 1997-1A Pass Through Trust
7.20% 1997-1A Pass Through Certificates
<PAGE>
5
Section Page
179212.3/NYL2
179212.3/NYL2
179212.3/NYL2
TABLE OF CONTENTS
<PAGE>
Section Page
ARTICLE I
DEFINITIONS
1.01. Definitions.......................................................................................... 2
-----------
1.02. Compliance Certificates and Opinions................................................................. 12
------------------------------------
1.03. Form of Documents Delivered to Trustee............................................................... 13
--------------------------------------
1.04. Acts of Certificateholders........................................................................... 14
--------------------------
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
2.01. Issuance of Certificates; Acquisition of Equipment Notes............................................. 15
--------------------------------------------------------
2.02. Acceptance by Trustee................................................................................ 17
---------------------
2.03. Limitation of Powers................................................................................. 18
--------------------
ARTICLE III
THE CERTIFICATES
3.01. Title, Form, Denomination and Execution of Certificates.............................................. 18
-------------------------------------------------------
3.02. Restrictive Legends.................................................................................. 19
-------------------
3.03. Authentication of Certificates....................................................................... 21
------------------------------
3.04. Transfer and Exchange................................................................................ 22
---------------------
3.05. Book-Entry Provisions for U.S. Global Certificate and Offshore Global Certificates................... 22
----------------------------------------------------------------------------------
3.06. Special Transfer Provisions.......................................................................... 24
---------------------------
3.07. Mutilated, Destroyed, Lost or Stolen Certificates.................................................... 27
-------------------------------------------------
3.08. Persons Deemed Owners................................................................................ 28
---------------------
3.09. Cancellation......................................................................................... 28
------------
3.10. Limitation of Liability for Payments................................................................. 28
------------------------------------
3.11. Temporary Certificates............................................................................... 28
----------------------
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
4.01. Certificate Account and Special Payments Account..................................................... 29
------------------------------------------------
4.02. Distributions from Certificate Account and Special Payments Account.................................. 29
-------------------------------------------------------------------
4.03. Statements to Certificateholders..................................................................... 31
--------------------------------
4.04. Investment of Special Payment Moneys................................................................. 31
------------------------------------
ARTICLE V
THE COMPANY
5.01. Maintenance of Corporate Existence................................................................... 32
----------------------------------
5.02. Consolidation, Merger, Etc........................................................................... 32
--------------------------
ARTICLE VI
DEFAULT
6.01. Events of Default.................................................................................... 33
-----------------
6.02. Incidents of Sale of Equipment Notes................................................................. 36
------------------------------------
6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit................................... 36
------------------------------------------------------------------
6.04. Control by Certificateholders........................................................................ 37
-----------------------------
6.05. Waiver of Past Defaults.............................................................................. 37
-----------------------
6.06. Right of Certificateholders to Receive Payments Not to Be Impaired................................... 38
------------------------------------------------------------------
6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions................................ 38
---------------------------------------------------------------------
6.08. Remedies Cumulative.................................................................................. 39
-------------------
6.09. Undertaking for Costs................................................................................ 39
---------------------
ARTICLE VII
THE TRUSTEE
7.01. Certain Duties and Responsibilities.................................................................. 39
-----------------------------------
7.02. Notice of Defaults................................................................................... 40
------------------
7.03. Certain Rights of Trustee............................................................................ 40
-------------------------
7.04. Not Responsible for Recitals or Issuance of Certificates............................................. 41
--------------------------------------------------------
7.05. May Hold Certificates................................................................................ 42
---------------------
7.06. Money Held in Trust.................................................................................. 42
-------------------
7.07. Compensation and Reimbursement....................................................................... 42
------------------------------
7.08. Corporate Trustee Required; Eligibility.............................................................. 43
---------------------------------------
7.09. Resignation and Removal; Appointment of Successor.................................................... 44
-------------------------------------------------
7.10. Acceptance of Appointment by Successor............................................................... 45
--------------------------------------
7.11. Merger, Conversion, Consolidation or Succession to Business.......................................... 46
-----------------------------------------------------------
7.12. Maintenance of Agencies.............................................................................. 46
-----------------------
7.13. Money for Certificate Payments to Be Held in Trust................................................... 47
--------------------------------------------------
7.14. Registration of Equipment Notes in Name of Subordination Agent....................................... 47
--------------------------------------------------------------
7.15. Representations and Warranties of Trustee............................................................ 48
-----------------------------------------
7.16. Withholding Taxes; Information Reporting............................................................. 49
----------------------------------------
7.17. Trustee's Liens...................................................................................... 49
---------------
7.18. Preferential Collection of Claims.................................................................... 50
---------------------------------
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders........................ 50
-----------------------------------------------------------------------------
8.02. Preservation of Information; Communications to Certificateholders.................................... 50
-----------------------------------------------------------------
8.03. Reports by Trustee................................................................................... 50
------------------
8.04. Reports by the Guarantor and the Company............................................................. 50
----------------------------------------
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
9.01. Supplemental Agreements Without Consent of Certificateholders........................................ 52
-------------------------------------------------------------
9.02. Supplemental Agreements with Consent of Certificateholders........................................... 53
----------------------------------------------------------
9.03. Documents Affecting Immunity or Indemnity............................................................ 54
-----------------------------------------
9.04. Execution of Supplemental Agreements................................................................. 54
------------------------------------
9.05. Effect of Supplemental Agreements.................................................................... 54
---------------------------------
9.06. Conformity with Trust Indenture Act.................................................................. 54
-----------------------------------
9.07. Reference in Certificates to Supplemental Agreements................................................. 54
----------------------------------------------------
ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
10.01. Amendments and Supplements to Indentures and Other Financing Documents.............................. 54
----------------------------------------------------------------------
ARTICLE XI
TERMINATION OF TRUST
11.01. Termination of the Trust............................................................................ 55
------------------------
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Limitation on Rights of Certificateholders.......................................................... 56
12.02. Certificates Nonassessable and Fully Paid........................................................... 56
12.03. Notices 57
12.04. Governing Law....................................................................................... 58
-------------
12.05. Severability of Provisions.......................................................................... 58
--------------------------
12.06. Effect of Headings and Table of Contents............................................................ 58
----------------------------------------
12.07. Successors and Assigns.............................................................................. 58
----------------------
12.08. Benefits of Agreement............................................................................... 58
---------------------
12.09. Legal Holidays...................................................................................... 58
--------------
12.10. Counterparts........................................................................................ 59
------------
12.11. Communication by Certificateholders with Other Certificateholders................................... 59
-----------------------------------------------------------------
Schedule 1 - Indentures
Schedule 2 - Financing Agreements
Exhibit A - Form of Certificate
Exhibit B - Form of Certificate for Unlegended Certificates
Exhibit C - Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit D - Form of Certificate to be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
<PAGE>
17
SS_NYL4/255622 1
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.50(c)
U.S. GLOBAL CERTIFICATE
REGISTERED
No. A-1 CUSIP NO. 048395 AA 5
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY ATLANTIC COAST AIRLINES ("ACA") OR ANY
AFFILIATE OF ACA, RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT
(A) TO ACA OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL
AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD
BY ACA OR ANY AFFILIATE OF ACA, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND ACA SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE 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
HEREON 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.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
ANY PERSON ACQUIRING THIS PASS THROUGH CERTIFICATE WILL BE DEEMED TO
REPRESENT AND WARRANT THAT (i) NO ASSETS OF AN EMPLOYEE BENEFIT PLAN
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR AN INDIVIDUAL RETIREMENT ACCOUNT OR PLAN
SUBJECT TO 4975 OF THE CODE, OR ANY TRUST ESTABLISHED UNDER ANY SUCH
PLAN OR ACCOUNT, HAVE BEEN USED TO ACQUIRE OR HOLD ANY OF THE PASS
THROUGH CERTIFICATES OR (ii) THAT ONE OR MORE ADMINISTRATIVE OR
STATUTORY EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES UNDER
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE APPLIES TO ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE SUCH THAT ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE WILL NOT RESULT
IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA AND
SECTION 4975 OF THE CODE.
<PAGE>
ATLANTIC COAST AIRLINES 1997-1A PASS THROUGH TRUST
7.20% Atlantic Coast Airlines Pass Through Certificate
Series 1997-1A
Final Expected Distribution Date: January 1, 2014
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft leased to or owned
by Atlantic Coast Airlines.
$ 57,714,000 Fractional Undivided Interest
representing .0017327% of the Trust per $1,000 face amount
THIS CERTIFIES THAT Cede & Co., for value received, is the
registered owner of a $ 57,714,000 (Fifty-seven million, seven hundred and
fourteen thousand dollars) Fractional Undivided Interest in Atlantic Coast
Airlines 1997-1A Pass Through Trust (the "Trust") created pursuant to a Pass
Through Trust Agreement, dated as of September 25, 1997 (the "Agreement"), among
The First National Bank of Maryland (the "Trustee"), Atlantic Coast Airlines, a
corporation incorporated under California law (the "Company") and Atlantic Coast
Airlines, Inc., a corporation incorporated under Delaware law (the "Guarantor"),
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 "7.20% Atlantic Coast Airlines Pass
Through Certificates Series 1997-1A" (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 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 the 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 assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement
and the Intercreditor Agreement, from and to the extent of funds then available
to the Trustee, there will be distributed on each January 1 and July 1 (a
"Regular Distribution Date"), commencing on January 1, 1998, 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.
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 AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: September 25, 1997 ATLANTIC COAST AIRLINES
1997-1A PASS THROUGH
TRUST
By: The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Name:
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred
to in the within-mentioned Agreement.
The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Authorized Officer
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company, the Guarantor or
the Trustee or any of their affiliates. The Certificates are limited in right or
payment, all as more specifically set forth on the face hereof and in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the Trust Property to
make such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to such Certificateholder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantor and the rights of the
Certificateholders under the Agreement at any time by the Guarantor, the Company
and the Trustee with the consent of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust. Any such consent by the Certificateholder of this
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
<PAGE>
No service charge will be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and
transfer(s) unto
Insert Taxpayer Identification No.
please print or typewrite name and address including zip code of assignee
the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
In connection with any transfer of this Certificate occurring
prior to __________, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
Date: [Name of Transferor]
NOTE: The signature
must correspond with
the name as written
upon the face of the
within-mentioned
instrument in every
particular, without
alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an executive officer.
<PAGE>
24
SS_NYL4/255613 1
TEMPORARY OFFSHORE GLOBAL CERTIFICATE
REGISTERED
No. A-2 CINS NO. U04852 AA 4
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT;
(2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY ATLANTIC COAST AIRLINES ("ACA") OR ANY
AFFILIATE OF ACA, RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT
(A) TO ACA OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR ACQUIRING $100,000 OR MORE AGGREGATE PRINCIPAL
AMOUNT OF SUCH CERTIFICATE THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE
(THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD
BY ACA OR ANY AFFILIATE OF ACA, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND ACA SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE 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
HEREON 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.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
ANY PERSON ACQUIRING THIS PASS THROUGH CERTIFICATE WILL BE DEEMED TO
REPRESENT AND WARRANT THAT (i) NO ASSETS OF AN EMPLOYEE BENEFIT PLAN
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR AN INDIVIDUAL RETIREMENT ACCOUNT OR PLAN
SUBJECT TO 4975 OF THE CODE, OR ANY TRUST ESTABLISHED UNDER ANY SUCH
PLAN OR ACCOUNT, HAVE BEEN USED TO ACQUIRE OR HOLD ANY OF THE PASS
THROUGH CERTIFICATES OR (ii) THAT ONE OR MORE ADMINISTRATIVE OR
STATUTORY EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES UNDER
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE APPLIES TO ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE SUCH THAT ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE WILL NOT RESULT
IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA AND
SECTION 4975 OF THE CODE.
<PAGE>
ATLANTIC COAST AIRLINES 1997-1A PASS THROUGH TRUST
7.20% Atlantic Coast Airlines Pass Through Certificate
Series 1997-1A
Final Expected Distribution Date: January 1, 2014
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft leased to or owned
by Atlantic Coast Airlines.
$57,714,000 Fractional Undivided Interest
representing .0017327% of the Trust per $1,000 face amount
THIS CERTIFIES THAT Cede & Co., for value received, is the
registered owner of a $0 (zero dollars) Fractional Undivided Interest in
Atlantic Coast Airlines 1997-1A Pass Through Trust (the "Trust") created
pursuant to a Pass Through Trust Agreement, dated as of September 25, 1997 (the
"Agreement"), among The First National Bank of Maryland (the "Trustee"),
Atlantic Coast Airlines, a corporation incorporated under California law (the
"Company") and Atlantic Coast Airlines, Inc., a corporation incorporated under
Delaware law (the "Guarantor"), 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 "7.20% Atlantic Coast Airlines Pass Through Certificates Series
1997-1A" (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 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 the
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 assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement
and the Intercreditor Agreement, from and to the extent of funds then available
to the Trustee, there will be distributed on each January 1 and July 1 (a
"Regular Distribution Date"), commencing on January 1, 1998, 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.
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 AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: September 25, 1997 ATLANTIC COAST AIRLINES
1997-1A PASS THROUGH
TRUST
By: The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Name:
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
<PAGE>
26
SS_NYL4/255613 1
This is one of the Certificates referred
to in the within-mentioned Agreement.
The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Authorized Officer
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company, the Guarantor or
the Trustee or any of their affiliates. The Certificates are limited in right or
payment, all as more specifically set forth on the face hereof and in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the Trust Property to
make such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to such Certificateholder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantor and the rights of the
Certificateholders under the Agreement at any time by the Guarantor, the Company
and the Trustee with the consent of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust. Any such consent by the Certificateholder of this
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
<PAGE>
29
SS_NYL4/255613 1
<PAGE>
No service charge will be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and
transfer(s) unto
Insert Taxpayer Identification No.
please print or typewrite name and address including zip code of assignee
the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
In connection with any transfer of this Certificate occurring
prior to __________, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
<PAGE>
Date: [Name of Transferor]
NOTE: The signature
must correspond with
the name as written
upon the face of the
within-mentioned
instrument in every
particular, without
alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an executive
officer.
<PAGE>
34
SS_NYL4/255870 1
PERMANENT OFFSHORE GLOBAL CERTIFICATE
REGISTERED
No. A-3 CINS NO. U04852 AA 4
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE 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
HEREON 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.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH
TRUST AGREEMENT REFERRED TO HEREIN.
ANY PERSON ACQUIRING THIS PASS THROUGH CERTIFICATE WILL BE DEEMED TO
REPRESENT AND WARRANT THAT (i) NO ASSETS OF AN EMPLOYEE BENEFIT PLAN
SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR AN INDIVIDUAL RETIREMENT ACCOUNT OR PLAN
SUBJECT TO 4975 OF THE CODE, OR ANY TRUST ESTABLISHED UNDER ANY SUCH
PLAN OR ACCOUNT, HAVE BEEN USED TO ACQUIRE OR HOLD ANY OF THE PASS
THROUGH CERTIFICATES OR (ii) THAT ONE OR MORE ADMINISTRATIVE OR
STATUTORY EXEMPTIONS FROM THE PROHIBITED TRANSACTION RULES UNDER
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE APPLIES TO ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE SUCH THAT ITS
PURCHASE AND HOLDING OF THIS PASS THROUGH CERTIFICATE WILL NOT RESULT
IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA AND
SECTION 4975 OF THE CODE.
<PAGE>
ATLANTIC COAST AIRLINES 1997-1A PASS THROUGH TRUST
7.20% Atlantic Coast Airlines Pass Through Certificate
Series 1997-1A
Final Expected Distribution Date: January 1, 2014
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft leased to or owned
by Atlantic Coast Airlines.
$57,714,000 Fractional Undivided Interest
representing .0017327% of the Trust per $1,000 face amount
THIS CERTIFIES THAT Cede & Co., for value received, is the
registered owner of a $0 (zero dollars) Fractional Undivided Interest in
Atlantic Coast Airlines 1997-1A Pass Through Trust (the "Trust") created
pursuant to a Pass Through Trust Agreement, dated as of September 25, 1997 (the
"Agreement"), among The First National Bank of Maryland (the "Trustee"),
Atlantic Coast Airlines, a corporation incorporated under California law (the
"Company") and Atlantic Coast Airlines, Inc., a corporation incorporated under
Delaware law (the "Guarantor"), 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 "7.20% Atlantic Coast Airlines Pass Through Certificates Series
1997-1A" (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 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 the
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 assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement
and the Intercreditor Agreement, from and to the extent of funds then available
to the Trustee, there will be distributed on each January 1 and July 1 (a
"Regular Distribution Date"), commencing on January 1, 1998, 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.
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 AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Reference is hereby made to the further provisions of this
Certificate set forth in the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
Dated: September 25, 1997 ATLANTIC COAST AIRLINES
1997-1A PASS THROUGH
TRUST
By: The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Name:
Title:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
<PAGE>
36
SS_NYL4/255870 1
This is one of the Certificates referred
to in the within-mentioned Agreement.
The First National Bank of Maryland,
not in its individual capacity but
solely as Trustee
By:
Authorized Officer
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation of, or
an obligation guaranteed by, or an interest in, the Company, the Guarantor or
the Trustee or any of their affiliates. The Certificates are limited in right or
payment, all as more specifically set forth on the face hereof and in the
Agreement. All payments or distributions made to Certificateholders under the
Agreement shall be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the Trust Property to
make such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to such Certificateholder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the Guarantor and the rights of the
Certificateholders under the Agreement at any time by the Guarantor, the Company
and the Trustee with the consent of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust. Any such consent by the Certificateholder of this
Certificate shall be conclusive and binding on such Certificateholder and upon
all future Certificateholders of this Certificate and of any Certificate issued
upon the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
in the Register upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee in its capacity as
Registrar, or by any successor Registrar, in the Borough of Manhattan, the City
of New York, duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust will be
issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $100,000 Fractional Undivided
Interest and integral multiples of $1,000 in excess thereof. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
<PAGE>
39
SS_NYL4/255870 1
<PAGE>
No service charge will be made for any such registration of
transfer or exchange, but the Trustee shall require payment by the Holder of a
sum sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or
the Registrar may treat the person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Trustee, the Registrar,
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement
and the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
<PAGE>
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and
transfer(s) unto
Insert Taxpayer Identification No.
please print or typewrite name and address including zip code of assignee
the within Certificate and all rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
In connection with any transfer of this Certificate occurring
prior to __________, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with
the exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than in
accordance with (a) above and documents are being furnished
that comply with the conditions of transfer set forth in this
Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
<PAGE>
Date: [Name of Transferor]
NOTE: The signature
must correspond with
the name as written
upon the face of the
within-mentioned
instrument in every
particular, without
alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Certificate for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is aware
that the transferor is relying upon the undersigned's foregoing representations
in order to claim the exemption from registration provided by Rule 144A.
Dated:
NOTE: To be executed by an executive officer
<PAGE>
SS_NYL4/255622 1
- --------
* Not to be included on the face of the Permanent Offshore Global
Certificate.
* To be included on the face of each Global Certificate.
* To be included on the face of each Global Certificate.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXHIBIT 10.50(d)
===================================================================================================================
PARTICIPATION AGREEMENT
(ATLANTIC COAST AIRLINES TRUST NO. _____)
Dated as of September 30, 1997
among
ATLANTIC COAST AIRLINES,
Lessee and Initial Owner Participant
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity (except as otherwise
expressly set forth herein) but solely as trustee,
Owner Trustee
THE FIRST NATIONAL BANK OF MARYLAND,
not in its individual capacity (except as otherwise
expressly set forth herein) but solely as trustee,
Indenture Trustee
THE FIRST NATIONAL BANK OF MARYLAND,
Pass-Through Trustee
and
THE FIRST NATIONAL BANK OF MARYLAND
Subordination Agent
================================================================================
LEVERAGED LEASE OF ONE CANADAIR REGIONAL JET SERIES 200 ER AIRCRAFT
SERIAL NO. _____, REGISTRATION NO. _____
===================================================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Initial Recitals..................................................................................................1
ARTICLE 1 DEFINITIONS............................................................................................3
ARTICLE 2 ISSUANCE OF PASS-THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES...........................3
Section 2.01. Transfer of Funds...................................................................................3
Section 2.02. Certificates.......................................................................................4
Section 2.03. Amendments on Delivery or Transfer Date.............................................................5
ARTICLE 3 PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT.....................................6
Section 3.01. Lessee's Notice of Delivery Date....................................................................6
Section 3.02. Commitments to Participate in Purchase Price........................................................6
Section 3.03. Reserved...........................................................................................8
Section 3.04. Reserved...........................................................................................8
Section 3.05. Postponement of Delivery Date.......................................................................8
Section 3.06. Closing.............................................................................................9
ARTICLE 4 CONDITIONS PRECEDENT...................................................................................9
Section 4.01. Conditions Precedent (Certificate Closing Date).....................................................9
Section 4.02. Conditions Precedent (Delivery Date)...............................................................16
Section 4.03. Opinion of Special Aviation Counsel Upon Registration..............................................24
ARTICLE 5 CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS..........................................................24
Section 5.01. Conditions Precedent to Lessee's Obligations.......................................................24
ARTICLE 6 LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................24
Section 6.01. Lessee's Representations and Warranties............................................................24
Section 6.02. Offering by Lessee.................................................................................29
Section 6.03. Certain Covenants of Lessee........................................................................30
Section 6.04. Survival of Representations and Warranties.........................................................36
ARTICLE 7 OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................36
Section 7.01. Reserved..........................................................................................36
Section 7.02. Citizenship.......................................................................................36
Section 7.03. Concerning Assignment of Interests of Owner Participant...........................................37
Section 7.04. Representations, Covenants and Warranties of and the Owner Trustee............................37
Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee.................................39
Section 7.06. Indenture Trustee's Notice of Default..............................................................41
Section 7.07. Releases from Indenture............................................................................41
Section 7.08. Covenant of Quiet Enjoyment........................................................................41
Section 7.09. Pass-Through Trustee's Representations and Warranties.............................................41
Section 7.10. Survival of Representations, Warranties and Covenants..............................................42
Section 7.11. Lessee's Assumption of the Certificates............................................................42
Section 7.12. Indebtedness of Owner Trustee.....................................................................44
Section 7.13. Compliance with Trust Agreement, Etc..............................................................44
Section 7.14. Subordination Agent's Representations, Warranties and Covenants....................................45
ARTICLE 8 TAXES.................................................................................................47
Section 8.01. Lessee's Obligation to Pay Taxes..................................................................47
Section 8.02. After-Tax Basis....................................................................................51
Section 8.03. Time of Payment....................................................................................52
Section 8.04. Contests...........................................................................................52
Section 8.05. Refunds...........................................................................................54
Section 8.06. Lessee's Reports...................................................................................55
Section 8.07. Survival of Obligations...........................................................................55
Section 8.08. Payment of Taxes...................................................................................56
Section 8.09. Reimbursements by Indemnitees Generally...........................................................56
Section 8.10. Special Indemnity.................................................................................56
Section 8.11. Verification......................................................................................56
ARTICLE 9 GENERAL INDEMNITY.....................................................................................56
Section 9.01. Generally..........................................................................................56
Section 9.02. After-Tax Basis...................................................................................60
Section 9.03. Subrogation........................................................................................60
Section 9.04. Notice and Payment.................................................................................60
Section 9.05. Refunds............................................................................................61
Section 9.06. Defense of Claims..................................................................................61
Section 9.07. Survival of Obligations............................................................................62
Section 9.08. Effect of Other Indemnities........................................................................62
Section 9.09. Interest...........................................................................................62
Section 9.10. Special Indemnity..................................................................................62
ARTICLE 10 TRANSACTION COSTS....................................................................................63
Section 10.01. Transaction Costs and Other Costs.................................................................63
ARTICLE 11 SUCCESSOR OWNER TRUSTEE..............................................................................65
Section 11.01. Appointment of Successor Owner Trustee............................................................65
ARTICLE 12 LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS.......................................66
Section 12.01. Liabilities of the Owner Participant..............................................................66
Section 12.02. Interest of Holders of Certificates...............................................................67
ARTICLE 13 OTHER DOCUMENTS......................................................................................67
Section 13.01. Consent of Lessee to Other Documents..............................................................67
Section 13.02. Further Assurances................................................................................67
Section 13.03. Pass-Through Trustee's and Subordination Agent's Acknowledgment..................................67
ARTICLE 14 NOTICES..............................................................................................68
Section 14.01. Notices...........................................................................................68
ARTICLE 15 REFINANCING/REOPTIMIZATION...........................................................................69
Section 15.01. Refinancing.......................................................................................69
Section 15.02. Reoptimization...................................................................................72
ARTICLE 16 CONFIDENTIALITY.......................................................................................73
Section 16.01. Confidentiality...................................................................................73
ARTICLE 17 MISCELLANEOUS........................................................................................74
Section 17.01. Reserved.........................................................................................74
Section 17.02. Collateral Account................................................................................74
Section 17.03. Counterparts......................................................................................75
Section 17.04. No Oral Modifications.............................................................................75
Section 17.05. Captions..........................................................................................75
Section 17.06. Successors and Assigns............................................................................76
Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass-Through Trustee......................76
Section 17.08. Severability......................................................................................76
Section 17.09. Public Release of Information.....................................................................76
Section 17.10. Certain Limitations on Reorganization.............................................................77
Section 17.11. GOVERNING LAW.....................................................................................77
Section 17.12. Section 1110 Compliance...........................................................................77
Section 17.13. Reliance of Liquidity Providers...................................................................77
SCHEDULE I Definitions
SCHEDULE II Certificate Information
SCHEDULE III Debt Portion
SCHEDULE IV Mandatory Economic Terms
SCHEDULE V Mandatory Document Terms
EXHIBIT A(1)(a) Opinion of Lessee's Counsel (Certificate Closing Date)
EXHIBIT A(1)(b) Opinion of Lessee's Special Counsel (Certificate Closing Date)
EXHIBIT A(2)(a) [Reserved]
EXHIBIT A(2)(b) [Reserved]
EXHIBIT A(3) Opinion of Indenture Trustee's Special Counsel
EXHIBIT A(4)(a) Opinion of Owner Trustee's Special Counsel (Certificate Closing Date)
EXHIBIT A(5) Opinion of Pass-Through Trustee's and Subordination Agent's Special Counsel
EXHIBIT A(6)(A) Opinion of Liquidity Provider's Counsel
EXHIBIT A(6)(b) Opinion of Liquidity of Provider's Special Counsel
EXHIBIT A(7) [Reserved]
EXHIBIT A(8) [Reserved]
EXHIBIT B Lease Agreement
EXHIBIT C Trust Indenture and Security Agreement
EXHIBIT D Trust Agreement
EXHIBIT E Purchase Agreement Assignment with PAA Consent
EXHIBIT F Engine Warranty Assignment with Engine Manufacturer's Consent
<PAGE>
PARTICIPATION AGREEMENT
(ATLANTIC COAST AIRLINES TRUST NO. ______)
PARTICIPATION AGREEMENT (ATLANTIC TRUST AIRLINES TRUST NO. _______)
dated as of September 30, 1997 (this "Agreement") among ATLANTIC COAST AIRLINES,
a California corporation (herein, together with its successors and permitted
assigns, the "Lessee" and the "Initial Owner Participant"), STATE STREET BANK
AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as otherwise expressly
stated herein, but solely as owner trustee under the Trust Agreement referred to
below (in such capacity as trustee, together with its successors and permitted
assigns, the "Owner Trustee"), THE FIRST NATIONAL BANK OF MARYLAND, a national
banking association, not in its individual capacity, except as otherwise
expressly stated herein, but solely as indenture trustee under the Indenture
referred to below (in such capacity as trustee, together with its successors and
permitted assigns, the "Indenture Trustee"), THE FIRST NATIONAL BANK OF
MARYLAND, a national banking association, not in its individual capacity, except
as otherwise expressly stated herein, but solely as pass-through trustee of four
separate Pass-Through Trusts (in such capacity as trustee, together with its
successors and permitted assigns, the "Pass-Through Trustee"), and THE FIRST
NATIONAL BANK OF MARYLAND, a national banking association, not in its individual
capacity, except as otherwise expressly stated herein, but solely as
subordination agent (in such capacity as trustee, together with its successors
and permitted assigns, the "Subordination Agent").
W I T N E S S E T H:
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article 1 hereof.
WHEREAS, the Initial Owner Participant has entered into the Trust
Agreement with the Owner Trustee in its individual capacity, substantially in
the form of Exhibit D hereto, pursuant to which Trust Agreement the Owner
Trustee agrees, among other things, to hold the Lessor's Estate for the benefit
of the Initial Owner Participant on the terms specified in the Trust Agreement,
subject to the Lien of the Indenture.
WHEREAS, on the Pass-Through Closing Date, a closing occurred with
respect to the offering of Pass-Through Certificates issued by each Pass-Through
Trust, an allocable amount of the proceeds of which offering will be used by the
Pass-Through Trustee to purchase for each such Pass-Through Trust the
Certificates of the Series and Maturity applicable thereto.
WHEREAS, as of September 26, 1997, the Owner Trustee and the Indenture
Trustee have entered into the Indenture for the benefit of the Pass-Through
Trustee, pursuant to which the Owner Trustee is issuing the Certificates to the
Subordination Agent on behalf of the Pass-Through Trustee as evidence of the
loans made by the Pass-Through Trustee to the Owner Trustee, the proceeds of
which loans will be deposited by the Indenture Trustee on behalf of the Owner
Trustee in the Collateral Account.
WHEREAS, on the Pass-Through Closing Date, (i) ING Bank N.V. entered
into three revolving credit agreements (each, a "Liquidity Facility"), one for
the benefit of the holders of Pass-Through Certificates of each of the
Pass-Through Trusts for the Series A Certificates, the Series B Certificates and
the Series C Certificates, with the Subordination Agent, as agent for the
Pass-Through Trustee on behalf of each such Pass-Through Trust; and (ii) the
Pass-Through Trustees, each Liquidity Provider and the Subordination Agent
entered into the Intercreditor Agreement.
WHEREAS, the Certificates will be held by the Subordination Agent
pursuant to the Intercreditor Agreement on behalf of the Pass-Through Trustee
for each of the Pass-Through Trusts.
WHEREAS, prior to the Delivery Date, the Certificates will be secured
by the Liquid Collateral.
WHEREAS, pursuant to the terms of the Trust Agreement, the Owner
Trustee will be authorized and directed by the Initial Owner Participant:
(a) on the Delivery Date, to purchase the Aircraft from the Seller;
(b) on the Delivery Date, to execute and deliver the Lease
substantially in the form of Exhibit B hereto, pursuant to which,
subject to the terms and conditions set forth in the Lease, the Owner
Trustee agrees to lease to the Lessee, and the Lessee agrees to lease
from the Owner Trustee, the Aircraft on the Delivery Date, such lease
to be effected by the execution and delivery on the Delivery Date of a
Lease Supplement, in the form of Exhibit A to the Lease, covering the
Aircraft and incorporating by reference all of the terms of the Lease;
(c) to execute and deliver the Indenture, substantially in the
form of Exhibit C hereto, for the benefit of the Holders from time to
time of the Certificates, pursuant to which the Owner Trustee agrees,
among other things, (A) to deposit, mortgage and pledge with the
Indenture Trustee, as part of the Trust Indenture Estate, all of the
Lessor's Estate but not Excepted Payments, (B) on the Certificate
Closing Date, to issue Certificates substantially in the form set forth
in Exhibit B to the Indenture, the proceeds of the sale of which will
be held by the Indenture Trustee on behalf of the Owner Trustee in the
Collateral Account until released in accordance with the terms hereof
and of the Indenture, and (C) on the Delivery Date, to execute and
deliver the Indenture Supplement, substantially in the form of Exhibit
A to the Indenture, covering the Aircraft and supplementing the
Indenture; and
(d) on the Delivery Date, to execute and deliver (i) the
Purchase Agreement Assignment, whereby the Lessee assigns to the Owner
Trustee the right to purchase the Aircraft from the Seller and certain
of the Lessee's rights and interests under the Purchase Agreement to
the extent that the same relate to the Aircraft (except to the extent
reserved in the Purchase Agreement Assignment), which Purchase
Agreement Assignment is to include as an annex a PAA Consent executed
by the Manufacturer, and (ii) the Engine Warranty Assignment pursuant
to which the Lessee assigns to the Owner Trustee certain of the
Lessee's rights under the General Terms Agreement with respect to the
Engines, which Engine Warranty Assignment is to include as an annex the
Engine Manufacturer's Consent executed by the Engine Manufacturer, the
Purchase Agreement Assignment, and PAA Consent to be substantially in
the form of Exhibit E hereto and the Engine Warranty Assignment and the
Engine Manufacturer's Consent to be in substantially the form of
Exhibit F hereto, in each case, as amended or modified on or before the
Delivery Date in accordance with the terms hereof.
WHEREAS, on the Delivery Date pursuant to and subject to the terms and
conditions of this Agreement, the Purchase Agreement Assignment, the PAA
Consent, the Engine Warranty Assignment, the Engine Manufacturer's Consent, the
FAA Bill of Sale, and the Warranty Bill of Sale, the Owner Trustee will
purchase, and receive title to, the Aircraft from the Seller and lease the
Aircraft to the Lessee pursuant to the Lease.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise specifically provided herein, the definitions set
forth in Schedule I hereto are incorporated herein for all purposes of this
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms so defined.
ARTICLE 2
ISSUANCE OF PASS-THROUGH CERTIFICATES;
ISSUANCE AND PURCHASE OF CERTIFICATES
Section 2.01. Transfer of Funds.
(a) On the Pass-Through Closing Date: (i) the Lessee shall direct the
Placement Agent to execute a wire transfer or intra-bank transfer to the
Pass-Through Trustee in the amount of the total proceeds payable pursuant to the
Placement Agreement with respect to the Pass-Through Certificates, and (ii) the
Pass-Through Trustee shall deliver the Pass-Through Certificates to the
Placement Agent upon receipt by the Pass-Through Trustee of such proceeds.
(b) Subject to the satisfaction or waiver of the conditions set forth
herein, on the Certificate Closing Date, on behalf of each Pass-Through Trust,
from an allocable amount of the proceeds of the sale of the related Pass-Through
Certificates, the Pass-Through Trustee shall purchase the Certificates specified
for such Pass-Through Trust on Schedule II hereto. For each Pass-Through Trust,
the Pass-Through Trustee shall pay an amount equal to the principal amount of
Certificates of the Series and Maturity that relates to such Pass-Through Trust,
which amounts in the aggregate shall equal the aggregate principal amount of the
Certificates as specified in Section 2.04 of the Indenture. The aggregate amount
payable by the Pass-Through Trustee pursuant to this Section 2.01(b) shall be
payable by wire transfer or intra-bank transfer to the Indenture Trustee on
behalf of the Owner Trustee.
(c) On the Certificate Closing Date, the Indenture Trustee shall, on
behalf of the Owner Trustee, deposit, by wire transfer or intra-bank transfer,
the amounts received by it pursuant to Section 2.01(b) hereof in the Collateral
Account pursuant to the Indenture.
(d) On or before the Certificate Closing Date, the parties hereto shall
execute and deliver, to the extent they are parties thereto, and consent to the
execution and delivery of (if they are not parties thereto), the Indenture
(other than the Indenture Supplement), and the other documents listed in Section
4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture
Trustee for authentication, and the Indenture Trustee shall authenticate and
deliver to the Subordination Agent on behalf of the Pass-Through Trustee for
each of the Pass-Through Trusts, upon the request of the Owner Trustee, the
Certificates as provided in Section 2.02 hereof.
(e) The Closings shall take place at the offices of Shearman & Sterling, 599 Lexington Avenue, New
York, NY 10022.
Section 2.02. Certificates. (a) Subject to the satisfaction or waiver
of the conditions set forth herein, on the Certificate Closing Date, the Initial
Owner Participant will instruct the Owner Trustee to execute and deliver to the
Indenture Trustee, and the Indenture Trustee shall authenticate and deliver,
upon the request of the Owner Trustee, to the Subordination Agent on behalf of
the Pass-Through Trustee for each of the Pass-Through Trusts, the Certificates
specified for such Pass-Through Trust on Schedule II hereto, which (i) shall be
issued in the principal amount and in the Series and Maturity set forth for such
Certificate in Schedule II hereto, (ii) shall bear interest at the interest rate
set forth for such Certificate in Schedule II hereto, (iii) shall be issued in
such form and on such terms as are specified in the Indenture, (iv) shall be
dated and authenticated on the Certificate Closing Date and shall bear interest
from the Certificate Closing Date and (v) shall be registered in the name of the
Subordination Agent on behalf of the Pass-Through Trustee for such Pass-Through
Trust.
(b) Transfer of Beneficial Interest. If on a date prior to the Delivery
Date, the Lessee shall have identified one or more Owner Participants ready,
willing and able to acquire the Beneficial Interest of the Initial Owner
Participant in consideration for such Owner Participant's or Owner Participants'
agreement to participate in the Lessor's payment of the Purchase Price for the
Aircraft on the Delivery Date as provided in Section 3.02(a) hereof, the Initial
Owner Participant shall transfer its Beneficial Interest to such Owner
Participant or Owner Participants on such date (the "Transfer Date"). On the
Delivery Date (or if earlier the Transfer Date), the document amendments
contemplated by Section 2.03 hereof (subject to the limitations set forth in
such Section) shall be effected and such amended documents delivered.
Section 2.03. Amendments on Delivery or Transfer Date. (a) Amendment
and Restatement of Certain Documents. Upon any transfer by the initial Owner
Participant of its Beneficial Interest on the Delivery Date (as contemplated by
Section 3.02(a) hereof (or, if earlier, the Transfer Date), the parties hereto
shall enter into amendments and restatements of the Trust Agreement, the Lease,
the Indenture and this Agreement, which amendments and restatements shall
reflect such changes as shall have been requested by the Owner Participant,
agreed to by the Lessee and, if modified in any material respect, as to which
Rating Agency Confirmation shall have been obtained from each Rating Agency by
the Lessee (to be delivered by the Lessee to the Pass Through Trustee on or
before the Delivery Date or the Transfer Date, as the case may be); provided,
however, that in any event such amended and restated documents shall not vary
the Mandatory Economic Terms and shall contain the Mandatory Document Terms.
The Lessee agrees to furnish to each Liquidity Provider and to Coudert
Brothers (the initial Liquidity Provider's special New York counsel) at its New
York office, attention: David Schmidt, as soon as practicable prior to the
estimated Delivery Date (or, if earlier, the estimated Transfer Date), true and
complete copies of drafts of any such amended and restated Participation
Agreement, amended and restated Lease Agreement and amended and restated
Indenture. The Lessee further agrees to furnish to each Liquidity Provider and
to the counsel identified in the preceding sentence (i) each and every
subsequent draft of such documents and (ii) promptly following the execution
thereof, true and complete copies of such documents.
(b) Amendments to Certain Schedules. The schedule of principal payments
on the Certificates set forth in Section 6.06 of the Indenture and in the
Certificate on the Certificate Closing Date have been calculated based in part
upon a hypothetical owner's economic return and certain assumptions regarding
the Delivery Date, Transaction Costs, tax law, Basic Term and certain other
items (the "Assumptions"). If the Initial Owner Participant transfers its
Beneficial Interest to one or more Owner Participants on the Delivery Date (as
contemplated by Section 3.02(a) hereof (or, if earlier, the Transfer Date),
then, no later than 20 days following the Delivery Date (the "Initial
Reoptimization Date"), the Owner Trustee may elect to amend such schedule of
principal payments to reflect the actual Owner's or Owners' Economic Return and
any changes to the Assumptions, subject to the restrictions set forth below. On
the Initial Reoptimization Date the Owner Trustee shall deliver and the
Subordination Agent on behalf of the Pass Through Trustee of each Pass Through
Trust shall accept delivery of an amended Schedule I to each Certificate
containing such changed principal installments.
The Owner Trustee will give not less than 10 days' notice of the
Initial Reoptimization Date. Any amendments to the Indenture and such Schedule
shall not vary the Mandatory Economic Terms and on the Initial Reoptimization
Date the Lessee shall deliver a certificate to the Pass Through Trustee and the
Liquidity Providers signed by the Vice President and Treasurer or any other
authorized officer of the Lessee certifying to such effect. If the Initial
Reoptimization Date occurs later than the Delivery Date, the Lessee shall cause
any required filing and recording of the affected documents with the Aeronautics
Authority to be effected on the Initial Reoptimization Date.
ARTICLE 3
PARTICIPATION IN INVESTMENT ON DELIVERY DATE;
DELIVERY OF AIRCRAFT
Section 3.01. Lessee's Notice of Delivery Date. The Lessee agrees to
give the Owner Participant, the Indenture Trustee, the Owner Trustee, the
Pass-Through Trustee and the Liquidity Providers at least three Business Days'
written or facsimile notice prior to the Delivery Date (which notice shall be
effective only if received not later than 12:00 noon (New York City time) on the
date that is at least three Business Days prior to the Delivery Date), which
Delivery Notice shall specify the amount of the Purchase Price, the amount of
the Owner Participant's Commitment, the Debt Portion, the Delivery Date for the
Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics
Authority registration number for the Aircraft.
Section 3.02. Commitments to Participate in Purchase Price. (a)
Participation in Purchase Price. Subject to the terms and conditions of this
Agreement, on the Delivery Date, (i) subject to the proviso to this Section
3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser
amount as may then be held in the Collateral Account together with the Lessee
Shortfall (as defined in clause (iii) below), if any, to the Owner Trustee for
application to the Purchase Price as provided below, (ii) unless previously
transferred on the Transfer Date, the Initial Owner Participant agrees to
transfer its Beneficial Interest to the Owner Participant in consideration for
the Owner Participant's participation in the Lessor's payment of the Purchase
Price through an investment in the beneficial ownership of the Lessor's Estate
in an amount equal to the Purchase Price minus the Debt Portion, (iii) subject
to the proviso to this Section 3.02(a), the Lessee agrees to pay to the
Indenture Trustee the excess, if any, of (I) the Debt Portion over (II) such
amount as may then be held in the Collateral Account (the "Lessee Shortfall") as
provided in Section 17.02(a) hereof, and (iv) the Seller shall sell the Aircraft
to the Owner Trustee and the Owner Trustee shall immediately thereafter lease
the Aircraft to the Lessee pursuant to the Lease. In consideration for the
assignment to the Owner Trustee by the Lessee under the Purchase Agreement
Assignment of the Lessee's right to purchase the Aircraft, the transfer by the
Initial Owner Participant to the Owner Participant of its Beneficial Interest
and the transfer of title to the Aircraft from the Seller to the Owner Trustee,
the following cash payments will be made by wire transfer of immediately
available funds on the Delivery Date: (A) by the Owner Trustee to the Seller, an
amount equal to the remaining balance due to the Seller for the Aircraft, as
evidenced by the Invoice, (B) by the Owner Trustee to the Lessee, an amount
equal to the Purchase Price minus the cash payment to the Seller pursuant to
clause (A) above and (C) by the Indenture Trustee, on behalf of the Owner
Trustee, to the Lessee the excess of any amounts as may then be held in the
Collateral Account over the Debt Portion.
(b) Reserved.
(c) No Obligation to Increase Commitments; Delayed Delivery. (i) If the
Indenture Trustee shall default in its obligation to make the amount of its Debt
Portion available pursuant hereto, the Owner Participant shall have no
obligation to make any portion of such Debt Portion available or to increase the
amount of its Commitment, but the obligations of the Owner Participant shall
remain subject to the terms and conditions of this Agreement.
(ii) Subject to the provisions of Section 3.05 hereof, if the closing
of the transactions contemplated by the Operative Agreements shall not have been
consummated by 2:00 p.m. (New York City time), or such earlier time as directed
by the Lessee, on the Scheduled Delivery Date, the Owner Trustee shall, if
instructed in writing by the Lessee, at the expense of the Lessee, use its
reasonable best efforts to cause the Owner Participant's Commitment to be
invested and reinvested to the extent practicable at the direction received by
it from the Lessee (with a copy to the Owner Participant), at the risk of the
Lessee, in Permitted Investments consisting of either commercial paper or time
deposits; provided, however, that in the absence of instructions by 2:00 p.m.
(New York City time) the Owner Trustee shall use its reasonable [best] efforts
to cause such amount or the proceeds thereof to be invested and reinvested to
the extent practicable in overnight Eurodollar time deposits. Earnings on any
such investments shall be applied to the Lessee's payment obligations, if any,
to such Owner Participant pursuant to the last two paragraphs of this Section
3.02, and the balance, if any, of such earnings remaining after such application
shall be paid in accordance with the Lessee's written instructions.
If for any reason (i) the Operative Agreements shall not be executed
and delivered by the respective parties thereto and/or the delayed Delivery Date
shall not occur (whether by reason of a failure to meet a condition precedent
thereto set forth in Article 4 hereof or otherwise) on or before the third
Business Day after the Scheduled Delivery Date (or earlier if requested by the
Owner Participant) or, if earlier, the Cut-Off Date, or (ii) the Lessee has
notified the Owner Trustee (with a copy to the Owner Participant) prior to 2:00
p.m. (New York City time) on any date after the Scheduled Delivery Date that it
does not intend to go forward to close the transactions contemplated hereby for
such Delivery Date, the Owner Participant may cancel any funding arrangements
made to fund its Commitment on the Scheduled Delivery Date but the Owner
Participant's Commitment hereunder with respect to the Aircraft shall not be
terminated thereby until the Cut-off Date, whereupon the Owner Participant's
Commitment hereunder shall terminate. On such third Business Day (or such
earlier date) or the Cut-Off Date, as the case may be, or the earliest
practicable Business Day thereafter, the Owner Trustee shall return the amounts
held by it hereunder on behalf of the Owner Participant to the Owner
Participant, provided that the Owner Trustee shall have had a reasonable time to
liquidate any Permitted Investments it has been authorized to invest in pursuant
to the preceding paragraph and to obtain the proceeds therefrom in funds of the
type originally received, and the Lessee shall pay interest on such funds to the
Owner Participant at the Debt Rate, such interest to be payable for the period
from and including such Scheduled Delivery Date to but excluding the date such
funds are returned to the Owner Participant in accordance with the terms hereof;
provided that if any such funds are returned to the Owner Participant after 2:00
p.m. (New York City time) on any such date, such funds shall be deemed for
purposes of this paragraph to have been returned on the next succeeding Business
Day.
The Lessee shall reimburse the Owner Trustee on demand for any loss
incurred by the Owner Trustee as a result of the investment of funds by the
Owner Trustee in accordance with the terms of this Section 3.02(c). Further, the
Lessee shall indemnify the Owner Trustee and hold it harmless from and against
any cost or expense the Owner Trustee may incur as a result of any investment of
funds or transfer of funds referred to herein in accordance with the terms
hereof. The Owner Trustee shall not be liable for failure to invest such funds
except as otherwise provided herein or for any losses incurred on such
investments except for any losses arising out of its own gross negligence or
willful misconduct.
Section 3.03. Reserved.
Section 3.04. Reserved.
Section 3.05. Postponement of Delivery Date. (a) If no Owner
Participant has committed to participate in the transactions contemplated to
occur on the Scheduled Delivery Date or if an Owner Participant shall for any
reason fail or refuse to make the full amount of its Commitment available on the
Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the
Owner Trustee will promptly give each party confirmed facsimile notice thereof
and the Lessee shall postpone the Delivery Date to a date not later than the
Cut-off Date. If no Owner Participant has committed to participate or an Owner
Participant shall for any reason fail or refuse to make the full amount of its
Commitment available in accordance with the terms of Section 3.02 hereof on such
postponed Delivery Date (in which event the Owner Participant's interest in the
Lessor's Estate shall be automatically reconveyed to the Lessee), the Lessee
shall endeavor during such period to identify another equity investor to whom it
can assign its Beneficial Interest. If the Lessee identifies an equity investor,
the Lessee shall assign its interest in the Lessor's Estate as provided above.
In case of any such conveyance (or any conveyance by the Lessee to another owner
participant on or prior to the Cut-Off Date) (but subject to the satisfaction of
the conditions precedent specified herein), the Indenture Trustee shall release
the Debt Portion or such lesser amount as may then be held in the Collateral
Account for application to the payments contemplated in the last sentence of
Section 3.02(a) hereof. If no such equity investor is identified or if for any
reason other than the failure of the Seller to deliver the Aircraft, the Lessee
does not enter into the Lease and the Lease Supplement with the Owner Trustee on
or prior to the Cut-Off Date, the Lessee, the Indenture Trustee and the
Pass-Through Trustee agree that the Lessee shall purchase the Aircraft and
assume all the obligations of the Owner Trustee under the Certificates upon
satisfaction of the requirements set forth in Sections 4.02 and 7.11(b) (to the
extent applicable) hereof, and as otherwise necessary to reflect a full recourse
secured aircraft financing of the Lessee.
(b) Release of Obligations. If (i) the Seller fails to deliver the
Aircraft on or prior to the Cut-Off Date or (ii) the Lessee does not enter into
the Lease and the Lease Supplement and the conditions to the Lessee's assumption
of the Certificates pursuant to Section 3.05(a) have not been satisfied on or
prior to the Cut-Off Date, then, in such event, the Owner Trustee shall not
purchase the Aircraft from the Seller, and the parties to the Operative
Agreements shall have no further obligations or liabilities under any of the
Operative Agreements with respect to the Aircraft, including the obligation of
the Owner Participant to participate in the payment of the Purchase Price, and
such documents shall terminate and have no further force or effect with respect
to the Aircraft; provided, that the Lessee shall provide, no later than the
Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates
shall be prepaid on the 15th day following the Cut-Off Date as provided in
Section 6.02(a)(vi) of the Indenture and Section 17.02(c) hereof and provided
further, that (i) the Lessee's obligation to pay any Transaction Costs as
provided in Section 3.04 hereof (to the extent such section is applicable) and
to indemnify such parties to the extent provided in such documents, shall not be
diminished or modified in any respect and (ii) the obligations of the Owner
Trustee, the Indenture Trustee and the Lessee to return funds and pay interest,
costs, expenses and other amounts thereon or in respect thereof as provided in
Section 3.02 hereof shall continue.
(c) Optional Postponement. Without limiting the provisions of Section
3.02(c) hereof, the Scheduled Delivery Date may be postponed from time to time
(but in no event shall the Delivery Date be later than the Cut-Off Date) for any
reason, other than pursuant to Section 3.05(a) hereof, if the Lessee gives the
Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass-Through
Trustee and the Liquidity Providers confirmed facsimile notice (or telephone
notice followed by written confirmation) of such postponement and notice of the
date to which the Delivery Date has been postponed, such notice of postponement
to be received by each party no later than 11:00 a.m. (New York City time) on
the Business Day preceding the Scheduled Delivery Date.
Section 3.06. Closing. The closing with respect to the purchase and
lease of the Aircraft on the Delivery Date shall take place at the offices of
Troutman Sanders LLP, 600 Peachtree Street, N.E., Atlanta, Georgia 30308 or such
other place as the Lessee, the Owner Participant and the Indenture Trustee shall
mutually agree.
ARTICLE 4
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent (Certificate Closing Date). The
obligations of the Owner Trustee, the Lessee, the Initial Owner Participant, the
Indenture Trustee, the Subordination Agent and the Pass-Through Trustee on
behalf of each Pass-Through Trust to participate in the transactions
contemplated hereby on the Certificate Closing Date are subject to the
fulfillment to the reasonable satisfaction of such party (or waiver by such
party), prior to or on the Certificate Closing Date, of the following conditions
precedent (it being understood that receipt by the Lessee of any of the
following documents shall not be a condition precedent to the obligations of any
party):
(a) Certificates. (i) On the Certificate Closing Date, there
shall have been duly issued and delivered by the Owner Trustee to the
Subordination Agent on behalf of the Pass-Through Trustee for each
Pass-Through Trust, against payment therefor, a Certificate,
substantially in the form set forth in Exhibit B to the Indenture, duly
authenticated, dated the Certificate Closing Date and registered in the
name of the Subordination Agent, in the principal amounts, Series and
Maturity, bearing the interest rate and otherwise as provided in
Section 2.04 of the Indenture, and (ii) on the Certificate Closing
Date, the "Certificates" (as defined in each of the Related Indentures)
have been duly issued and delivered by the "Owner Trustee" (as defined
in each of the Related Indentures) to the Subordination Agent on behalf
of the Pass-Through Trustee for each Pass-Through Trust.
(b) Legal Investment. On the Certificate Closing Date, no fact
or condition shall exist under applicable laws or regulations, or
interpretations of any such laws or regulations by applicable
regulatory authorities, which, in the opinion of the Pass-Through
Trustee, the Subordination Agent, or the Indenture Trustee, would make
it illegal for the Initial Owner Participant, the Lessee, the Owner
Trustee, the Pass-Through Trustee, the Subordination Agent or the
Indenture Trustee, and no change in circumstances shall have occurred
which would otherwise make it illegal or otherwise in contravention of
guidance issued by regulatory authorities for the Initial Owner
Participant, the Lessee, the Owner Trustee, the Pass-Through Trustee,
the Subordination Agent or the Indenture Trustee, to participate in the
transactions to be consummated on the Certificate Closing Date; and no
action or proceeding shall have been instituted nor shall governmental
action before any court, governmental authority or agency be threatened
which in the opinion of counsel for the Indenture Trustee, the
Subordination Agent or the Pass-Through Trustee is not frivolous, nor
shall any order have been issued or proposed to be issued by any court,
or governmental authority or agency, as of the Certificate Closing
Date, to set aside, restrain, enjoin or prevent the consummation of any
of the transactions contemplated by this Agreement or by any of the
other Operative Agreements.
(c) Placement Agent. The Placement Agent shall have
transferred the funds specified in Section 2.01(a) hereof and all
conditions with respect thereto shall have been satisfied or waived.
(d) Documents. This Agreement and the following documents
shall have been duly authorized, executed and delivered by the
respective party or parties thereto, shall each be reasonably
satisfactory in form and substance to the Lessee, the Owner Trustee,
the Indenture Trustee, the Pass-Through Trustee (each acting directly
or by authorization to its special counsel) and shall each be in full
force and effect; there shall not have occurred any default thereunder,
or any event which with the lapse of time or the giving of notice or
both would be a default thereunder, and copies executed or certified as
requested by the Lessee, the Owner Trustee, the Indenture Trustee, the
Pass-Through Trustee or the Subordination Agent, as the case may be, of
such documents shall have been delivered to the Lessee, the Indenture
Trustee, the Pass-Through Trustee, the Subordination Agent and the
Owner Trustee (provided, that the sole chattel-paper original of the
Lease shall be delivered to the Indenture Trustee):
(i) the Indenture;
(ii) the Trust Agreement;
(iii) the ACA Guaranty;
(iv) the Intercreditor Agreement;
(v) the Liquidity Facility for each of the Pass-Through
Trusts for the Series A Certificates, the Series B
Certificates and the Series C Certificates.
(e) Approvals. All approvals and consents of any trustees or
holders of any indebtedness or obligations of the Lessee or ACA Inc.,
which in the opinion of the Owner Participant, the Pass-Through Trustee
or the Indenture Trustee are required in connection with any
transaction contemplated by this Agreement, shall have been duly
obtained.
(f) Financing Statements. Uniform Commercial Code ("UCC")
financing statements covering all the security interests (and other
interests) intended to be created by or pursuant to the Granting Clause
of the Indenture shall have been executed and delivered by the Owner
Trustee, as debtor, and by the Indenture Trustee, as secured party, for
and on behalf of the Holders, for filing in Connecticut, and all other
actions shall have been taken which, in the opinion of the Pass-Through
Trustee and the Placement Agent, are necessary to perfect and protect
such security interests and other interests.
(g) Corporate Documents. Except when such Person is the
delivering party, the Owner Trustee, the Pass-Through Trustee, the
Lessee and the Indenture Trustee (acting directly or by authorization
to its counsel) shall have received the following, in each case in form
and substance reasonably satisfactory to it:
(i) a copy of the certificate of incorporation and
by-laws of the Lessee, certified by the Secretary or an
Assistant Secretary of the Lessee and ACA Inc. as of the
Certificate Closing Date, and a copy of a resolution adopted
by the board of directors of the Lessee, certified as such as
of the Certificate Closing Date by such Secretary or Assistant
Secretary, duly authorizing the lease by the Lessee of the
Aircraft and the execution, delivery and performance by the
Lessee of this Agreement, the Indenture, a lease with respect
to the Aircraft, the Pass-Through Agreement, and agreements
related thereto to which the Lessee is or is to be a party and
each other document to be executed and delivered by the Lessee
in connection with the transactions contemplated hereby and a
copy of the resolutions of the board of directors of ACA Inc.,
certified as such as of the Certificate Closing Date by the
Secretary or an Assistant Secretary, authorizing the execution
and delivery by ACA Inc. of the ACA Guaranty and the other
Operative Agreements to which ACA Inc. is or is to be a party
and each other document to be executed and delivered by ACA
Inc. in connection with the transactions contemplated hereby;
(ii) a copy of the articles of incorporation and
by-laws and other instruments of the Owner Trustee, certified
by the Secretary or an Assistant Secretary of the Owner
Trustee as of the Certificate Closing Date (or other like
instruments satisfactory to the Lessee and the Initial Owner
Participant) and evidence authorizing the execution, delivery
and performance by the Owner Trustee in its individual
capacity or as Owner Trustee, as the case may be, of this
Agreement, the Trust Agreement and each of the other Operative
Agreements to which it is or is to be a party, whether in its
individual capacity or as Owner Trustee, and each other
document to be executed and delivered by the Owner Trustee in
connection with the transactions contemplated hereby;
(iii) a copy of the articles of association and
by-laws and other instruments of the Indenture Trustee,
certified by the Secretary or an Assistant Secretary of the
Indenture Trustee as of the Certificate Closing Date (or other
like instruments satisfactory to the Lessee and the Initial
Owner Participant) and evidence authorizing the execution,
delivery and performance by the Indenture Trustee of each of
this Agreement, the Indenture and each of the other Operative
Agreements to which it is or is to be a party, and each other
document to be executed and delivered by the Indenture Trustee
in connection with the transactions contemplated hereby;
(iv) a copy of the articles of association and
by-laws and other instruments of the Pass-Through Trustee,
certified by the Secretary or an Assistant Secretary of the
Pass-Through Trustee as of the Certificate Closing Date (or
other like instruments satisfactory to the Lessee and the
Initial Owner Participant) and evidence authorizing the
execution, delivery and performance by the Pass-Through
Trustee of this Agreement, the Pass-Through Agreement, and
each of the other Operative Agreements to which it is or is to
be a party, and each other document to be executed and
delivered by the Pass-Through Trustee in connection with the
transactions contemplated hereby;
(v) a copy of the articles of association and by-laws
and other instruments of the Subordination Agent, certified by
the Secretary or an Assistant Secretary of the Subordination
Agent as of the Certificate Closing Date (or other like
instruments satisfactory to the Lessee and the Initial Owner
Participant) and evidence authorizing the execution, delivery
and performance by the Subordination Agent of this Agreement,
the Intercreditor Agreement and each of the other Operative
Agreements to which it is or is to be a party, and each other
document to be executed and delivered by the Subordination
Agent in connection with the transactions contemplated hereby;
and
(vi) such other documents, evidences, materials, and
information with respect to the Lessee, the Owner Trustee, the
Indenture Trustee, and the Pass-Through Trustee as the Initial
Owner Participant, the Indenture Trustee or the Pass-Through
Trustee may reasonably request in order to establish the
consummation of the transactions contemplated by this
Agreement.
(h) Officer's Certificate of Lessee and ACA Inc. On the
Certificate Closing Date, the following statements shall be true, and
the Owner Trustee, the Pass-Through Trustee, the Liquidity Providers
and the Indenture Trustee shall have received a certificate of the
Lessee and of ACA Inc. signed on its respective behalf by the Vice
President and Treasurer or any other duly authorized officer of the
Lessee or ACA Inc., as applicable, dated the Certificate Closing Date,
stating that:
(i) the representations and warranties of the Lessee
and ACA Inc., as the case may be, contained in the Operative
Agreements to which it is a party and in any certificate
delivered pursuant hereto or thereto are true and correct on
and as of the Certificate Closing Date as though made on and
as of such date (except to the extent that such
representations and warranties relate solely to an earlier
date, in which case such certificate shall state that such
representations and warranties were true and correct on and as
of such earlier date);
(ii) except as disclosed in the Offering Memo, no
materially adverse change has occurred in the financial
condition, business or operations of the Lessee or ACA Inc.
from that shown in the unaudited financial statements of the
Lessee and ACA Inc. as of July 31, 1997, and nothing has
occurred which will, in the judgment of such officer,
materially adversely affect the ability of the Lessee or ACA
Inc., as the case may be, to carry on its business or to
perform its obligations under this Agreement and each other
Operative Agreement to which it is or is to be a party; and
(iii) no event has occurred and is continuing, or
would result from the purchase, sale, mortgage, or lease of
the Aircraft, which constitutes an Event of Loss (or event
which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine, or a Default under
the Lease.
(i) Reserved.
(j) Other Officer's Certificates. On the Certificate Closing
Date, the following statements shall be true, and the Lessee, the
Pass-Through Trustee, the Liquidity Providers, the Owner Trustee, the
Subordination Agent and the Indenture Trustee shall have received a
certificate from each of SSB and the Owner Trustee (in the case of the
Lessee, the Pass-Through Trustee, the Subordination Agent and the
Indenture Trustee), FNBM and the Indenture Trustee (in the case of the
Lessee, the Pass-Through Trustee, the Subordination Agent and the Owner
Trustee), FNBM and the Pass-Through Trustee (in the case of the Lessee,
the Indenture Trustee, the Subordination Agent and the Owner Trustee),
and FNBM and the Subordination Agent (in the case of the Lessee, the
Pass-Through Trustee, the Indenture Trustee and the Owner Trustee),
signed by a duly authorized officer of SSB and FNBM, respectively,
dated the Certificate Closing Date, stating with respect to SSB and the
Owner Trustee, with respect to FNBM and the Indenture Trustee, with
respect to FNBM and the Pass-Through Trustee, or with respect to FNBM
and the Subordination Agent, as the case may be, that:
(i) the representations and warranties of SSB in its
individual capacity and as Owner Trustee, of FNBM in its
individual capacity and as Indenture Trustee, of FNBM in its
individual capacity and as Pass-Through Trustee, or of FNBM in
its individual capacity and as Subordination Agent contained
in this Agreement, the Lease, the Trust Agreement and the
Indenture and in any certificate delivered pursuant hereto or
thereto are true and correct on and as of the Certificate
Closing Date as though made on and as of such date (except to
the extent that such representations and warranties relate
solely to an earlier date, in which case such certificate
shall state that such representations and warranties were true
and correct on and as of such earlier date);
(ii) to the best of its knowledge, no Default or
Indenture Default exists due to any action or omission on the
part of SSB in its individual capacity or as Owner Trustee, of
FNBM in its individual capacity or as Indenture Trustee, of
FNBM in its individual capacity or as Pass-Through Trustee, or
of FNBM in its individual capacity or as Subordination Agent;
and
(iii) there are no Lessor's Liens attributable to the
Owner Trustee or SSB and no Indenture Trustee's Liens.
(k) Legal Opinions. The Placement Agent, the Lessee, the Owner
Trustee, the Pass-Through Trustee and the Indenture Trustee (acting
directly or by authorization to its special counsel) shall have
received from the following counsel their respective legal opinions in
each case reasonably satisfactory to the Placement Agent, the Lessee,
the Owner Trustee, the Pass-Through Trustee or the Indenture Trustee,
as the case may be, as to scope and substance (and covering such other
matters as the recipient may reasonably request) and dated the
Certificate Closing Date:
(i) Richard J. Kennedy, Vice President and General
Counsel of the Lessee and ACA Inc., in the form of Exhibit
A(l)(a)(i) hereto and addressed to the Placement Agent, the
Owner Trustee, the Pass-Through Trustee, each Liquidity
Provider and the Indenture Trustee;
(ii) Ober, Kaler, Grimes & Shriver, special counsel
for the Indenture Trustee, in the form of Exhibit A(3) hereto
and addressed to the Placement Agent, the Indenture Trustee,
the Owner Trustee, the Pass-Through Trustee, each Liquidity
Provider and the Lessee;
(iii) Bingham, Dana & Gould LLP, special counsel for
the Owner Trustee, in the form of Exhibit A(4)(a)(i) hereto
and addressed to the Placement Agent, the Indenture Trustee,
the Owner Trustee, the Pass-Through Trustee, each Liquidity
Provider and the Lessee;
(iv) Troutman Sanders LLP, special leasing counsel
for the Lessee, and of Gibson, Dunn & Crutcher, special
securities counsel to the Lessee, in the forms attached as
Exhibit A(l)(b)(i) hereto and addressed to the Placement
Agent, the Indenture Trustee, the Owner Trustee, the
Pass-Through Trustee, each Liquidity Provider and the Lessee;
(v) Ober, Kaler, Grimes & Shriver special counsel for
the Pass-Through Trustee and the Subordination Agent, in the
form of Exhibit A(5) hereto addressed to the Placement Agent,
the Indenture Trustee, the Owner Trustee, the Pass-Through
Trustee, each Liquidity Provider and the Lessee; and
(vi) Clifford Chance, special Dutch counsel to ING
Bank N.V. in the form of Exhibit A(6)(a) hereto, and Coudert
Brothers, special counsel for the Liquidity Providers, in the
form of Exhibit A(6)(b) hereto, each addressed to the
Pass-Through Trustee, the Subordination Agent, each Liquidity
Provider and the Lessee.
(l) No Indenture Default. No Indenture Default exists.
(m) No Lease Default or Event of Loss. No Default exists, and
no Event of Loss, or event which with the passage of time would
constitute an Event of Loss, shall exist.
(n) Other Agreements. The Lessee and the Pass-Through Trustee
shall have entered into the Pass-Through Agreement, all conditions to
the effectiveness of each thereof shall have been satisfied or waived,
and the Pass-Through Certificates shall have been issued. The Lessee
and the Placement Agent shall have entered into the Placement
Agreement, all conditions to the effectiveness thereof shall have been
satisfied or waived, and the Pass-Through Certificates shall have been
delivered pursuant to the Placement Agreement. All conditions to the
effectiveness of each Liquidity Facility shall have been satisfied or
waived.
(o) Payment of Taxes. (A) All taxes, fees, charges,
assessments, costs and other expenses then due and payable in
connection with the execution, delivery, recording and filing of all
financing statements referred to in subparagraph (f) of this Section
4.01, or in connection with the issuance of the Certificates shall have
been duly paid or caused to be paid in full; and (B) all sales or use
taxes and duties related to the consummation of the transactions
contemplated by the Operative Agreements on the Certificate Closing
Date which are then due and payable shall have been duly paid in full.
(p) Governmental Compliance. All appropriate action required
to have been taken by the FAA, the SEC, or any governmental or
political agency, subdivision or instrumentality of the United States,
prior to the Certificate Closing Date in connection with the
transactions contemplated by this Agreement shall have been taken, and
all orders, permits, waivers, authorizations, exemptions and approvals
(collectively "permits") of such entities required to be in effect on
the Certificate Closing Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such
permits shall be in full force and effect on the Certificate Closing
Date.
(q) Section 131.3 of the New York State Banking Law Filing.
SSB shall have delivered evidence of its filing made with the New York
Superintendent of Banking pursuant to Section 131.3 of the New York
State Banking Law.
(r) Letter of Credit. The Lessee shall have delivered the
Letter of Credit to the Indenture Trustee in connection with the
obligations of the Lessee pursuant to the first sentence of Section
17.02(h) hereof.
Section 4.02. Conditions Precedent (Delivery Date). Subject to the last
paragraph of this Section 4.02, the obligations of the Owner Trustee, the Owner
Participant, the Indenture Trustee, the Subordination Agent and the Pass-Through
Trustee on behalf of each Pass-Through Trust to participate in the transactions
contemplated hereby on the Delivery Date are subject to the fulfillment to the
reasonable satisfaction of each party (or waiver by such party), prior to or on
the Delivery Date, of the following conditions precedent (it being understood
that receipt by the Lessee of any of the following documents shall not be a
condition precedent to the obligation of any party):
(a) Notice, Etc. Each party hereto shall have received a
Delivery Notice pursuant to Section 3.01 hereof at least three Business
Days prior to the Delivery Date.
(b) Legal Investment. No change shall have occurred after the
Certificate Closing Date (or, in the case of the Owner Participant, the
Transfer Date) and on or prior to the Delivery Date in applicable laws
or regulations, or interpretations of any such laws or regulations by
applicable regulatory authorities, which, in the opinion of the Owner
Participant, the Pass-Through Trustee, the Subordination Agent, or the
Indenture Trustee, would make it illegal for the Owner Participant, the
Lessee, the Owner Trustee, the Pass-Through Trustee, the Subordination
Agent or the Indenture Trustee, and no change in circumstances shall
have occurred which would otherwise make it illegal or otherwise in
contravention of guidance issued by regulatory authorities for the
Owner Participant, the Lessee, the Owner Trustee, the Pass-Through
Trustee, the Subordination Agent or the Indenture Trustee, to
participate in the transactions to be consummated on the Delivery Date;
and no action or proceeding shall have been instituted nor shall
governmental action before any court, governmental authority or agency
be threatened which in the opinion of counsel for the Owner
Participant, the Indenture Trustee, the Subordination Agent or the
Pass-Through Trustee is not frivolous, nor shall any order have been
issued or proposed to be issued by any court, or governmental authority
or agency, as of the Delivery Date, to set aside, restrain, enjoin or
prevent the consummation of any of the transactions contemplated by
this Agreement or by any of the other Operative Agreements.
(c) Documents. The documents referred to in Section 4.01(d)
hereof shall each be in full force and effect and the following
documents shall have been duly authorized, executed and delivered by
the respective party or parties thereto, shall each be reasonably
satisfactory in form and substance to the Lessee, the Owner Trustee,
the Indenture Trustee, the Pass-Through Trustee, the Subordination
Agent and the Owner Participant (each acting directly or by
authorization to its special counsel) and shall each be in full force
and effect; there shall not have occurred any default thereunder, or
any event which with the lapse of time or the giving of notice or both
would be a default thereunder, and copies executed or certified as
requested by the Lessee, the Owner Trustee, the Indenture Trustee, the
Pass-Through Trustee or the Owner Participant, as the case may be, of
such documents shall have been delivered to the Owner Participant, the
Lessee, the Indenture Trustee, the Pass-Through Trustee and the Owner
Trustee (provided, that the sole chattel-paper original of the Lease
(whether delivered on the Transfer Date or the Delivery Date) and the
Lease Supplement shall be delivered to the Indenture Trustee):
(i) this Agreement, as amended and restated as of the Delivery Date;
(ii) the Lease;
(iii) the Trust Agreement, as amended and restated as of the
Delivery Date;
(iv) the Indenture, as amended and restated as of the Delivery Date;
(v) the Lease Supplement covering the Aircraft, dated the Delivery Date;
(vi) the Indenture Supplement covering the Aircraft, dated the Delivery Date;
(vii) in the case of the Owner Participant only, the Tax
Indemnity Agreement (unless delivered on the Transfer
Date);
(viii) the Invoice;
the FAA Bill of Sale and the Warranty Bill of Sale;
the Purchase Agreement Assignment;
(xi) the PAA Consent;
the Engine Warranty Assignment;
the Engine Manufacturer's Consent;
in the case of the Owner Participant only, the RVG;
in the case of the Owner Participant only, the Deficiency Agreement;
the Owner Participant Guaranty, if any; and
(xvii) the Old Lease Termination;
unless, in the case of each of the documents listed in clauses (i)
through (iv) above they shall have been amended and restated as of and
delivered on the Transfer Date.
(d) Legal Opinions. The Owner Participant, the Placement
Agent, the Lessee, the Owner Trustee, the Pass-Through Trustee and the
Indenture Trustee (acting directly or by authorization to its special
counsel) shall have received from the following counsel their
respective legal opinions in each case reasonably satisfactory to the
Owner Participant, the Placement Agent, the Lessee, the Owner Trustee,
the Pass-Through Trustee or the Indenture Trustee, as the case may be,
as to scope and substance (and covering such other matters as the
recipient may reasonably request) and dated the Delivery Date:
(i) Richard J. Kennedy, Vice President and General Counsel of the Lessee and ACA
Inc., addressed to the Placement Agent, the Owner Participant, the Owner Trustee, the
Pass-Through Trustee, each Liquidity Provider and the Indenture Trustee;
(ii) special leasing counsel for the Lessee addressed
to the Placement Agent, the Owner Participant, the Indenture
Trustee, the Owner Trustee, the Pass-Through Trustee, each
Liquidity Provider and the Lessee;
(iii) special counsel for the Owner Trustee addressed
to the Placement Agent, the Owner Participant, the Indenture
Trustee, the Owner Trustee, the Pass-Through Trustee, each
Liquidity Provider and the Lessee;
(iv) special aviation counsel, in customary form and
addressed to the Placement Agent, the Owner Participant, the
Indenture Trustee, the Owner Trustee, the Pass-Through
Trustee, each Liquidity Provider and the Lessee;
special counsel for the Manufacturer addressed to the Placement
Agent, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass-Through
Trustee, each Liquidity Provider and the Lessee;
counsel for the Engine Manufacturer addressed to the Placement
Agent, the Owner Participant, the Indenture Trustee, the Owner Trustee, the Pass-through
Trustee, each Liquidity Provider and the Lessee;
(vii) in the case of the Owner Participant only, tax
counsel to the Owner Participant, addressed to the Owner
Participant, with respect to tax matters;
(viii) special counsel for the Manufacturer addressed
to the Owner Participant;
(ix) special counsel for SDIQ addressed to the Owner
Participant and the Owner Trustee; and
(x) special counsel for the Owner Participant and the
Owner Participant Guarantor, if any, and the General Counsel's
Office of the Owner Participant and the Owner Participant, if
any, addressed to the Placement Agent, the Owner Participant,
the Indenture Trustee, the Owner Trustee , the Pass-Through
Trustee, each Liquidity Provider and the Lessee.
(e) Title, Airworthiness and Registration. On the Delivery Date, the
following statements shall be true, and the Owner Participant, the Indenture
Trustee, the Pass-Through Trustee and the Owner Trustee shall have received
evidence from the Lessee reasonably satisfactory to the Owner Participant, the
Indenture Trustee, the Pass-Through Trustee and the Owner Trustee to the effect
that:
(i) the Owner Trustee has good and marketable title
(subject to filing and recording of the FAA Bill of Sale with
the Aeronautics Authority) to the Aircraft, free and clear of
Liens, except the rights of the Owner Trustee and the Lessee
under the Lease, the rights of the Indenture Trustee under the
Indenture (including the Indenture Supplement), the beneficial
interest of the Owner Participant created by the Trust
Agreement, and the interest of the Certificate Holders created
by the Indenture, which evidence shall include the FAA Bill of
Sale and the Warranty Bill of Sale;
(ii) the Aircraft has been duly certificated by the
Aeronautics Authority as to type and airworthiness;
(iii) the Old Lease Termination (if applicable and if
the Old Lease was filed of record with the FAA), the FAA Bill
of Sale, the amended and restated Lease (including the Lease
Supplement), the amended and restated Indenture (including the
Indenture Supplement), and the amended and restated Trust
Agreement shall have been duly filed for recordation (or shall
be in the process of being so duly filed for recordation) with
the FAA pursuant to the Transportation Code; and
(iv) application to the FAA for registration of the
Aircraft in the name of the Owner Trustee shall have been duly
filed and the Lessee shall have permanent authority to operate
the Aircraft.
(f) Financing Statements. (i) a form UCC-3 financing statement
to amend and restate each financing statement referred to in Section
4.01(f) hereof shall have been executed and delivered by the Owner
Trustee, as debtor, and by the Indenture Trustee, as secured party, and
a form UCC-1 financing statement covering all the security interests
(and other interests) created by or pursuant to the Granting Clause of
the Indenture shall have been executed and delivered by the Owner
Trustee, as debtor, and by the Indenture Trustee, as secured party, for
and on behalf of the Holders, and (ii) a UCC notice filing describing
the Lease as a lease shall have been executed and delivered by the
Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall
name the Indenture Trustee as assignee of the Owner Trustee), for
filing in Virginia.
(g) Payments. The Owner Participant shall have made available
its Commitment to the Owner Trustee, and the other payments
contemplated by Section 3.02 hereof shall have been made and interest
accrued on the Certificates prior to (but excluding) the Delivery Date
shall have been paid on or before the Delivery Date in accordance with
Section 17.02 hereof.
(h) Report of Aircraft Expert. The Owner Participant shall
have received a report prepared by BK Associates, Inc., addressed to
the Owner Participant (with an abbreviated report to the Lessee), in
form and substance reasonably satisfactory to the Owner Participant to
the effect that, on the Delivery Date:
(i) (A) the estimated fair market value of the
Aircraft net of any cost to the Owner Participant or the Owner
Trustee of return at the end of the Basic Term and any Renewal
Term (determined without including in such value any increase
or decrease for inflation or deflation during the Term) is
equal to or greater than 20% of the Purchase Price and (B) at
least 20% of the useful economic life of the Aircraft will be
remaining at the end of the Basic Term and any Renewal Term;
(ii) the estimated useful life of the Aircraft is at least 125% of the Basic Term
and any Renewal Term;
(iii) the Purchase Price is no greater than the fair
market value of the Aircraft on the Delivery Date;
(iv) on the Delivery Date, the Aircraft will not
require any modifications, improvements or additions in order
to be rendered complete for its intended purpose by the
Lessee;
(v) the amount payable by the Lessee upon the
exercise of its purchase option pursuant to Section 16(a)(1)
of the Lease equals or exceeds the currently estimated Fair
Market Value of the Aircraft on such date (taking into account
inflation or deflation to such date); and
(vi) the Aircraft is not limited use property.
(i) Insurance. Each of the Indenture Trustee, the Pass-Through
Trustee, the Owner Trustee and the Owner Participant shall have
received such evidence as it reasonably deems appropriate, including,
without limitation, an independent insurance broker's report, together
with certificates of insurance from such broker, in form and substance
reasonably satisfactory to the Indenture Trustee, the Pass-Through
Trustee, the Owner Trustee and the Owner Participant, to establish that
the insurance required by Section 12 of the Lease is in effect.
(j) Payment of Taxes. (A) All taxes, fees, charges,
assessments, costs and other expenses then due and payable in
connection with the execution, delivery, recording and filing of all
financing statements and the documents and instruments referred to in
subparagraphs (e) and (f) of this Section 4.02, or in connection with
the purchase of the Aircraft by the Owner Trustee and the making by the
Owner Participant of its equity investment shall have been duly paid or
caused to be paid in full; and (B) all sales or use taxes and duties
related to the consummation of the transactions contemplated by the
Operative Agreements on the Delivery Date which are then due and
payable shall have been duly paid in full.
(k) No Indenture Default. No Indenture Default exists.
(l) No Lease Default or Event of Loss. No Default exists, and
no Event of Loss, or event which with the passage of time would
constitute an Event of Loss, shall exist.
(m) Governmental Compliance. All appropriate action required
to have been taken by the FAA, the SEC, or any governmental or
political agency, subdivision or instrumentality of the United States,
prior to the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders,
permits, waivers, authorizations, exemptions and approvals
(collectively "permits") of such entities required to be in effect on
the Delivery Date in connection with the transactions contemplated by
this Agreement shall have been issued, and all such permits shall be in
full force and effect on the Delivery Date.
(n) Officer's Certificate of Lessee and ACA Inc. On the
Delivery Date, the following statements shall be true, and the Owner
Participant, the Owner Trustee, the Pass-Through Trustee and the
Indenture Trustee shall have received a certificate of the Lessee and
of ACA Inc., signed on its respective behalf by the Vice President and
Treasurer or any other duly authorized officer of the Lessee or ACA
Inc., as applicable, dated the Delivery Date, stating that:
(i) the representations and warranties of the Lessee
or ACA Inc., as the case may be, contained in the Operative
Agreements to which it is a party (excluding the Tax Indemnity
Agreement) and in any certificate delivered pursuant hereto or
thereto are true and correct on and as of the Delivery Date as
though made on and as of such date (except to the extent that
such representations and warranties relate solely to an
earlier date, in which case such certificate shall state that
such representations and warranties were true and correct on
and as of such earlier date);
(ii) except as disclosed in the Offering Memo, no
materially adverse change has occurred in the financial
condition, business, or operations of the Lessee or ACA Inc.
from that shown in the unaudited financial statements of the
Lessee and ACA Inc. as of July 31, 1997, and nothing has
occurred which will, in the reasonable judgment of such
officer, materially adversely affect the ability of the Lessee
or ACA Inc., as the case may be, to carry on its business or
to perform its obligations under this Agreement and each other
Operative Agreement to which it is or is to be a party; and
(iii) no event has occurred and is continuing, or
would result from the purchase, sale, mortgage, or lease of
the Aircraft, which constitutes an Event of Loss (or event
which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine, or a Default under
the Lease.
(o) Officer's Certificate of Owner Participant and any Owner
Participant Guarantor. On the Delivery Date, the following statements
shall be true, and the Lessee, the Pass-Through Trustee, the Owner
Trustee and the Indenture Trustee shall have received a certificate
from the Owner Participant, signed by a duly authorized officer of (aa)
the Owner Participant dated the Delivery Date, stating that:
(i) the representations and warranties of the Owner
Participant contained in this Agreement, the Trust Agreement
and any other Operative Agreement (excluding the Tax Indemnity
Agreement) to which it is a party and in any certificate
delivered pursuant hereto or thereto, are true and correct on
and as of the Delivery Date as though made on and as of such
date (except to the extent that such representations and
warranties relate solely to an earlier date, in which case
such certificate shall state that such representations and
warranties were true and correct on and as of such earlier
date);
(ii) no Lessor's Liens attributable to the Owner Participant exist; and
(iii) no event has occurred and is continuing which
constitutes or, with notice or lapse of time or both would
constitute, an Indenture Event of Default other than an
Indenture Event of Default attributable to a Lease Event of
Default.
and (bb) from the Owner Participant Guarantor, if any, signed by a duly
authorized officer of such Owner Participant Guarantor dated the
Certificate Closing Date, stating that the representations and
warranties of such Owner Participant Guarantor contained in its Owner
Participant Guaranty and in any certificate delivered at the closing
pursuant thereto are true and correct on and as of the Certificate
Closing Date as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date, in which case such certificate shall state that such
representations and warranties were true and correct on and as of such
earlier date).
(p) Other Officer's Certificates. On the Delivery Date, the
following statements shall be true, and the Owner Participant, the
Lessee, the Pass-Through Trustee, the Owner Trustee, the Subordination
Agent and the Indenture Trustee shall have received a certificate from
each of SSB and the Owner Trustee (in the case of the Lessee, the
Pass-Through Trustee, the Owner Participant, the Subordination Agent
and the Indenture Trustee), FNBM and the Indenture Trustee (in the case
of the Lessee, the Pass-Through Trustee, the Owner Participant, the
Subordination Agent and the Owner Trustee), FNBM and the Pass-Through
Trustee (in the case of the Lessee, the Indenture Trustee, the Owner
Participant, the Subordination Agent and the Owner Trustee), and FNBM
and the Subordination Agent (in the case of the Lessee, the Indenture
Trustee, the Owner Participant, the Pass-Through Trustee and the Owner
Trustee), signed by a duly authorized officer of SS and FNBM,
respectively, dated the Delivery Date, stating with respect to SSB and
the Owner Trustee, with respect to FNBM and the Indenture Trustee, with
respect to FNBM and the Pass-Through Trustee, or with respect to FNBM
and the Subordination Agent, as the case may be, that:
(i) the representations and warranties of SSB in its
individual capacity and as Owner Trustee, of FNBM in its
individual capacity and as Indenture Trustee, of FNBM in its
individual capacity and as Pass-Through Trustee, or of FNBM in
its individual capacity and as Subordination Agent contained
in this Agreement, the Lease, the Trust Agreement and the
Indenture and in any certificate delivered pursuant hereto or
thereto are true and correct on and as of the Delivery Date as
though made on and as of such date (except to the extent that
such representations and warranties relate solely to an
earlier date, in which case such certificate shall state that
such representations and warranties were true and correct on
and as of such earlier date);
(ii) to the best of its knowledge, no Default or
Indenture Default exists due to any action or omission on the
part of SSB in its individual capacity or as Owner Trustee, of
FNBM in its individual capacity or as Indenture Trustee, of
FNBM in its individual capacity or as Pass-Through Trustee, or
of FNBM in its individual capacity or as Subordination Agent;
and
(iii) there are no Lessor's Liens attributable to the
Owner Trustee or SSB and no Indenture Trustee's Liens
affecting the Trust Indenture Estate or the Lessor's Estate or
any part thereof.
(q) Release of Debt Portion. The Indenture Trustee shall have
released the Debt Portion from (or such lesser amount as may then be
held in) the Collateral Account.
(r) Officer's Certificate of Lessee Regarding Mandatory
Economic Terms and Mandatory Document Terms. On the Delivery Date, or
if earlier, the Transfer Date, in connection with the amendments
contemplated by Sections 2.03 and 2.04 hereof, the Lessee shall have
delivered a certificate to the Pass-Through Trustee and the Liquidity
Providers signed by the Vice President and Treasurer or any other duly
authorized officer of the Lessee stating that (i) the Operative
Agreements which are amended and restated as of the Delivery Date or
the Transfer Date, as the case may be, do not vary the Mandatory
Economic Terms and contain the Mandatory Document Terms and (ii) any
substantive modification of such documents from those in effect on the
Certificate Closing Date does not materially and adversely affect the
Holders of Pass-Through Certificates and each Liquidity Provider and
such certification shall be true and correct.
Notwithstanding anything else to the contrary in this Section 4.02, it shall not
be a condition precedent to the obligations of the Indenture Trustee, the
Pass-Through Trustee or the Subordination Agent that the conditions in Section
4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill
such condition precedent is not reasonably likely to materially adversely affect
the holders of Pass-Through Certificates and, in the event of such failure,
there has been delivered to the Indenture Trustee written confirmation from both
Moody's and S&P of the rating on any class of Pass-Through Certificates.
Section 4.03. Opinion of Special Aviation Counsel Upon Registration.
Promptly upon the registration of the Aircraft and the filing and, where
appropriate, recordation pursuant to the Transportation Code, of the Old Lease
Termination (if the Old Lease was filed of record with the FAA), the FAA Bill of
Sale, the Trust Agreement, the Lease (including the Lease Supplement), and the
Indenture (including the Indenture Supplement), the Lessee shall cause Special
Aviation Counsel to deliver to the Owner Participant, the Lessee, the Owner
Trustee, the Pass-Through Trustee and the Indenture Trustee an opinion as to (i)
the due registration of the Aircraft in the name of the Owner Trustee, (ii) the
due recording pursuant to the Transportation Code of the Old Lease Termination
if the Old Lease was filed of record with the FAA), the FAA Bill of Sale, the
amended and restated Trust Agreement, the amended and restated Lease (including
the Lease Supplement), and the Indenture (including the Indenture Supplement),
and (iii), subject to customary qualifications, the lack of any intervening
documents with respect to the Aircraft.
ARTICLE 5
CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS
Section 5.01. Conditions Precedent to Lessee's Obligations. The
Lessee's obligation to participate in the transactions contemplated hereby on
the Certificate Closing Date is subject to the conditions that, prior to or on
the Certificate Closing Date, the Lessee shall have received the certificates
and other documents which are referred to in, or the opinions to be addressed to
it under, as the case may be, paragraphs (d), (g)(ii)-(v), (j), (k)(ii)-(vi) of
Section 4.01 hereof and the Placement Agent shall have made available the
amounts required to be paid by it pursuant to Section 2.01 hereof, and the
Lessee's obligation to participate in the transactions contemplated hereby on
the Delivery Date, is subject to the conditions that, on or prior to the
Delivery Date, the Lessee shall have received the documents which are referred
to in, or the opinions to be addressed to it under, as the case may be,
paragraphs (c) and (d)(ii)-(vi) of Section 4.02 hereof and the Indenture Trustee
shall have released the Debt Portion from (or such lesser amount as may then be
held in) the Collateral Account.
ARTICLE 6
LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.01. Lessee's Representations and Warranties. The Lessee
represents and warrants to the Owner Participant, the Owner Trustee (in its
individual capacity and as Owner Trustee), the Pass-Through Trustee (in its
individual capacity and as Pass-Through Trustee), the Liquidity Provider, and
the Indenture Trustee (in its individual capacity and as Indenture Trustee)
that, on the date hereof and as of the Certificate Closing Date and the Delivery
Date (unless any such representation is specifically made as of one date):
(a) the Lessee is a corporation duly organized and validly
existing and is in good standing under the laws of California, has its
principal place of business and chief executive office (as such terms
are used in Article 9 of the Uniform Commercial Code) in Dulles,
Virginia, and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the failure to be so
qualified or in good standing would have a materially adverse effect on
its business or would impair its ability to perform its obligations
under the Operative Agreements;
(b) the Lessee has full power, authority and legal right to
conduct its business and operations as currently conducted and to own
or hold under lease its Properties and to enter into and perform its
obligations under this Agreement, the other Operative Agreements to
which it is a party, the Pass-Through Agreement and the Series
Supplements (the "Lessee Documents");
(c) the Lessee is an "air carrier" within the meaning of the
Transportation Code and a holder of a certificate under Section
41102(a) of the Transportation Code and a "citizen of the United
States" within the meaning of Section 40102(a)(15) of the
Transportation Code holding an "air carrier operating certificate"
issued under Chapter 447 of the Transportation Code for aircraft
capable of carrying ten or more individuals or 6,000 pounds or more of
cargo, and each such certificate is in full force and effect;
(d) the Lessee possesses all necessary certificates,
franchises, licenses, permits, rights and concessions and consents
(collectively "permits") which are material to the operation of the
routes flown by it and the conduct of its business and operations as
currently conducted and each such permit is in full force and effect;
(e) the execution, delivery and performance of the Lessee
Documents by the Lessee have been duly authorized by all necessary
corporate action on the part of the Lessee and do not require any
stockholder approval, or approval or consent of any trustee or holder
of any indebtedness or obligations of the Lessee, and each such
document has been duly executed and delivered or, in the case of those
Lessee Documents constituting Operative Agreements identified in
Section 4.02(c) hereof, will on the Delivery Date be executed and
delivered by the Lessee and constitutes (or will constitute, as the
case may be) the legal, valid and binding obligations of the Lessee
enforceable against it in accordance with the terms thereof except as
such enforceability may be limited by bankruptcy, insolvency, or other
similar laws or by general equitable principles;
(f) no authorization, consent or approval of or other action
by, and no notice to or filing with, any United States federal or state
governmental authority or regulatory body is required for the
execution, delivery or performance by the Lessee of the Lessee
Documents or for the use and maintenance of the Aircraft except for
such registrations, applications and recordings referred to in the
opinions of Special Aviation Counsel delivered or to be delivered
pursuant to Sections 4.02(d)(vi) and 4.03 hereof and except for the
filings referred to in Sections 4.01(f) and 4.02(f) hereof, all of
which shall be in full force and effect on and as of the Certificate
Closing Date or the Delivery Date, or as contemplated by such Sections;
(g) neither the execution, delivery or performance by the
Lessee of the Lessee Documents nor compliance with the terms and
provisions hereof or thereof, conflicts or will conflict with or
results or will result in a breach or violation of any of the terms,
conditions or provisions of, or will require any consent (other than
the PAA Consent and the Engine Manufacturer's Consent) or approval
under, any law, governmental rule or regulation or the charter
documents, as amended, or bylaws, as amended, of the Lessee or any
order, writ, injunction or decree of any court or governmental
authority against the Lessee or by which it or any of its Properties is
bound or any indenture, mortgage or contract or other agreement or
instrument to which the Lessee is a party or by which it or any of its
Properties is bound, or constitutes or will constitute a default
thereunder or results or will result in the imposition of any Lien upon
any of its Properties;
(h) there are no pending or, to the knowledge of the Lessee,
threatened actions, suits, investigations or proceedings (whether or
not purportedly on behalf of the Lessee) against or affecting the
Lessee or any of its Property before or by any court or administrative
agency (A) which involve the Aircraft or (B) which (except as disclosed
in the Offering Memo), if adversely determined, may reasonably be
expected to have a materially adverse effect on the Lessee's
consolidated financial condition, business, or operations, or (C) if
adversely determined, would materially adversely affect the ability of
the Lessee to perform its obligations under the Lessee Documents;
(i) the Lessee has filed or caused to be filed all federal,
state and material local and non-U.S. tax returns which are required to
be filed and has paid or caused to be paid all taxes shown to be due
and payable pursuant to such returns or pursuant to any assessment
received by the Lessee (other than assessments the payment of which is
being contested in good faith by the Lessee by appropriate proceedings
that do not involve any material risk of sale, forfeiture or loss of
the Aircraft or any part thereof), and the Lessee has no knowledge of
any related actual or proposed deficiency or additional assessment
which either in any case or in the aggregate would materially adversely
affect the Lessee's consolidated financial condition;
(j) except for (A) the registration in the Owner Trustee's
name of the Aircraft pursuant to the Transportation Code to be
accomplished by filing with the FAA, of the Old Lease Termination (if
the Old Lease was filed of record with the FAA, the FAA Bill of Sale,
the Trust Agreement, the Affidavits and the Application, (B) the filing
with and, where appropriate, recordation by the FAA pursuant to the
Transportation Code of the Indenture (including the Indenture
Supplement), and the Lease (including the Lease Supplement), (C) the
filing of the financing statements referred to in Sections 4.01(f) and
4.02(f) hereof, and (D)(x) on the Certificate Closing Date, the taking
of possession by the Indenture Trustee of the Liquid Collateral and
maintaining possession by the Indenture Trustee thereof as contemplated
in Section 2.14(a) of the Indenture, and (y) on the Delivery Date, the
taking of possession by the Indenture Trustee of the original
counterpart of the Lease (including the Lease Supplement), no further
action, including any filing or recording of any document, is necessary
or advisable in order (i) to establish the Owner Trustee's title to and
interest in the Aircraft and the Lessor's Estate as against the Lessee
and any third parties, or (ii) to perfect the first security interest
in and mortgage Lien on the Trust Indenture Estate in favor of the
Indenture Trustee;
(k) on the Delivery Date, the Owner Trustee has received good
and marketable title to the Aircraft, free and clear of all Liens,
except Permitted Liens except the rights of the Owner Trustee and the
Lessee under the Lease and the Lease Supplement, the Lien of the
Indenture, the rights of the Owner Participant under the Trust
Agreement and the rights of the Indenture Trustee under the Indenture
and other Permitted Liens not filed of record;
(l) with respect to ERISA:
(i) none of the Pension Plans (as defined at the end
of this Section 6.01(l)) nor their related trusts has been
terminated in a distress termination pursuant to Section
4041(c) of ERISA or by the Pension Benefit Guaranty
Corporation (together with any successor agency or
instrumentality thereto, the "PBGC") pursuant to Section 4042
of ERISA, nor has any action been taken so to terminate any
Pension Plan or related trust, and neither the Lessee nor any
ERISA Affiliate (as defined at the end of this Section
6.01(l)) has incurred or could reasonably be expected to incur
any material liability with respect to a Pension Plan under
Section 4062, 4063, 4064 or 4069 of ERISA;
(ii) there have been no "reportable events" (as such
term is defined in Section 4043(b) of ERISA) with respect to
any Pension Plan which have resulted or could reasonably be
expected to result in any material liability of the Lessee or
any ERISA Affiliate;
(iii) no "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the
Code) exists with respect to any Pension Plan, whether or not
waived, nor has any request for a waiver under Section 412(d)
of the Code been, or is reasonably likely to be, filed with
respect to any of the Pension Plans;
(iv) neither the Lessee nor any ERISA Affiliate has
failed to make any contribution or payment to any Pension Plan
which has resulted or could reasonably be expected to result
in the imposition of a Lien under Section 302(f) of ERISA or
Section 412(n) of the Code;
(v) all Pension Plans are in compliance in all
material respects with all applicable provisions of ERISA and
the Code;
(vi) neither the Lessee nor any ERISA Affiliate has
incurred or is reasonably likely to incur any material
withdrawal liability pursuant to Section 4201 or 4204 of ERISA
or any material liability under Section 515 of ERISA;
(vii) to the best of the Lessee's knowledge, neither
the Lessee nor any ERISA Affiliate has engaged in a
"prohibited transaction" (within the meaning of Section 4975
of the Code or Section 406 of ERISA) which could reasonably be
expected to subject the Lessee to the tax or penalties on
prohibited transactions imposed by Section 4975 of the Code or
Section 502 of ERISA; and
(viii) assuming the truth of the representations
contained in Section 7.09 hereof and compliance with Section
10.06 of the Indenture, the execution and delivery of this
Agreement and the other Operative Agreements and the
consummation of the transactions contemplated hereby and
thereby will not involve any transaction which is prohibited
by Section 406 of ERISA or in connection with which a tax
could be imposed pursuant to Section 4975 of the Code. No part
of the funds to be used by the Lessee in satisfaction of its
obligations under this Agreement or any other of the Operative
Agreements to which the Lessee is a party or to which the
Lessee is bound are the assets of any employee benefit plan
subject to Title I of ERISA, or any individual retirement
account or an employee benefit plan subject to Section 4975 of
the Code;
as used in this Section 6.01(l), the term "Pension Plan" means an
employee pension benefit plan as defined in Section 3(2) of ERISA
(other than a multiemployer plan as defined in Section 4001 (a) (3) of
ERISA) which is covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Code and which is
maintained, or contributed to, by the Lessee or any ERISA Affiliate,
and the term "ERISA Affiliate" means any entity which together with the
Lessee would be treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code;
(m) the Lessee is a Citizen of the United States;
(n) except for the filings referred to in Sections 4.01(f),
4.02(e) and 4.02(f) hereof, no governmental approval of any kind is
required of the Owner Participant or for the Owner Participant's
execution of or performance under this Agreement or any agreement
contemplated hereby by reason of any fact or circumstance of the
Lessee, the nature of the Aircraft, or the Lessee's proposed operations
or use of the Aircraft;
(o) on the Delivery Date, all premiums which have become due
with respect to the insurance required to be provided by the Lessee on
or prior to the Delivery Date under Section 12 of the Lease have been
paid by the Lessee;
(p) on the Delivery Date, all sales, use, transfer or similar
taxes relating to the sale of the Aircraft by the Seller to the Owner
Trustee which are then or were theretofore due shall have been paid;
(q) the Lessee is not in default under any mortgage, deed of
trust, indenture, lease or other instrument or agreement to which the
Lessee is a party or by which it or any of its Properties or assets may
be bound, or in violation of any applicable law, which default or
violation would have a materially adverse effect on the financial
condition, business or operations of the Lessee or its ability to
perform any of its obligations under the Lessee Documents;
(r) no Default exists and no Event of Loss, or event which
with the passage of time would constitute an Event of Loss, exists;
(s) on the Delivery Date, the Aircraft will be in such
condition so as to enable the airworthiness certificate of such
Aircraft to be in good standing under the Transportation Code; the
Aircraft will have been duly certificated by the FAA as to type and
airworthiness; there will be in effect with respect to the Aircraft a
current and valid airworthiness certificate issued by the FAA pursuant
to the Transportation Code; and there is no fact known to the Lessee
which materially adversely affects the value, utility, useful life or
condition of the Aircraft;
(t) on the Certificate Closing Date and the Delivery Date, the
Lessee shall not be in default in the performance of any term or
condition of the Purchase Agreement, and the aggregate amount of loans
shall not exceed the Debt Portion;
(u) neither the Lessee nor any subsidiary of the Lessee is an
"investment company" or a company "controlled by an investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(v) on the Delivery Date, the Aircraft will, upon delivery, be
fully equipped to operate in commercial service and will comply with
all governmental requirements governing such service;
(w) there are no broker's or underwriter's fees payable on
behalf of the Lessee in connection with the transactions contemplated
in the Operative Agreements other than those of the Placement Agent and
Babcock & Brown, Inc. referred to in Article 10 hereof; and
(x) interest accrued on the Certificates prior to (but
excluding) the Delivery Date shall have been paid on or before the
Delivery Date in accordance with Section 17.02 hereof, together with
all other amounts owing by the Lessee or ACA Inc. under the Indenture
or any other Operative Agreement, to the Holders or the relevant
Indemnitee, as the case may be, on or prior to such date.
Section 6.02. Offering by Lessee. (a) The Lessee represents and
warrants that it has authorized no one to act on its behalf in connection with
the offer or sale of any interest in the Lessor's Estate or the Trust Agreement
other than Babcock & Brown, Inc. Neither the Lessee nor, based on
representations of Babcock & Brown, Inc., anyone acting on its behalf has
directly or indirectly offered any interest in the Lessor's Estate or the Trust
Agreement, or similar interests, for sale to, or solicited any offer to acquire
any of the same from, no more than 80 other accredited investors (as such term
is defined in Regulation D promulgated under the Securities Act of 1933, as
amended).
(b) The Lessee represents and warrants that it has authorized no one to
act on its behalf in connection with the offer or sale of any interest in the
Certificates or the Pass-Through Certificates other than the Placement Agent.
Section 6.03. Certain Covenants of Lessee. The Lessee covenants and
agrees with the Owner Participant, the Owner Trustee (in its individual and
trust capacities), the Pass-Through Trustee (in its individual and trust
capacities) and the Indenture Trustee (in its individual and trust capacities)
as follows:
(a) The Lessee will cause to be done, executed, acknowledged
and delivered at the Lessee's cost and expense all such further acts,
conveyances and assurances as the Owner Trustee, the Indenture Trustee,
the Pass-Through Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of the Operative Agreements.
Without limiting the generality of this Section 6.03(a), the Lessee
will promptly take, or cause to be taken, at the Lessee's cost and
expense, such action with respect to the recording, filing,
re-recording and re-filing of the Indenture (including each supplement
thereto), the Lease (including each supplement thereto), and any
financing statements or other instruments as may be necessary, or as
reasonably requested by the Indenture Trustee and appropriate, to
maintain the perfection of the first security interest and the Lien
created by the Indenture, and the Owner Trustee's title to and interest
in the Aircraft and the Lessor's Estate, as against the Lessee and any
third parties, or if the Lessee cannot take, or cause to be taken, such
action, will furnish to the Indenture Trustee and the Owner Trustee
timely notice of the necessity of such action, together with such
instruments, in execution form, and such other information as may be
required to enable either of them to take such action at the Lessee's
cost and expense in a timely manner.
(b) From and after the Delivery Date, the Lessee shall cause
the Aircraft to be duly registered, and at all times to remain duly
registered, in the name of the Owner Trustee (provided that the Owner
Trustee and the Owner Participant shall be and remain Citizens of the
United States), under the Transportation Code, and shall furnish to the
Owner Trustee such information as may be required to enable the Owner
Trustee to make application for such registration; provided, however,
that the Lessee may, at any time after the end of the Recovery Period
(or before that date if the Lessee prepays in a lump sum any indemnity
required under the Tax Indemnity Agreement as a result of such foreign
registration) cause the Aircraft to be appropriately re-registered
under the laws of a country with which at the time of such registration
the United States maintains normal diplomatic relations and is listed
on Exhibit E-1 to the Lease; provided that
(i) at the time of re-registration, no Specified Default exists or would occur as a result
of such re-registration,
(ii) the Lessee shall pay all fees and expenses (including the
reasonable fees and expenses of local counsel in such country) relating
to such re-registration,
(iii) the Lessee shall, at its cost, cause the interest of the
Owner Trustee as owner of the Aircraft and the Indenture Trustee as
mortgagee thereof to be duly registered or recorded under the laws of
such country and at all times thereafter to remain so duly registered
or recorded unless and until the registration of the Aircraft is
changed as provided herein, and shall cause to be done at all times all
other acts including the filing, recording and delivery of any document
or instrument and the payment of any sum necessary or, by reference to
prudent industry practice in such country, advisable in order to
create, preserve and protect such interest in the Aircraft (including
the first priority duly perfected Lien under the Indenture) as against
the Lessee or any third parties in such jurisdiction, and the laws of
such country would give effect to the Owner Trustee's title to the
Aircraft and the Indenture Trustee's Lien thereon substantially to the
same effect as in the United States,
(iv) the obligations of the Lessee and each other party under
the Operative Documents (and of the Sublessee, if any, under a
Sublease) shall remain or be, as the case may be, legal, valid, binding
and enforceable in such country and in the United States,
(v) The Lessee shall ensure that all insurance provided for
herein shall be in full force and effect prior to, at the time of, and
after such change in registration and the Owner Participant, the Owner
Trustee, and the Indenture Trustee shall receive a certificate of
Lessee's insurance broker to such effect,
(vi) any possessory rights in favor of the Lessee (or any
Sublessee) or any third party, including any government or
instrumentality thereof, taken as whole, are not more restrictive than
existing in the United States (other than immaterial differences in
procedures of enforcement), which would, upon bankruptcy or other
default by the Lessee (or any Sublessee) prevent or delay beyond the
recovery time under the then-existing laws of the United States the
return of the Aircraft to the Owner Trustee in accordance with and when
permitted by the terms of the Lease upon the exercise by the Owner
Trust or the Indenture Trustee of its remedies thereunder, and there is
no adverse effect under the laws of such country of re-registration to
the enforceability (other than immaterial differences in procedures of
enforcement) of the material rights and remedies of the Owner Trustee
and the Indenture Trustee provided for herein and under the other
Operative Agreements (it being understood that, in the absence of
restrictions similar to those imposed under Sections 362 and 363 of the
Bankruptcy Code, rights and remedies similar to those available under
Section 1110 of the Bankruptcy Code are not required),
(vii) the Owner Participant, the Owner Trustee, and the
Indenture Trustee shall have received evidence reasonably satisfactory
to them that such country imposes aircraft maintenance standards
approved by, or at least as stringent as those approved by, the FAA or
the central civil aviation authority of the United Kingdom, France,
Germany or Canada,
(viii) it shall not be necessary by reason of such
re-registration or for purposes of enforcing remedies contained in the
Lease or the Indenture or the related Sublease for the Owner Trustee,
the Indenture Trustee or the Owner Participant to register or qualify
to do business in such country,
(ix) no Liens (except Permitted Liens) shall arise by reason
of such re-registration, and the Indenture shall continue as a first
priority Lien on the collateral thereunder,
(x) none of the Owner Trustee, the Indenture Trustee and the
Owner Participant shall be subjected to any adverse tax consequences
for which the Lessee is not required to and does not then indemnify
such Person in a manner [reasonably] satisfactory to such Person as a
result of such re-registration and, if an additional indemnity is then
provided by the Lessee as the result of such re-registration and the
Owner Trustee, the Indenture Trustee or the Owner Participant
reasonably deems itself insecure with respect to such indemnity, the
Lessee shall have provided security or collateral for said indemnity
which is reasonably satisfactory to such Person,
(xi) in such country, there is no tort liability imposed on
passive lessors other than tort liability which might be imposed under
the prevailing rule among the states of the United States of America,
unless insurance reasonably satisfactory to the Owner Participant
covering such risk is provided by the Lessee or a Sublessee at its
expense,
(xii) any export licenses and certificate of deregistration
required in connection with any repossession or return of the Aircraft
will be readily obtainable in the normal course without material delay
or material burden on the Owner Trustee or the Indenture Trustee, it
being agreed that the Lessee shall be responsible for the cost thereof,
(xiii) the laws of such country require fair compensation by
the government of such country payable in currency freely convertible
into Dollars for the loss of use of the Aircraft (unless the Lessee or
a Sublessee shall have provided insurance reasonably satisfactory to
the Owner Participant covering the risk of requisition of use of the
Aircraft by the government of such country so long as the Aircraft is
registered under the laws of such country), and
(xiv) the Owner Participant, the Owner Trustee, and the
Indenture Trustee shall have received opinions in scope, form and
substance reasonably satisfactory to them, of counsel, expert in the
laws of the United States and such country, to the effect set forth in
clauses (iii), (iv), (vi), (viii), (ix), (x), (xii), (xiii) and, if the
insurance described in such clause is not provided by the Lessee or a
Sublessee, clause (xi) and to such further effect with respect to such
other matters as the Owner Participant, the Owner Trustee, or the
Indenture Trustee may reasonably request.
Lessee agrees to pay on an After-Tax Basis all reasonable out-of-pocket
costs and expenses (including, without limitation, reasonable counsel
fees and disbursements) of the Owner Participant, the Owner Trustee,
and the Indenture Trustee in connection with any re-registration
pursuant to this Section.
At any time and from time to time during the Term, the Owner
Participant may request in writing to the Lessee, or the Lessee may
request in writing to the Owner Participant, that Exhibit E-1 to the
Lease be amended to delete, or in the case of a request from the Lessee
be amended to add, one or more countries on such Exhibit and specified
in such request, such request to be based upon the reasonable belief by
the Owner Participant that changes have occurred after the date hereof
regarding each such country that could adversely affect its interests
in the Operative Documents or the Aircraft, if the Aircraft were
registered in such country, or in the case of a request from the
Lessee, based upon the reasonable belief of the Lessee that each such
country would adequately protect the interests of the Owner
Participant, the Owner Trustee, and the Indenture Trustee in the
Operative Documents and the Aircraft (including, without limitation,
having the characteristics of and meeting the requirements specified
above with respect to the countries listed on such Exhibit), if the
Aircraft were to be registered in such country. Promptly after the
receipt of such request (and in any event within ten Business Days
thereof), the Lessee shall consult in good faith with the Owner
Participant as to whether each such country should be so deleted, or as
to whether such country should be added, as the case may be, and each
party hereto agrees not to unreasonably withhold its consent to such
request. In the event that the Lessee and the Owner Participant shall
agree as to the deletion or addition of any such country, such Exhibit
shall be deemed amended to reflect such agreement (such agreement to be
so evidenced by a writing signed by the Lessee and the Owner
Participant, but without the requirement of any action or signature by
any other Person; otherwise, such Exhibit shall not be so amended.
(c) The Lessee shall promptly file any reports, or furnish to
the Owner Trustee and the Owner Participant such information as may be
required to enable the Owner Trustee and the Owner Participant timely
to file any reports required to be filed by the Owner Trustee as the
Lessor and the Owner Participant under the Lease with any governmental
authority.
(d) The Lessee will cause the Special Aviation Counsel to
file, and where appropriate record, on the Delivery Date, the Old Lease
Termination (if the Old Lease was filed of record with the FAA), the
FAA Bill of Sale, the Lease (including the Lease Supplement), the Trust
Agreement, and the Indenture (including the Indenture Supplement). The
following documents shall be filed and, where appropriate, recorded on
the Delivery Date with the Aeronautics Authority in the following order
of priority: first, the Old Lease Termination (if the Old Lease was
filed of record with the FAA), second, the FAA Bill of Sale, third, the
Application, with the Trust Agreement and the Affidavits, fourth, the
Indenture with the Indenture Supplement attached thereto, and fifth,
the Lease with the Lease Supplement, the Indenture, and the Indenture
Supplement attached thereto. So long as the Aircraft remains subject to
the Lien of the Indenture, the Lessee will cause the Special Aviation
Counsel, or other counsel reasonably satisfactory to the Indenture
Trustee, to deliver to the Indenture Trustee an annual legal opinion
regarding the continuing perfection of the Lien under the Indenture.
(e) The Lessee shall at all times maintain its corporate
existence except as permitted by Section 6.03(f) hereof and all of its
rights, privileges and franchises necessary in the normal conduct of
its business, except for any corporate right, privilege or franchise
(i) that it determines, in its reasonable, good faith business
judgment, is no longer necessary or desirable in the conduct of its
business and (ii) the loss of which will not materially adversely
affect or diminish the rights of the Holders or the Owner Participant.
(f) Neither the Lessee nor ACA Inc. shall enter into any
merger with or into or consolidation with, or sell, convey, transfer,
lease or otherwise dispose of in one or a series of transactions all or
substantially all of its assets as an entirety to any Person, unless
the surviving corporation or Person which acquires by purchase,
conveyance, transfer or lease all or substantially all of the assets of
the Lessee as an entirety (i) is a domestic corporation organized and
existing under the laws of the United States or any State of the United
States (ii) is a Citizen of the United States, (iii) is a Section 1110
Person, (iv) if not the Lessee or ACA Inc., executes a duly authorized,
legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Owner Trustee and Owner
Participant, containing an effective assumption of all of the Lessee's
or ACA Inc.'s, as applicable, obligations hereunder and under the other
Operative Agreements, and each other document contemplated hereby or
thereby and delivers such instrument to the Indenture Trustee, the
Owner Participant and the Owner Trustee, (v) provides an opinion from
outside counsel delivered to the Owner Trustee, the Indenture Trustee
and the Owner Participant, which counsel shall be reasonably
satisfactory to the Owner Participant and the Indenture Trustee and
which opinion shall be reasonably satisfactory to the Owner Participant
and the Indenture Trustee, and an officer's certificate, each stating
that such merger, consolidation, conveyance, transfer, lease or other
disposition and the instrument noted in clause (iv) above comply with
this Section 6.03(f), that such instrument is a legal, valid and
binding obligation of, and is enforceable against, such survivor or
Person, and that all conditions precedent herein provided for relating
to such transaction have been complied with, (vi) immediately after
such merger, consolidation or conveyance, transfer or lease, as the
case may be, the surviving company (or Person which acquires by
conveyance, transfer or lease the assets of the Lessee) has a net worth
not less than the lesser of (A) the net worth of the Lessee on the
Delivery Date and (B) 75% of the net worth of the Lessee immediately
prior to such merger, consolidation, conveyance, transfer or lease; and
(vii) such survivor or Person makes such filings and recordings with
the FAA as are required pursuant to part A of subtitle VII or Title 49,
United States Code to evidence such merger or consolidation; provided
that no such merger, consolidation or conveyance, transfer or lease
shall be permitted if, immediately after giving effect to such
consolidation, merger, purchase, conveyance, transfer, lease or other
disposition, no Event of Default shall have occurred and be continuing.
Upon any consolidation or merger, or any conveyance, transfer
or lease of all or substantially all of the assets of the Lessee and
the satisfaction of the conditions specified in this Section 6.03(f),
the successor corporation formed by such consolidation or into which
the Lessee is merged or the Person to which such conveyance, transfer
or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Lessee under this Agreement and
the Lease and each other Operative Agreement and any other document
contemplated hereby and thereby to which the Lessee is a party with the
same effect as if such successor corporation had been named as the
Lessee herein and therein. No such conveyance, transfer or lease of all
or substantially all of the assets of the Lessee as an entirety shall
have the effect of releasing the Lessee or any successor corporation
which shall theretofore have become the Lessee hereunder in the manner
prescribed in this Section 6.03(f) from its liability hereunder or
under the other Operative Agreements. Nothing contained herein shall
permit any lease, sublease, or other arrangement for the use, operation
or possession of the Aircraft except in compliance with the applicable
provisions of the Lease.
(g) The Lessee agrees to give prompt written notice to the
Owner Participant, the Owner Trustee and the Indenture Trustee of any
change in the address of its chief executive office (as such term is
used in Section 9-103(3) of the Virginia Uniform Commercial Code) or of
any change in its corporate name.
(h) The Lessee agrees to furnish to the Owner Participant and
the Indenture Trustee:
(A) as soon as available, but in any event within 120
days after the end of each fiscal year of ACA Inc., a
consolidated balance sheet as of the end of such fiscal year,
and the related consolidated statements of income, common
stockholders' equity, retained earnings and cash flows of ACA
Inc. for the fiscal year then ended as prepared and certified
by ACA Inc.'s independent certified public accountants,
including their certificate and accompanying comments and
opinion;
(B) within 60 days after the end of the first, second
and third quarterly accounting periods in each fiscal year of
ACA Inc., a consolidated balance sheet of ACA Inc. prepared by
it as of the close of the accounting period then ended,
together with the related consolidated statements of income,
retained earnings and cash flows for such accounting period
certified by the chief accounting officer or a financial vice
president of ACA Inc.;
(C) promptly upon their general transmission, copies
of all reports and statements furnished by ACA Inc. to its
stockholders;
(D) promptly after filing with the SEC, copies of ACA
Inc.'s annual reports on form 10-K, quarterly reports on form
10-Q, and, if requested, any registration statement or
prospectus filed by ACA Inc. with any securities exchange or
the SEC;
(E) promptly upon (and in any event within five
Business Days after) any officer of the Lessee obtaining
knowledge of any condition or event which constitutes an Event
of Default, an officer's certificate specifying the nature and
period of existence thereof and what action the Lessee has
taken or is taking or proposes to take with respect thereto;
and
(F) from time to time, such other financial
information as the Lessor, the Owner Participant or the
Indenture Trustee may reasonably request.
Concurrently with the delivery of the financial statements referred to
in clause (A) above, the Lessee shall deliver to the Lessor, the Owner
Participant, the Indenture Trustee and the Pass-Through Trustee a certificate of
the Lessee, signed by any one of the President, the Chief Financial Officer, the
General Counsel, the Treasurer or the principal accounting officer of the
Lessee, stating that the signer, or an employee reporting to same, is familiar
with the relevant terms of this Agreement and the Lease and the signer has
reviewed, or has caused to be made under such Person's supervision a review, of
the activities of the Lessee and that, to the best of his or her knowledge, no
Default exists, or if a Default does exist, specifying the nature thereof, the
period of existence thereof, and what action the Lessee has taken or proposes to
take with respect thereto.
Section 6.04. Survival of Representations and Warranties. The
representations and warranties of the Lessee provided in Sections 6.01 and 6.02
hereof and in any other Operative Agreement and the representations and
warranties of ACA Inc. provided in Section 6.04 hereof and is any other
Operative Agreement shall survive the Closings hereunder and the delivery of the
Aircraft and the expiration or other termination of this Agreement and the other
Operative Agreements.
ARTICLE 7
OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 7.01. Reserved.
Section 7.02. Citizenship. (a) Generally. The Owner Trustee, in its
individual capacity and as trustee, represents and warrants that it is and on
the Delivery Date will be a Citizen of the United States. If the Owner Trustee
in its individual capacity does not comply with the requirements of this Section
7.02, the Owner Trustee and the Indenture Trustee hereby agree that no Default
shall be deemed to exist due to non-compliance by the Lessee with the
registration requirements in the Lease or in Section 6.03(b) hereof occasioned
by such the noncompliance of the or the Owner Trustee.
(b) Owner Trustee. The Owner Trustee, in its individual capacity,
covenants that if at any time on or after the Delivery Date it shall have actual
knowledge that it has ceased to be a Citizen of the United States, it will
resign immediately as the Owner Trustee if such citizenship is necessary for
registration of the Aircraft in the Owner Trustee's name under the
Transportation Code as in effect at such time (such necessity to be determined
without regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used) or, if it is not necessary
for such registration, if the Owner Trustee is informed in writing by the
Lessee, the Indenture Trustee or any Owner Participant that such lack of United
States citizenship would have any adverse effect on the Lessee, the Indenture
Trustee, the Holders or any Owner Participant. The Owner Trustee, in its
individual capacity, further covenants that if at any time it appears reasonably
probable that it will cease to be a Citizen of the United States based on
information that is (i) known to a Responsible Officer or (ii) generally known
to the public, it will promptly so notify, to the extent permitted by law, all
parties to this Agreement.
Section 7.03. Concerning Assignment of Interests of Owner Participant.
In connection with the transfer by an Owner Participant to a transferee Owner
Participant, the Owner Trustee, the Lessee and the Indenture Trustee shall be
entitled to receive an opinion or opinions of counsel reasonably satisfactory to
each of them to the effect that the obligations of such transferee under the
Operative Agreements are legal, valid, binding and enforceable in accordance
with their terms, subject to customary exceptions, and that such transfer will
not be required to be registered under applicable securities laws.
Section 7.04. Representations, Covenants and Warranties of SSB and the
Owner Trustee. (a) In addition to and without limiting its other representations
and warranties provided for in this Article 7, SSB represents and warrants, in
its individual capacity with respect to items (i), (ii), (iii)(A), (iv), (v),
(vi), and (vii) below, and as the Owner Trustee with respect to items (iii)(B)
and (iv) on the date hereof and as of the Certificate Closing Date and the
Delivery Date that:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America with its principal place of business and chief executive
office (as such terms are used in Article 9 of the Uniform Commercial
Code) in Hartford, Connecticut, and has full corporate power and
authority, in its individual capacity or (assuming the Trust Agreement
has been duly authorized, executed and delivered by the Owner
Participant) as the Owner Trustee, as the case may be, to carry on its
business as now conducted, and to execute, deliver and perform this
Agreement and the Operative Agreements to which it is or is to be a
party;
(ii) the execution, delivery and performance by SSB, either in
its individual capacity or as the Owner Trustee, as the case may be, of
this Agreement and the Operative Agreements to which it is or is to be
party have been duly authorized by all necessary corporate action on
its part, and do not contravene its articles of association or by-laws;
each of this Agreement and the other Operative Agreements to which it
is or is to be a party has been duly authorized, and has been duly
executed and delivered or, in the case of the Operative Agreements
identified in Section 4.02(c) hereof, will on the Delivery Date be duly
executed and delivered by SSB, either in its individual capacity or as
the Owner Trustee, as the case may be, and neither the execution and
delivery thereof nor SSB performance of or compliance with any of the
terms and provisions thereof will violate any federal or Connecticut
law or regulation governing SSB's banking or trust powers,
(iii) (A) assuming due authorization, execution and delivery
by each other party thereto, each of the Operative Agreements to which
it is or is to be party when duly executed and delivered will, to the
extent each such document is entered into by SSB in its individual
capacity, constitute the legal, valid and binding obligation of SSB in
its individual capacity enforceable against it in such capacity in
accordance with its respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights (regardless of whether enforceability
is considered in a proceeding in equity or at law), and the performance
by SSB in its individual capacity of any of its obligations thereunder
does not contravene any lease, regulation or contractual restriction
binding on SSB in its individual capacity;
(B) assuming due authorization, execution and delivery by each
other party thereto, each of the Operative Agreements to which it is or
is to be party when duly executed and delivered will, to the extent
each such document is entered into by the Owner Trustee in its trust
capacity, constitute the legal, valid and binding obligation of the
Owner Trustee enforceable against it in such capacity in accordance
with its respective terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws or
general equitable principles, and the performance by the Owner Trustee
of any of its obligations thereunder does not contravene any lease,
regulation or contractual restriction binding on the Owner Trustee;
(iv) there are no pending or, to its knowledge, threatened
actions or proceedings against SSB before any court or administrative
agency which would materially adversely affect the ability of SSB,
either in its individual capacity or as the Owner Trustee, as the case
may be, to perform its obligations under the Operative Agreements to
which it is or is to be party;
(v) it shall give the Lessee, the Indenture Trustee and the
Owner Participant at least 30 days' prior written notice in the event
of any change in its chief executive office or name;
(vi) neither the execution and delivery by it, either in its
individual capacity or as the Owner Trustee, as the case may be, of any
of the Operative Agreements to which it is or is to be a party,
requires on the part of SSB in its individual capacity or any of its
Affiliates the consent or approval of or the giving of notice to, the
registration with, or the taking of any other action in respect of, any
federal or Connecticut governmental authority or agency governing its
banking or trust powers; and
(vii) on the Certificate Closing Date, the proceeds arising
from the issuance and sale of the Certificates shall be free of
Lessor's Liens attributable to SSB in its individual capacity and on
the Delivery Date the Owner Trustee shall be holding whatever title to
the Aircraft as was conveyed to it by the Seller, the Aircraft shall be
free of Lessor's Liens attributable to SSB in its individual capacity,
and SSB in its individual capacity is a Citizen of the United States.
(b) Lessor's Liens. SSB, in its individual capacity, further
represents, warrants and covenants that there are no Lessor's Liens
attributable to it in its individual capacity and that there will not
be any such Lessor's Liens on the Certificate Closing Date or the
Delivery Date. The Owner Trustee, in its trust capacity, and at the
cost and expense of the Lessee, covenants that it will in its trust
capacity promptly, and in any event within 30 days after the same shall
first become known to it, take such action as may be necessary to
discharge duly any Lessor's Liens attributable to it in its trust
capacity. SSB, in its individual capacity, covenants and agrees that it
will at its own expense take such action as may be necessary to duly
discharge and satisfy in full, promptly, and in any event within 30
days after the same shall first become known to it, any Lessor's Liens
attributable to it in its individual capacity which may arise at any
time after the date of this Agreement.
(c) Indemnity for Lessor's Liens. SSB, in its individual
capacity, agrees to indemnify and hold harmless the Lessee, the
Indenture Trustee, the Owner Participant and the Pass-Through Trustee
and the Owner Trustee from and against any loss, cost, expense or
damage which may be suffered by the Lessee, the Indenture Trustee, the
Owner Participant, the Pass-Through Trustee or the Owner Trustee as a
result of the failure of SSB to discharge and satisfy any Lessor's
Liens attributable to it in its individual capacity, as described in
Section 7.04(b) hereof.
(d) Securities Act. None of SSB, the Owner Trustee or any
Person authorized by either of them to act on its behalf has directly
or indirectly offered or sold or will directly or indirectly offer or
sell any interest in the Lessor's Estate, or in any similar security
relating to the Lessor's Estate, or in any security the offering of
which for purposes of the Securities Act of 1933, as amended, would be
deemed to be part of the same offering as the offering of the
aforementioned securities to, or solicited any offer to acquire any of
the same from, any Person.
(e) Actions With Respect to Lessor's Estate, Etc. Neither SSB,
in its individual capacity, nor the Owner Trustee will take any action
to subject the Lessor's Estate or the trust established by the Trust
Agreement, as debtor, to the reorganization or liquidation provisions
of the Bankruptcy Code or any other applicable bankruptcy or insolvency
statute.
(f) Actions With Respect to Lease. The Owner Trustee will not
assign any of its rights under the Lease without the consent of the
Owner Participant, which consent will not be unreasonably withheld or
delayed.
Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee. (a) The Indenture
Trustee in its individual capacity represents on the date hereof and as of the Certificate Closing Date and the
Delivery Date as follows:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the power and authority to enter into and perform
its obligations under the Indenture, this Agreement and the other
Operative Agreements to which it is a party and to authenticate the
Certificates to be delivered on the Certificate Closing Date;
(ii) the Indenture and this Agreement and the other Operative
Agreements to which it is or is to be a party, and the authentication
of the Certificates to be delivered on the Certificate Closing Date,
have been duly authorized by all necessary corporate action on its
part, and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will violate any
federal or Maryland law or regulation relating to its banking or trust
powers or contravene or result in any breach of, or constitute any
default under, its articles of association or by-laws;
(iii) each of the Indenture and this Agreement, and the other
Operative Agreements to which it is or is to be a party, has been duly
executed and delivered or, in the case of the Operative Agreements
identified in Section 4.02(c) hereof, will on the Delivery Date be
executed and delivered by it and, assuming that each such agreement is
the legal, valid and binding obligation of each other party thereto, is
(or will be, as the case may be), the legal, valid and binding
obligation of the Indenture Trustee, enforceable against the Indenture
Trustee in accordance with its terms except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors ' rights (regardless of whether enforceability
is considered in a proceeding in equity or at law);
(iv) neither the execution and delivery by it of the Indenture
and this Agreement and the other Operative Agreements to which it is or
is to be a party, nor the performance by it of any of the transactions
contemplated hereby or thereby, requires the consent or approval of,
the giving of notice to, the registration with, or the taking of any
other action in respect of, any Federal or state governmental authority
or agency governing its banking and trust powers; and
(v) on the Certificate Closing Date, the Indenture Trustee
holds the Liquid Collateral on behalf of the Owner Trustee and on the
Delivery Date, the Indenture Trustee will hold the original
counterparts of the Lease and the Lease Supplement.
(b) Indenture Trustee's Liens. The Indenture Trustee, in its individual
capacity, further represents, warrants and covenants that there are no Indenture
Trustee's Liens attributable to it in its individual capacity and that there
will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as
at and following the Delivery Date, the Aircraft. The Indenture Trustee, in its
individual capacity, covenants and agrees that it will at its own expense take
such action as may be necessary to duly discharge and satisfy in full, promptly,
and in any event within 30 days, after the same shall first become known to it,
any Indenture Trustee's Liens.
(c) Indemnity for Indenture Trustee's Liens. The Indenture Trustee, in
its individual capacity, agrees to indemnify and hold harmless the Lessee, the
Owner Participant, the Owner Trustee and the Pass-Through Trustee from and
against any loss, cost, expense or damage which may be suffered by the Lessee,
the Indenture Trustee, the Owner Participant, the Owner Trustee or the
Pass-Through Trustee as a result of the failure of the Indenture Trustee to
discharge and satisfy any Indenture Trustee's Liens attributable to it in its
individual capacity, as described in Section 7.05(b) hereof.
Section 7.06. Indenture Trustee's Notice of Default. The Indenture
Trustee agrees to give the Owner Participant notice of any Default or Event of
Default promptly upon a Responsible Officer of the Indenture Trustee having
actual knowledge thereof.
Section 7.07. Releases from Indenture. The Indenture Trustee covenants
and agrees, for the benefit of the Lessee and the Owner Participant, to execute
and deliver the instruments of release from the Lien of the Indenture which it
is required to execute and deliver in accordance with the provisions of Article
XIV of the Indenture, and the Owner Participant agrees, for the benefit of the
Lessee, to cause the Owner Trustee to request the Indenture Trustee to execute
and deliver such instruments of release upon written notice from the Lessee to
make such request.
Section 7.08. Covenant of Quiet Enjoyment. Each of the Owner
Participant, the Indenture Trustee, the Pass-Through Trustee and the Owner
Trustee covenants and agrees as to itself only that, so long as no Event of
Default under the Lease has occurred and is continuing, neither the Owner
Participant (or the Owner Trustee, the Pass-Through Trustee or the Indenture
Trustee, as the case may be) nor any Person lawfully claiming through the Owner
Participant (or the Owner Trustee, the Pass-Through Trustee or the Indenture
Trustee, as the case may be) shall interfere with the Lessee's right quietly to
enjoy the Aircraft during the Term without hindrance or disturbance by the Owner
Participant (or the Owner Trustee, the Pass-Through Trustee or the Indenture
Trustee, as the case may be).
Section 7.09. Pass-Through Trustee's Representations and Warranties.
The Pass-Through Trustee, in its individual capacity (except with respect to
clause (iii) below), represents and warrants as of the date hereof (except as
otherwise provided), as of the Pass-Through Closing Date, the Certificate
Closing Date and the Delivery Date that:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the power and authority to enter into and perform
its obligations under the Pass-Through Agreement, the Series
Supplements, the Intercreditor Agreement and this Agreement and to
execute and authenticate the Pass-Through Certificates to be delivered
on the Pass-Through Closing Date;
(ii) the execution, delivery and performance of this
Agreement, the Pass-Through Agreement and the Series Supplements and
the performance of its obligations hereunder and thereunder (including
the execution and authentication of the Pass-Through Certificates to be
delivered on the Pass-Through Closing Date) have been fully authorized
by all necessary corporate action on its part, and neither the
execution and delivery thereof nor its performance of any of the terms
and provisions thereof will violate any federal or Maryland law or
regulation relating to its banking or trust powers or contravene or
result in any breach of, or constitute any default under its articles
of association, or bylaws or the provisions of any indenture, mortgage,
contract or other agreement to which it is a party or by which it or
its properties may be bound or affected; and
(iii) each of this Agreement and the Pass-Through Agreement
has been, and as of the Pass-Through Closing Date the Series
Supplements will be, duly executed and delivered by it (in its
individual and trust capacities) and, assuming that each such agreement
is the legal, valid and binding obligation of each other party thereto,
is or will be, as the case may be, the legal, valid and binding
obligation of the Pass-Through Trustee (in its individual and trust
capacities), enforceable in accordance with its respective terms except
as limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws or equitable principles of general application to or
affecting the enforcement of creditors' rights generally (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
Section 7.10. Survival of Representations, Warranties and Covenants.
The representations, warranties and covenants of the Owner Participant, the
Owner Trustee (in its individual or trust capacity), the Pass-Through Trustee
(in its individual or trust capacity), the Indenture Trustee (in its individual
or trust capacity) and the Subordination Agent (in its individual or trust
capacity) provided for in this Article 7, and their respective obligations under
any and all of them, shall survive the Closings, the delivery of the Aircraft
and the expiration or other termination of this Agreement, and the other
Operative Agreements.
Section 7.11. Lessee's Assumption of the Certificates. (a) Subject to
compliance by the Lessee with all of its obligations under the Operative
Agreements, each of the Owner Participant, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustee and the Lessee covenants and agrees that if
the Lessee elects to purchase the Aircraft pursuant to the terms of the
Operative Agreements, if no Event of Default shall exist, then, upon compliance
with the applicable provisions of the Operative Agreements, the Owner Trustee
will transfer to the Lessee, without recourse or warranty (except as to the
absence of Lessor's Liens attributable to the Owner Trustee) but subject to the
Lien of the Indenture, all of the Owner Trustee's right, title and interest in
and to the Aircraft, and if the Lessee, in connection with such purchase, elects
to assume the obligations of the Owner Trustee to the Indenture Trustee and the
Holders under the Indenture, the Certificates, and hereunder, then the Lessee
shall so notify the Indenture Trustee (such notice to be given at least 30 and
not more than 60 days prior to the effective date of such assumption), and each
of the parties shall execute and deliver appropriate documentation permitting
the Lessee to assume such obligations on the basis of full recourse to the
Lessee, maintaining for the benefit of the Holders the security interest in the
Aircraft created by the Indenture, and upon compliance with the provisions of
this Section 7.11 releasing the Owner Participant and the Owner Trustee from all
obligations in respect of the Certificates, the Indenture, this Agreement, and
the other Operative Agreements, except any obligations relating to the period
prior to such assumption and take all such other actions, at the Lessee's
expense, as are reasonably necessary to permit such assumption by the Lessee.
(b) In connection with such assumption:
(i) the Lessee shall execute and deliver an instrument (A)
pursuant to which the Lessee irrevocably and unconditionally assumes
and undertakes, with full recourse to the Lessee, to pay, satisfy, and
discharge when and as due (at the stated maturity thereof, by
acceleration or otherwise) the principal of, Make-Whole Premium, if
any, interest, and all other sums owing on all Outstanding Certificates
(or on the Lessee's substituted obligations) in accordance with their
terms, and punctually to perform and observe all of the covenants and
obligations hereunder and under the Indenture and the Certificates (as
the same may be amended in connection with such assumption) to be
performed or observed by the Owner Trustee, and (B) which contains
amendments to the Indenture, in form and substance as reasonably
satisfactory to the Indenture Trustee, that incorporate therein such
provisions from the Lease and this Agreement as may be appropriate,
including, without limitation, events of default substantially
identical in scope and effect to those set forth in the Lease and
covenants substantially identical to the covenants of the Lessee
hereunder and under the Lease;
(ii) the instrument referred to in paragraph (i) of this
Section 7.11(b), any Uniform Commercial Code financing statements
relating thereto, and any other documents which shall be necessary (or
reasonably requested by the Indenture Trustee) to establish the
Lessee's title to and interest in the Aircraft or to reflect the
substitution of the Lessee for the Owner Trustee under the Operative
Agreements or to continue the perfection of the security interests in
the Aircraft and the other, rights, Property, and interests included in
the Trust Indenture Estate for the benefit of the Holders (or the
Lessee's substituted obligations) shall be filed in such form, manner,
and places as are necessary or, in the reasonable opinion of the
Indenture Trustee, advisable for such purpose;
(iii) the Indenture Trustee shall have received an insurance
report dated the effective date of such assumption of an independent
insurance broker and certificates of insurance, each in form and
substance satisfactory to the Indenture Trustee, as to the due
compliance as of the effective date of such assumption with the terms
of Article 1 3 of the Lease (as it relates to the Indenture Trustee)
relating to the insurance with respect to the Aircraft;
(iv) the Indenture Trustee shall have received evidence that
as of the effectiveness of the assignment on the date of such
assumption the Aircraft is free and clear of all Liens other than the
Lien of the Indenture and other Permitted Liens;
(v) the Indenture Trustee shall have received a certificate
from the Lessee that no Event of Default exists as of the effective
date of such assumption;
(vi) the Indenture Trustee shall have received a guaranty of
the Certificates substantially in the form of the ACA Guaranty; and
(vii) the Indenture Trustee shall have received (A) from
counsel for the Lessee (who may be the Lessee's General Counsel) a
legal opinion, in form and substance as reasonably satisfactory to the
Indenture Trustee: (w) with respect to the compliance of the assumption
contemplated hereby with the terms hereof, (x) with respect to the due
authorization, execution, delivery, validity, and enforceability of the
instrument referred to in paragraph (i) of this Section 7.11(b), (y)
with respect to the continued perfection of the first and prior Lien
and security interest in the Aircraft for the benefit of the Holders of
the Certificates (or the Lessee's substituted obligations) referred to
in paragraph (ii) of this Section 7.11(b), and (z) with respect to the
continued availability of the benefits of Section 1110 of the
Bankruptcy Code to the Indenture Trustee for the benefit of the Holders
with respect to the Aircraft after giving effect to such assumption,
(B) from counsel to the Indenture Trustee and Special Aviation Counsel,
a legal opinion comparable to the respective opinions delivered on the
Certificate Closing Date or the Delivery Date, as the case may be, with
such changes therein as may be appropriate in light of such assumption,
and (C) in the case of each opinion described in clause (A) or (B)
above, covering such additional matters as the Indenture Trustee shall
reasonably request.
(c) The Lessee shall pay all reasonable expenses (including reasonable
fees and expenses of counsel) of the Indenture Trustee, the Owner Trustee, the
Pass Through Trustee, each Liquidity Provider and the Owner Participant in
connection with such assumption.
Section 7.12. Indebtedness of Owner Trustee. So long as the Indenture
is in effect, the Owner Trustee, not in its individual capacity, but solely as
trustee under the Trust Agreement, shall not incur any indebtedness for borrowed
money except as expressly contemplated herein or in any other Operative
Agreement (excluding the Tax Indemnity Agreement) and shall not engage in any
business or other activity other than the transactions contemplated herein or in
any other Operative Agreement (excluding the Tax Indemnity Agreement) and all
necessary or appropriate activity related thereto.
Section 7.13. Compliance with Trust Agreement, Etc.. Each of the
Initial Owner Participant, SSB, and the Owner Trustee agrees with the Lessee,
the Indenture Trustee, the Liquidity Providers and the Pass-Through Trustee that
so long as the Lien of the Indenture shall be in effect it will (i) comply with
all of the terms of the Trust Agreement applicable to it in its respective
capacity, the noncompliance with which would materially adversely affect any
such party and (ii) not take any action, or cause any action to be taken, to
amend, modify or supplement any other provision of the Trust Agreement in a
manner that would materially adversely affect any such party without the prior
written consent of such party. The Owner Trustee confirms for the benefit of the
Lessee, the Indenture Trustee, the Liquidity Providers and the Pass-Through
Trustee that it will comply with the provisions of Article 2 of the Trust
Agreement. Notwithstanding anything else to the contrary in the Trust Agreement,
so long as the Lease remains in effect, the Initial Owner Participant agrees not
to terminate or revoke the trust created by the Trust Agreement without the
consent of the Lessee. If and so long as the Indenture shall not have been
discharged the consent of the Indenture Trustee shall also be required prior to
any termination or revocation of such trust and in addition, the Owner
Participant will, at the Lessee's expense, promptly and duly execute and deliver
to the Indenture Trustee such documents and assurances including, without
limitation, conveyances, financing statements and continuation statements with
respect to financing statements and take such further action as the Indenture
Trustee may from time to time reasonably request in order to protect the rights
and remedies created or intended to be created in favor of the Indenture Trustee
under the Indenture and to create for the benefit of the Certificate Holders a
valid first priority Lien with respect to, and a first and prior perfected
security interest in, the Trust Indenture Estate.
Section 7.14. Subordination Agent's Representations, Warranties and Covenants. (a) Representations and
Warranties. The Subordination Agent represents and warrants as of the date hereof (except as otherwise
provided), the Pass-Through Closing Date, the Certificate Closing Date, and the Delivery Date, that:
(i) it is a national banking association duly organized and
validly existing in good standing under the laws of the United States
of America and has the corporate power and authority to enter into and
perform its obligations under this Agreement, the Liquidity Facilities
and the Intercreditor Agreement;
(ii) the execution, delivery and performance of this
Agreement, each of the Liquidity Facilities and the Intercreditor
Agreement and the performance of its obligations hereunder and
thereunder have been fully authorized by all necessary, corporate
action on its part, and, neither the execution and delivery thereof nor
its performance of any of the terms and provisions thereof will violate
any federal or Maryland law or regulation relating to its banking or
trust powers or contravene or result in any breach of, or constitute
any default under its articles of association, or bylaws or the
provisions of any indenture, mortgage, contract or other agreement to
which it is a party or by which it or its properties may be bound or
affected;
(iii) each of this Agreement, the Liquidity Facilities and the
Intercreditor Agreement has been duly executed and delivered by it and,
assuming that each such agreement is the legal, valid and binding
obligation of each other party thereto, is or will be, as the case may
be, the legal, valid and binding obligation of the Subordination Agent,
enforceable in accordance with its respective terms except as limited
by bankruptcy, insolvency, moratorium, reorganization or other similar
laws or equitable principles of general application to or affecting the
enforcement of creditors' rights generally (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(iv) there are no Taxes payable by the Subordination Agent
imposed by the State of Maryland or any political subdivision or taxing
authority thereof in connection with the execution, delivery and
performance by the Subordination Agent of this Agreement, any of the
Liquidity Facilities or the Intercreditor Agreement (other than
franchise or other taxes based on or measured by any fees or
compensation received by the Subordination Agent for services rendered
in connection with the transactions contemplated by the Intercreditor
Agreement or any of the Liquidity Facilities), and there are no Taxes
payable by the Subordination Agent imposed by the State of Maryland or
any political subdivision thereof in connection with the acquisition,
possession or ownership by the Subordination Agent of any of the
Certificates other than franchise or other taxes based on or measured
by any fees or compensation received by the Subordination Agent for
services rendered in connection with the transactions contemplated by
the Intercreditor Agreement or any of the Liquidity Facilities);
(v) there are no pending or threatened actions or proceedings
against the Subordination Agent before any court or administrative
agency which individually or in the aggregate, if determined adversely
to it, would materially adversely affect the ability of the
Subordination Agent to perform its obligations under this Agreement,
the Intercreditor Agreement or any Liquidity Facility;
(vi) the Subordination Agent has not directly or indirectly
offered any Certificate for sale to any Person or solicited any offer
to acquire any Certificates from any Person, nor has the Subordination
Agent authorized anyone to act on its behalf to offer directly or
indirectly any Certificate for sale to any Person, or to solicit any
offer to acquire any Certificate from any Person; and the Subordination
Agent is not in default under any Liquidity Facility; and
(vii) the Subordination Agent is not directly or indirectly
controlling, controlled by or under common control with the Owner
Participant, the Owner Trustee, any Underwriter or the Lessee.
(b) Covenants. (i) The Subordination Agent agrees not to amend any
Liquidity Facility without the consent of the Lessee (so long as no Event of
Default shall have occurred and be continuing) and of the Owner Participant
(such consents not to be unreasonably withheld or delayed).
(ii) In connection with the deposit in the applicable Cash Account of
amounts drawn pursuant to any Downgrade Drawing or Non-Extension Drawing (as
defined in the Liquidity Facility) under a Liquidity Facility, the Subordination
Agent agrees, so long as no Event of Default shall have occurred and be
continuing, to pay to the Lessee promptly following each Regular Distribution
Date any Investment Earnings on the amount so deposited which remain after
application of such Investment Earnings pursuant to Section 2.06 of such
Liquidity Facility to the interest payable on such Downgrade Drawing under
Section 3.07 of such Liquidity Facility. Capitalized terms used in this Section
shall have the meanings specified in the Intercreditor Agreement.
ARTICLE 8
TAXES
Section 8.01. Lessee's Obligation to Pay Taxes. (a) Generally. The
Lessee agrees promptly to pay when due, and to indemnify and hold each
Indemnitee harmless from all license, recording, documentary, registration and
other fees and all taxes (including, without limitation, income, gross receipts,
sales, rental, use, value added, property (tangible and intangible), ad valorem,
excise and stamp taxes), fees, levies, imposts, recording duties, duties,
charges, assessments or withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax or interest thereon
(individually, a "Tax," and collectively called "Taxes"), however imposed or
asserted (whether imposed upon any Indemnitee, the Lessee, all or any part of
the Aircraft, Airframe, any Engine or any Part or the Lessor's Estate, the Trust
Indenture Estate, Rent, the Certificates or otherwise upon or with respect to
any Operative Agreement, any payments thereunder or otherwise in connection
therewith), by any Federal, state or local government or taxing authority in the
United States, or by any government or taxing authority of a foreign country or
of any political subdivision or taxing authority thereof or by a territory or
possession of the United States or an international taxing authority relating to
or measured by:
(i) the construction, mortgaging, financing, refinancing,
purchase, acceptance, rejection, delivery, nondelivery, transport,
location, ownership, registration, reregistration, deregistration,
insuring, assembly, possession, repossession, operation, use, non-use,
condition, maintenance, repair, improvement, conversion, sale, return,
abandonment, preparation, installation, storage, redelivery,
replacement, manufacture, leasing, subleasing, sub-subleasing,
modification, alteration, rebuilding, importation, transfer of title,
transfer of registration, exportation or other application or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as a result of any Lien) on,
the Aircraft, the Airframe, any Engine or any Part or any interest
therein;
(ii) amounts payable under the Operative Agreements;
(iii) the Property, or the income or other proceeds received
with respect to the Property attributable to the transactions
contemplated by the Operative Agreements, held by the Owner Trustee
under the Trust Agreement or after an Event of Default under the Lease,
or by the Indenture Trustee under the Indenture;
(iv) otherwise with respect to any Operative Agreement, any
interest therein or by reason of the transactions described in or
contemplated by the Operative Agreements;
(v) the principal or interest or other amounts payable with respect to the Certificates;
(vi) the Pass-Through Certificates or the Certificates or the
issuance, sale, acquisition, reoptimization, or refinancing thereof or
the beneficial interests in the Trust Estate or the Trust Indenture
Estate or the creation thereof under the Trust Agreement or the
Indenture, or the security interest created or perfected thereby or by
any filing thereof;
(vii) any assumption by the Lessee pursuant to Section 7.11 of
this Agreement;
(viii) the Aircraft, the Airframe, any Engine or any Part; or
(ix) the rentals (including Basic Rent, Renewal Rent and
Supplemental Rent), receipts or earnings arising from the Operative
Agreements.
(b) Exceptions. The indemnity provided for in Section 8.01 (a) shall not extend to any of the
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following:
(i) With respect to an Indemnitee, Taxes, whether imposed by
withholding or otherwise, based upon, measured by or with respect to
the net or gross income, items of tax preference or minimum tax or
excess profits, receipts, capital, franchise, net worth (whether,
denominated income, excise, capital stock, or doing business taxes) or
other similarly-based taxes (other than sales, use, value-added,
transfer, rental, ad valorem, stamp, property, or similar taxes)
("Income Taxes") imposed by the United States or by any state, local or
foreign jurisdiction in which such Indemnitee is subject to tax without
regard to the transactions contemplated by the Operative Agreement,
provided, however, that this clause (i) shall not exclude from the
indemnity described in Section 8.01(a) above any such Income Taxes to
the extent such taxes are imposed by any jurisdiction in which the
Indemnitee would not be subject to such taxes of such type but for, or
would be subject to such taxes of such type solely as a result of, (x)
the operation, registration, location, presence, or use of the
Aircraft, Airframe, any Engine or any Part thereof, in such
jurisdiction or (y) the place of incorporation or principal office or
the activities of the Lessee or any Affiliate thereof or any sublessee
in such jurisdiction (it being understood that (A) any such indemnity
would be payable only to the extent of the net harm incurred by the
Indemnitee from such Income Taxes, taking into account any incremental
current Tax benefit in another tax jurisdiction resulting from payment
of such Income Taxes and (B) this sentence would require
indemnification in a jurisdiction in which the Indemnitee is already
subject to an Income Tax (an "Existing Income Tax") only if an event
set forth in Clause (x) or (y) of this sentence causes the Indemnitee
to be subject to an Income Tax in that jurisdiction (a "New Income
Tax") other than an Existing Income Tax, and such New Income Tax would
have been imposed even if the activities contemplated by the Operative
Agreements were the Indemnitee's sole nexus to the jurisdiction);
provided, further, that the provisions of this paragraph (b)(i)
relating to Income Taxes shall not exclude from the indemnity described
in Section 8.01(a) hereof any Income Taxes for which the Lessee would
be required to indemnify an Indemnitee (x) so that any payment under
the Operative Agreements, otherwise required to be made on an After-Tax
Basis, is made on an After-Tax Basis or (y) pursuant to the last
sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement;
(ii) Taxes on items of tax preference or any minimum tax or alternative minimum tax;
(iii) Taxes imposed with respect to any period after the later
of (A) the discharge in full of the Lessee's obligation, if any, to pay
Stipulated Loss Value or Termination Value under and in accordance with
the Lease, and (B) the earliest of (x) the expiration of the Term of
the Lease and return of the Aircraft in accordance with Section 5 of
the Lease, (y) the termination of the Lease in accordance with the
applicable provisions of the Lease and return of the Aircraft in
accordance with the Lease, or (z) the termination of the Lease in
accordance with the applicable provisions of the Lease and the transfer
of all right, title and interest in the Aircraft to the Lessee pursuant
to its exercise of any of its purchase options set forth in Section 16
of the Lease, provided that this exclusion (iii) shall not apply in
respect of any payment made after the dates set forth in clauses (A)
and (B) above if such payment is made with respect to any period prior
to such return or transfer, or Taxes incurred in connection with the
exercise of any remedies pursuant to Section 15 of the Lease following
the occurrence of an Event of Default;
(iv) As to the Owner Trustee, Taxes imposed against the Owner
Trustee upon or with respect to any fees for services rendered in its
capacity as Owner Trustee under the Trust Agreement or, as to the
Indenture Trustee, Taxes imposed against the Indenture Trustee upon or
with respect to any fees received by it for services rendered in its
capacity as Indenture Trustee under the Indenture;
(v) With respect to any Indemnitee, Taxes resulting from the
willful misconduct or gross negligence of any Indemnitee (other than
gross negligence or willful misconduct not actually committed by but
instead imputed to any Indemnitee by reason of such Indemnitee's
participation in the transactions contemplated by the Operative
Agreements) or the breach by any Indemnitee of any representation,
warranty or covenant contained in the Operative Agreements or any
document delivered in connection therewith (unless attributable to a
breach of representation, warranty or covenant of the Lessee);
(vi) Taxes imposed on the Owner Trustee or the Owner
Participant or any successor, assign or Affiliate thereof which became
payable by reason of any voluntary or involuntary transfer or
disposition by such Indemnitee subsequent to the Delivery Date,
including revocation of the Trust, of any interest in some or all of
the Aircraft, Airframe, Engines or Parts thereof or its interest in the
Lessor's Estate (not including any transfers of any Certificates
pursuant to Section 15.01 (a) hereof) or a disposition in connection
with a bankruptcy or similar proceedings involving either the Lessor or
the Owner Participant or a transfer or disposition of shares or other
interests in the Owner Trustee or the Owner Participant or a transfer
or disposition of shares or other interests in the Owner Trustee or the
Owner Participant other than (A) transfers resulting from a loss,
substitution or modification of the Aircraft, Engines or any Part, (B)
any transfer of the Aircraft, Engines or any Part (in each case other
than at Fair Market Value) to the Lessee, (C) transfers pursuant to the
Lessor's exercise of remedies in accordance with Section 15 of the
Lease or (D) a transfer pursuant to the Lessee's exercise of its rights
under Section 3(g) of the Lease; the parties agree to cooperate to
minimize any such Taxes covered by this provision;
(vii) Taxes subject to indemnification by the Lessee pursuant
to the Tax Indemnity Agreement;
(viii) Taxes imposed on a successor, assign or other
transferee of any interest of any Indemnitee (including, without
limitation, a transferee which is a new lending office of an original
Indemnitee) to the extent that such Taxes would not have been imposed
on the original Indemnitee or exceed the amount of Taxes that would
have been imposed and would have been indemnifiable pursuant to Section
8.01(a) hereof had there not been a succession, assignment or other
transfer by such original Indemnitee of any such interest of such
Indemnitee in the Aircraft or any Part, any interest in or under any
Operative Agreement, or any proceeds thereunder, provided, however,
that the exclusion provided by this clause (viii) shall not apply in
the case of a succession, transfer or disposition (A) pursuant to the
exercise of remedies under Section 15 of the Lease, (B) which is an
actual or deemed transfer pursuant to Section 7.11 hereof or as a
consequence of a Refinancing under Section 15.01 hereof, or any actual
or deemed transfer of a Certificate that as part of a Refinancing under
Section 15.01 hereof is not retired, but only to the extent the Taxes
attributable to such transfer exceed the amount of Taxes that would
have been imposed on such transferor if the debt had instead been
retired, (C) to the extent necessary to make payments with respect to
such Taxes on an After-Tax Basis, or (D) to the extent such Taxes are
directly attributable to the failure of the Lessee to take
administrative actions as have been reasonably requested of it in
writing in a timely manner and which will result in no after-tax cost
or expense to the Lessee;
(ix) Taxes imposed by any jurisdiction that would not have
been imposed on the Owner Trustee or the Owner Participant but for the
activities or the status of the Owner Trustee or the Owner Participant
in such jurisdiction unrelated to the transactions contemplated by the
Operative Agreements;
(x) Any Taxes which have been included in the Purchase Price;
(xi) Any Taxes which would not have been imposed but for a
Lessor's Lien or an Indenture Trustee's Lien;
(xii) Any Taxes imposed on the Owner Participant arising under
or in connection with any prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975(c)(1) of the Code ("Prohibited
Transaction"); and
(xiii) Taxes that would not have been imposed but for the
existence or status of any trust used to hold title to the Aircraft.
(c) Withholding. The Pass-Through Trustee shall withhold any Taxes
required to be withheld on payments to any holder of a Pass-Through Certificate
who is a Non-U.S. Person except to the extent that such a holder of a
Pass-Through Certificate has furnished evidence to the Pass-Through Trustee
sufficient under applicable law to entitle such holder of a Pass-Through
Certificate to any exemption from or reduction in the rate of withholding on
interest claimed by such holder of a Pass-Through Certificate. The Indenture
Trustee shall withhold any Taxes required to be withheld on any payment to a
Holder pursuant to Section 5.09 of the Indenture. If the Indenture Trustee or
the Pass-Through Trustee fails to withhold a Tax required to be withheld with
respect to any Holder of a Certificate or any holder of a Pass-Through
Certificate or any claim is otherwise asserted by a taxing authority against the
Owner Trustee or Owner Participant for any withholding tax, the Lessee will
indemnify the Owner Trustee and the Owner Participant (without regard to the
exclusions set forth in Section 8.01(b) hereof) on an After-Tax Basis against
any such Taxes required to be withheld and any interest and penalties with
respect thereto, along with any other costs (including reasonable attorney's
fees) incurred in connection with any such claim. The Indenture Trustee or the
Pass-Through Trustee, as the case may be, in its individual capacity (and
without recourse to the Trust Indenture Estate), shall indemnify the Lessee
(without regard to the exclusions set forth in Section 8.01(b) hereof) on an
After-Tax Basis for any payment the Lessee shall have made pursuant to the
preceding sentence.
Section 8.02. After-Tax Basis. The amount which the Lessee shall be
required to pay with respect to any Tax indemnified against under Section 8.01
shall be an amount sufficient to restore the Indemnitee, on an After-Tax Basis,
to the same position such party would have been in had such Tax not been
incurred, provided that the calculation of any additional amounts owing to any
Indemnitee as a result of the Lessee's obligation to indemnify on an After-Tax
Basis shall be made without regard to the exclusions set forth in Section
8.01(b). If any Indemnitee realizes a Tax benefit (whether by credit, deduction
or otherwise), or would have realized such a benefit if properly claimed, by
reason of the payment of any Tax paid or indemnified against by the Lessee, such
Indemnitee shall promptly pay to the Lessee, to the extent such Tax benefit was
not previously taken into account in computing such payment, but not before the
Lessee shall have made all payments then due to such Indemnitee under this
Agreement, the Tax Indemnity Agreement and any other Operative Agreement, an
amount equal to the lesser of (x) the sum of such tax benefit plus any other tax
benefit realized by such Indemnitee that would not have been realized but for
any payment made by such Indemnitee pursuant to this sentence and not already
paid to the Lessee, and (y) the amount of the payment made under Section 8.01
hereof and this Section 8.02 by the Lessee to such Indemnitee plus the amount of
any other payments by the Lessee to such Indemnitee theretofore required to be
made under this Section 8.02 and Sections 8.01 and 8.05 hereof (and the excess,
if any, of the Tax benefit over the applicable amount described in clause (x) or
clause (y) above shall be carried forward and applied to reduce pro tanto any
subsequent obligations of the Lessee to make payments to such Indemnitee
pursuant to Section 8.01 hereof); provided, however, that notwithstanding the
foregoing portions of this sentence, such Indemnitee shall not be obligated to
make any payment to the Lessee pursuant to this sentence as long as an Event of
Default shall have occurred and be continuing under the Lease. The Lessee shall
reimburse on an After-Tax Basis such Indemnitee (subject to Section 8.01(b)
hereof) for any payment of a tax benefit pursuant to the preceding sentence (or
a tax benefit otherwise taken into account in calculating the Lessee's indemnity
obligation hereunder) to the extent that such tax benefit is subsequently
disallowed or reduced.
In determining the order in which any Indemnitee utilizes withholding
or other foreign taxes as a credit against such Indemnitee's United States
income taxes, such Indemnitee shall be deemed to utilize (i) first, all foreign
taxes other than those described in clause (ii) below; provided, that such other
foreign taxes which are carried back to the taxable year for which a
determination is being made shall be deemed utilized after foreign taxes
described in clause (ii) below, and (ii) then, on a pro rata basis, all foreign
taxes with respect to which such Indemnitee is entitled to obtain
indemnification pursuant to an indemnification provision contained in any lease,
loan agreement, or other financing document (including this Participation
Agreement) that is similar to the indemnification provision in this Article 8.
Notwithstanding the preceding paragraph, if foreign taxes of an
Indemnitee have been indemnified hereunder and all such indemnified foreign
taxes have not been used to produce a credit against such Indemnitee's United
States income taxes resulting in the realization of a tax benefit paid to the
Lessee in accordance with the first paragraph of this Section 8.02, a tax
benefit will be deemed to be attributable to such indemnified foreign taxes to
the extent that an item of income derived from the transactions contemplated in
the Operative Agreements is allocable to sources outside the United States and
such allocation results in an increase in the amount of foreign tax credit such
Indemnitee is entitled to use in any taxable year over the amount of foreign tax
credit such Indemnitee would have been entitled to use if such foreign source
allocation had not occurred.
Section 8.03. Time of Payment. Any amount payable to an Indemnitee
pursuant to this Article 8 shall be paid promptly, but in any event within 30
days after receipt of a written demand therefor from such Indemnitee accompanied
by a written statement describing in reasonable detail the basis for such
indemnity and the computation of the amount so payable, provided that in the
case of amounts which are being contested by the Lessee in good faith or by the
Indemnitee in either case pursuant to Section 8.04 hereof, such amount shall be
payable within 30 days after the time such contest is finally resolved.
Section 8.04. Contests. If a written claim is made against any
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder, such Indemnitee shall promptly (but in any event within 30
days of receipt thereof) give the Lessee notice in writing of such claim and
shall furnish the Lessee with copies of any written requests for information
sent to such Indemnitee (and not the Lessee) from any taxing authority to the
extent relating to such Taxes with respect to which the Lessee may be required
to indemnify hereunder and with respect to which it would be necessary or
beneficial to have information provided by the Lessee; provided, however, that
the failure of an Indemnitee to give such notice or furnish such copy shall not
terminate any of the rights of such Indemnitee under this Article 8, except (a)
to the extent that the Lessee's contest rights have been materially and
adversely impaired by the failure to provide such notice or copy or (b) to the
extent that such failure results in the imposition of, or an increase in the
amount of, any penalties, interest or additions to Tax related to the Tax which
is the subject of such claim or proceeding. The Lessee may, at its option,
contest in its own name or, if required by law, require the Indemnitee to
contest in good faith, with due diligence and at the Lessee's expense, if timely
requested in writing by the Lessee, the validity, applicability or amount of
such Taxes by:
(i) resisting payment thereof if lawful and
practicable or not paying the same except under protest if
protest is necessary and proper in each case so long as
non-payment will not result in a material risk of the sale,
forfeiture or loss of, or the creation of a Lien other than a
Permitted Lien on the Aircraft, Airframe or any Engine or any
risk of criminal liability; or
(ii) if the payment be made, using reasonable efforts
to obtain a refund thereof in appropriate administrative and
judicial proceedings.
Notwithstanding the foregoing, the Lessee shall not be permitted or entitled to
contest any such Tax in its own name unless the Tax is reflected in a report or
a return of the Lessee or raised in an audit or other proceeding of the Lessee
and the Lessee is allowed to directly contest such Tax under applicable law of
the taxing jurisdiction provided, that if the Lessee is so permitted under
applicable law to contest a Tax asserted against the Lessee and the same or
similar Tax is also asserted against the Indemnitee, each of the Lessee and such
Indemnitee shall conduct its contest in its own name and the Lessee and such
Indemnitee will cooperate in a reasonable manner with respect to the respective
contests of such Tax.
If the Indemnitee, after reasonable discussion with the Lessee and
consideration in good faith of any suggestion made by the Lessee as to the
method of pursuing such contest, elects to conduct the contest, such Indemnitee
shall control the contest and shall determine the manner in which to contest
such Taxes and shall periodically or upon the Lessee's request advise the Lessee
of the progress of such contest; provided, however, that the Lessee shall have
the right to be consulted in good faith with respect to any contest of claims
subject to indemnification hereunder, including governmental and judicial
conferences and the right to be consulted in good faith regarding the relevant
portions of all related submissions to any governmental or other authority,
provided, however, that the Lessee shall be permitted to participate in any such
contest only (x) with respect to issues that can be separated on audit from any
Taxes for which the Lessee is not required to indemnify the Indemnitee
hereunder, and (y) if the Indemnitee shall have determined that in its judgment,
exercised in its sole discretion, neither such participation nor the separation
of issues will adversely affect the Indemnitee. Notwithstanding the foregoing
provisions of this paragraph, if the Lessee acknowledges in writing its
liability to the Indemnitee hereunder with respect to the Taxes subject to the
contest if the contest is resolved adversely, the Lessee shall control such
contest. If the Lessee satisfies the conditions imposed on it in this Section
8.04 and an Indemnitee nevertheless fails to contest and refuses to permit the
Lessee to contest under and as and to the extent required by this Section 8.04,
then the Lessee shall not be obligated to indemnify such Indemnitee for such
claim or for any other claim for which a successful contest is adversely
affected because of such failure to contest or to permit a contest. The
Indemnitee will not settle a contest that results in a final determination
without consent of the Lessee, unless the Indemnitee waives its right to
indemnification with respect to such contest and any related contest. Any such
settlement, concession, or compromise without the prior written consent of the
Lessee shall constitute a waiver of such Indemnitee's rights to indemnification
hereunder with respect to such claim and any other claim for which a successful
contest is adversely affected because of such settlement, concession, or
compromise. Notwithstanding the preceding sentences of this Section 8.04, such
Indemnitee shall not be required to take or continue any action unless the
Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on a
current basis and on an After-Tax Basis all reasonable fees and expenses
(including reasonable attorneys' fees and accountants' fees) which such
Indemnitee may incur as a result of contesting such Taxes, and (ii) made all
payments and indemnities (other than contested payments and indemnities) then
due to the Indemnitee hereunder or with respect to any of the transactions
contemplated by or under the Operative Agreements. In no event shall such
Indemnitee be required or the Lessee be permitted to contest pursuant to this
Section 8.04 the imposition of any Tax for which the Lessee is obligated to
indemnify any Indemnitee hereunder unless (i) such Indemnitee shall have
received, at the Lessee's expense, an opinion of tax counsel selected by the
Lessee, such counsel to be reasonably satisfactory to the Indemnitee ("Tax
Counsel"), to the effect that there exists a reasonable basis for contesting
such claim, (ii) such contest will not result in any material risk of loss, sale
or forfeiture of, or the creation of a Lien (other than Permitted Liens) on, the
Aircraft or any part thereof or interest thereon or in a risk of criminal
liability, or adversely affect the Trust Indenture Estate, (iii) if a Specified
Default exists, the Lessee shall have provided security for its obligations
hereunder reasonably satisfactory to the Indemnitee, (iv) if such contest shall
be conducted in a manner requiring payment of the claim in advance, the Lessee
shall have advanced sufficient funds, on an interest free basis, to make the
payment required, and agreed to indemnify the Indemnitee against any additional
net adverse tax consequences on an After-Tax Basis to such Indemnitee of such
advance, and (v) the issue shall not be the same as an issue previously
contested hereunder and decided adversely, unless the Indemnitee shall have
received at the Lessee's sole expense, a written opinion, in form and substance
reasonably satisfactory to such Indemnitee, of Tax Counsel to the effect that
the applicable circumstances or law has changed and that in light thereof, there
is substantial authority for contesting such claim; provided, that in the event
that such Indemnitee is not required under this paragraph to contest any Tax
liability for which the Lessee is obligated to indemnify any Indemnitee, the
Lessee may contest such Tax liability in the name of the Lessee, if permitted by
law. The Lessee may appeal or require the Indemnitee to appeal any judicial
decision provided the foregoing requirements of this Section 8.04 are met and
the Indemnitee shall have received, at the Lessee's expense, an opinion of Tax
Counsel, to the effect that there is substantial authority for such appeal.
Nothing contained in this Section 8.04 shall require any Indemnitee to
contest or continue to contest, or permit Lessee to contest, a claim which such
Indemnitee would otherwise be required to contest pursuant to this Section 8.04,
if such Indemnitee shall waive payment by Lessee of any amount that might
otherwise be payable by Lessee under this Article 8 in connection with such
claim.
Section 8.05. Refunds. Upon receipt by an Indemnitee of a refund (or
would have received such a refund but for offset by matters not indemnifiable by
the Lessee under Section 8.01(a)) of all or any part of any Taxes which the
Lessee shall have paid for such Indemnitee or for which the Lessee shall have
reimbursed or indemnified such Indemnitee, and provided that no Specified
Default exists (but if a Specified Default does exist, payment shall not be made
to the Lessee until no Specified Default exists), such Indemnitee shall pay to
the Lessee an amount equal to the amount of such refund or offset less (x) any
expenses not previously reimbursed, (y) all payments then due to such Indemnitee
under this Article 8, and (z) Taxes imposed with respect to the accrual or
receipt thereof, including interest received attributable thereto, plus any tax
benefit realized by such Indemnitee as a result of any payment by such
Indemnitee made pursuant to this sentence; provided, however, that such amount
shall not be payable (a) before such time as the Lessee shall have made all
payments or indemnities then due and payable to such Indemnitee under this
Article 8 and (b) to the extent that the amount of such payment would exceed (i)
the amount of all prior payments by the Lessee to such Indemnitee pursuant to
this Article 8 less (ii) the amount of all prior payments by such Indemnitee to
the Lessee pursuant to this Article 8.
Any subsequent loss of such refund or tax benefit shall be treated as a
Tax subject to indemnification under the provisions of this Article 8 (in the
case of any such tax benefit, subject to Section 8.01 (b) hereof).
Section 8.06. Lessee's Reports. In case any report or return is
required to be made with respect to any Taxes against which the Lessee is or may
be obligated to indemnify the Indemnitees under this Article 8, the Lessee
shall, to the extent it has knowledge thereof, make such report or return,
except for any such report or return that the Indemnitee has notified the Lessee
that it intends to file, in such manner as will show the ownership of the
Aircraft in the Owner Trustee and shall send a copy of the applicable portions
of such report or return to the Indemnitee and the Owner Trustee or will notify
the Indemnitee of such requirement and make such report or return in such manner
as shall be satisfactory to such Indemnitee and the Owner Trustee. The Lessee
will provide such information within the possession or control of the Lessee as
the Indemnitee may reasonably require from the Lessee to enable the Indemnitee
to fulfill its tax filing requirements with respect to the transactions
contemplated by the Operative Agreements (without duplication of any comparable
requirements of the Tax Indemnity Agreement) and any audit information request
arising from any such filing. The Indemnitee will provide such information
within its possession or control as the Lessee may reasonably require from such
Indemnitee to enable the Lessee to fulfill its tax filing requirements with
respect to the transactions contemplated by the Operative Agreements and any
audit information request arising from such filing; provided that in no event
shall any Indemnitee be required to provide copies of any of its tax returns or
other confidential information. The Lessee shall hold the Indemnitee harmless on
an After-Tax Basis from and against any liabilities, including penalties,
additions to tax, fines and interest, imposed upon or incurred by such
Indemnitee to the extent directly attributable to any insufficiency or
inaccuracy in any return, statement, or report prepared by the Lessee or
information supplied by the Lessee, or directly attributable to the Lessee's
failure to supply information within its possession or control to such
Indemnitee as required by this Section 8.06. If an Indemnitee makes any
representation regarding the value of the Aircraft or any part thereof to any
taxing authority without the Lessee's prior written consent as to the value
represented (which consent shall not be unreasonably withheld), that Indemnitee
shall be responsible for any Tax to the extent that it would not have been
payable if the value used were a value reasonably proposed by the Lessee.
Section 8.07. Survival of Obligations. The representations, warranties,
indemnities and agreements of the Lessee provided for in this Article 8 and the
Lessee's obligations under any and all of them, in each case, with respect to
events or periods prior to the expiration or termination of the Lease shall
survive the expiration or other termination of the Operative Agreements.
Section 8.08. Payment of Taxes. With respect to any Tax otherwise
indemnifiable hereunder by the Lessee and applicable to the Aircraft, Airframe,
any Engine or Parts, to the extent permitted by the applicable federal, state,
local or foreign law, the Lessee shall pay such tax directly to the relevant
Taxing authority and file any returns or reports required with respect thereto
to the extent legally entitled to do so in its own name; provided, however, that
the Lessee shall not make any statements or take any action which would indicate
that the Lessee or any Person other than the Owner Trustee or Owner Participant
is the owner of the Aircraft, the Airframe, any Engine or any Part or which
would otherwise be inconsistent with the terms of the Lease or the Tax Indemnity
Agreement and the position thereunder of the Owner Trustee and the Owner
Participant. Copies of such returns or reports, together with evidence of
payment of any tax due, shall be sent by the Lessee to the Owner Participant
within 30 days after the date of each payment by the Lessee of any Tax.
Section 8.09. Reimbursements by Indemnitees Generally. To the extent
the Lessee is required to pay or withhold any Tax imposed on or with respect to
an Indemnitee in respect of the transactions contemplated by the Operative
Agreements, which Tax is not otherwise the responsibility of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Indemnitee, then such Indemnitee shall pay to the Lessee within 30 days of
the Lessee's demand therefor an amount which equals the amount actually paid by
the Lessee with respect to such Taxes.
Section 8.10. Special Indemnity. Notwithstanding anything in this
Article 8 to the contrary, the Lessee shall hold the Owner Participant harmless
on an After-Tax Basis from any Taxes or losses arising from or in connection
with the transactions contemplated by Section 17.02 hereof (provided, that this
Section 8.10 shall not require any indemnification for any Loss of Tax Benefits,
as defined in the Tax Indemnity Agreement).
. At the Lessee's request, the accuracy of any calculation of amount(s)
payable pursuant to this Article 8 shall be verified by independent public
accountants selected by the applicable Indemnitee and reasonably satisfactory to
the Lessee, and such verification shall bind the applicable Indemnitee and the
Lessee. In order, and to the extent necessary, to enable such independent
accountants to verify such amounts, such Indemnitee shall provide to such
independent accountants (for their confidential use and not to be disclosed to
the Lessee or any other person) all information reasonably necessary for such
verification. Verification shall be at the expense of the Lessee, unless such
verification results in an adjustment in the Lessee's favor of $10,000 or more
of the amount of the payment as computed by such Indemnitee, in which case the
verification shall be at the expense of the Indemnitee.
ARTICLE 9
GENERAL INDEMNITY
Section 9.01. Generally. (a) The Lessee agrees to indemnify each
Indemnitee against and agrees to protect, defend, save and keep harmless each
Indemnitee against and in respect of, and will pay on an After-Tax Basis, from
any and all liabilities, obligations, losses, damages, penalties, claims,
actions, suits, costs, disbursements and expenses, demands or judgments
(including legal fees and expenses and all costs and expenses relating to
amendments, supplements, adjustments, consents, refinancings and waivers under
the Operative Agreements except as otherwise provided in Section 10.01(c)(i)
hereof) of every kind and nature, including without limitation Make-Whole
Premium (other than any Make-Whole Premium payable as a result of an Indenture
Event of Default that is not a Lease Event of Default), and whether arising
before, on, or after the Certificate Closing Date, (whether or not any of the
transactions contemplated by this Agreement are consummated) (individually, an
"Expense," collectively, "Expenses"), which may be imposed on, incurred or
suffered by or asserted against any Indemnitee, in any way relating to, based on
or arising out of or in connection with, in each case directly or indirectly,
any one or more of the following:
(i) any Operative Agreement, any document entered into in
connection therewith, any sublease or transfer, or any other
transaction contemplated hereby or thereby;
(ii) the operation, possession, use, non-use, maintenance,
storage, overhaul, delivery, non-delivery, control, repair or testing
of the Aircraft, Airframe, or any Engine or any engine used in
connection with the Airframe, or any Part thereof by the Lessee, any
sublessee or any other Person whatsoever, whether or not such
operation, possession, use, non-use, maintenance, storage, overhaul,
delivery, non-delivery, control, repair or testing is in compliance
with the terms of the Lease, including, without limitation, claims for
death, personal injury or property damage or other loss or harm to any
Person whatsoever, including, without limitation, any passengers,
shippers or other Persons wherever located, and claims or penalty
relating to any laws, rules or regulations, including, without
limitation, environmental control, noise and pollution laws, rules or
regulation;
(iii) the manufacture, design, sale, return, purchase,
acceptance, rejection, delivery, non-delivery, condition, repair,
modification, servicing, rebuilding, airworthiness, registration,
reregistration, deregistration, ownership, financing, import, export,
performance, non-performance, lease, sublease, transfer,
merchantability, fitness for use, alteration, substitution or
replacement of any Airframe, Engine, or Part or other transfer of use
or possession, or other disposition of the Aircraft, the Airframe, any
Engine or any Part including, without limitation, latent and other
defects, whether or not discoverable, strict tort liability, and any
claims for patent, trademark or copyright infringement;
(iv) any breach of or failure to perform or observe, or any
other non-compliance with, any condition, covenant or agreement to be
performed, or other obligations of the Lessee under any of the
Operative Agreements or any Pass-Through Agreement, or the falsity or
inaccuracy of any representation or warranty of the Lessee in any of
the Operative Agreements or any Pass-Through Agreement (other than
representations and warranties in the Tax Indemnity Agreement);
(v) the Collateral Account and the Liquid Collateral;
(vi) the enforcement of the terms of the Operative Agreements
and the administration of the Trust Indenture Estate; and
(vii) the offer, issuance, sale, resale or delivery of any
Certificate or any Pass-Through Certificate, or any refunding or
refinancing thereof, or interest in the Lessor's Estate or the Trust
Agreement or any similar interest or in any way relating to or arising
out of the Trust Agreement and the Lessor's Estate, the Indenture or
the Trust Indenture Estate (including, without limitation, any claim
arising out of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or any other federal or state or
foreign statute, law or regulation, or at common law or otherwise
relating to securities), or the action or inaction of the Owner Trustee
or Indenture Trustee as trustees, in the manner contemplated by this
Agreement, the Indenture, the Indenture Supplement or the Trust
Agreement and in the case of the Owner Participant, its obligations
arising under Section 6.01 of the Trust Agreement.
The foregoing indemnity by the Lessee is intended to include and cover, but is
not limited to, any Expense to which the Indemnitees may be subject as a result
of their respective ownership or leasing of any interest in or holding of any
Lien on the Aircraft, Airframe, any Engine or Part during the Term, whether or
not in the Lessee's possession or control, insofar as such Expense relates to
any activity or event whatsoever involving such item while it is under lease to
the Lessee (or after termination of the Lease in connection with the exercise of
remedies thereunder to the extent that such Expense is attributable to the
transactions contemplated hereby and by the other Operative Agreements), and
such Expense does not fall within any of the exceptions listed in Section 9.01
(b) hereof.
(b) Exceptions. The indemnity provided for in Section 9.01 (a) shall not extend to any Expense of
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any Indemnitee to the extent it:
(i) results from the willful misconduct or gross negligence of
any Indemnitee (other than gross negligence or willful misconduct
imputed to such person by reason of its interest in the Aircraft or any
transaction documents);
(ii) is attributable to acts or events (other than the
performance by Lessee of its obligations pursuant to the terms of the
transaction documents) which occur after the Aircraft is no longer part
of the Lessor's Estate or, if the Aircraft remains a part of the
Lessor's Estate, after the expiration of the Term (unless the Aircraft
is being returned at such time, in which case after return of physical
possession; provided that if the Lease has been terminated pursuant to
Section 15 thereof, the indemnity provided in Section 9.01(a) hereof
shall survive for so long as Lessor or the Indenture Trustee shall be
exercising remedies under such Section 15), or to acts or events which
occur after return of possession of the Aircraft by the Lessee in
accordance with the provisions of the Lease (subject to the foregoing
proviso if the Lessor has terminated the Lease pursuant to Section 15
of the Lease);
(iii) is a Tax or loss of a Tax benefit, whether or not the
Lessee is required to indemnify therefor pursuant to Article 8 hereof
or pursuant to the Tax Indemnity Agreement;
(iv) is a cost or expense required to be paid by an Indemnitee
or its permitted transferees (and not by the Lessee) pursuant to this
Agreement or any other Operative Agreement and for which the Lessee is
not otherwise obligated to reimburse such Indemnitee, directly or
indirectly pursuant to the terms of this Agreement or such other
Operative Agreement;
(v) results from the incorrectness or breach by any Indemnitee
of its representations or warranties, under any of the Operative
Agreements;
(vi) results from the failure by any Indemnitee to perform its
obligations under any of the Operative Agreements;
(vii) is, in the case of the Owner Participant, Lessor's Liens
to the extent attributable to the Owner Participant; in the case of the
Owner Trustee, Lessor's Liens to the extent attributable to the Owner
Trustee; in the case of SSB, Lessor's Liens to the extent attributable
to SSB; and in the case of the Indenture Trustee, Indenture Trustee's
Liens;
(viii) is, in the case of the Owner Participant or the Owner
Trustee, attributable to the offer or sale by such Indemnitee after the
Certificate Closing Date of any interest in the Aircraft, the Lessor's
Estate or the Trust Agreement or any similar interest (including an
offer or sale resulting from bankruptcy or other proceedings for the
relief of debtors in which such Indemnitee is the debtor), unless in
each case such offer or sale shall occur (x) pursuant to the exercise
of remedies under Section 15 of the Lease or (y) in connection with the
Lessee's exercise of its early termination option under Section 3(g) of
the Lease or its purchase options under Section 16 of the Lease or in
connection with Section 11 of the Lease;
(ix) is an Expense arising under or in connection with any
prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975(c)(1) of the Code ("Prohibited Transaction");
(x) results from any amendment to any of the Operative
Agreements which is not requested by the Lessee and is not required
pursuant to the terms of any of the Operative Agreements;
(xi) results from the exercise by any Indemnitee of any right
to inspect the Aircraft except with respect to any such inspection
conducted while an Event of Default is continuing; and
(xii) constitutes the loss of future profits or losses
attributable to the Owner Participant's and/or the Owner Trustee's
overhead.
Section 9.02. After-Tax Basis. The amount which the Lessee shall be
required to pay with respect to any Expense indemnified against under Section
9.01 shall be an amount sufficient to restore the Indemnitee, on an After-Tax
Basis, to the same position such party would have been in had such Expense not
been incurred. If any Indemnitee realizes a Tax benefit (whether by credit,
deduction or otherwise), or would have realized such a benefit if properly
claimed, by reason of the payment of such Expense paid or indemnified against by
the Lessee which was not considered in the computation thereof, such Indemnitee
shall promptly pay to the Lessee, but not before the Lessee shall have made all
payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity
Agreement and any other Operative Agreement, an amount equal to the lesser of
(x) the sum of such Tax benefit plus any other permanent Tax benefit realized by
such Indemnitee as the result of any payment made by such Indemnitee pursuant to
this sentence and (y) the amount of the payment pursuant to Section 9.01 by the
Lessee to such Indemnitee plus the amount of any other payments by the Lessee to
such Indemnitee theretofore made pursuant to this Section 9.02 less the amount
of any payments by such Indemnitee to the Lessee theretofore made pursuant to
this Section 9.02 (and the excess, if any, of the Tax benefit over the
applicable amount described in clause (x) or clause (y) above shall be carried
forward and applied to reduce pro tanto any subsequent obligations of the Lessee
to make payments to such Indemnitee pursuant to this Section 9.02), it being
intended that no Indemnitee should realize a net Tax benefit pursuant to this
Section 9.02 unless the Lessee shall first have been made whole for any payments
by it to such Indemnitee pursuant to this Section 9.02; provided, however, that
notwithstanding the foregoing portions of this sentence, such Indemnitee shall
not be obligated to make any payment to the Lessee pursuant to this sentence so
long as a Specified Default exists. Any Taxes that are imposed on any Indemnitee
as a result of the disallowance or reduction of such Tax benefit referred to in
the next preceding sentence in a taxable year subsequent to the year of
allowance and utilization by such Indemnitee (including the expiration of any
tax credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be indemnifiable pursuant to the provisions of Section 8.01
hereof without regard to Section 8.01 (b) hereof.
Section 9.03. Subrogation. Upon the payment in full of any indemnity
pursuant to this Article 9 by the Lessee (but not earlier), the Lessee shall be
subrogated to any right of the Indemnitee in respect of the matter against which
such indemnity has been made.
Section 9.04. Notice and Payment. Each Indemnitee and the Lessee shall
give prompt written notice one to the other of any liability of which such party
has received notice for which the Lessee is, or may be, liable under this
Article 9; provided, however, that failure to give such notice shall not
terminate any of the rights of the Indemnitees under this Article 9, except
(with respect to such Indemnitee) to the extent that such failure adversely
affects any applicable defense or counterclaim, or otherwise increases the
amount the Lessee would have been liable for in the absence of such failure to
provide such notice. Unless otherwise provided in the Operative Agreements, any
amount payable to an Indemnitee pursuant to this Article 9 shall be paid within
30 days after receipt of a written demand therefor from such Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable.
Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all
or any part of any amount which the Lessee shall have paid to such Indemnitee or
for which the Lessee shall have reimbursed such Indemnitee under this Article 9,
and provided that no Specified Default exists (but if a Specified Default does
exist, payment shall not be made to the Lessee until no Specified Default
exists), such Indemnitee shall pay to the Lessee the amount of any such
recovery, including interest received with respect to the recovery, net of any
Taxes paid or payable as a result of the receipt of the recovery and interest,
plus any net additional tax benefits realized by the Indemnitee as the result of
any payment made pursuant to this sentence less reasonable costs incurred by
such Indemnitee and not indemnified by the Lessee; provided, however, that such
amount shall not be payable (a) before such time as the Lessee shall have made
all payments or indemnities then due and payable to such Indemnitee under this
Article 9, or (b) to the extent that the amount of such payment would exceed the
amount of all prior payments by the Lessee to such Indemnitee pursuant to this
Article 9, less the amount of all prior payments by such Indemnitee to the
Lessee pursuant to this Article 9. Any subsequent loss of such recovery or tax
benefit shall be subject to indemnification under Article 8 or this Article 9,
as the case may be, subject to Section 8.01 (b) hereof.
Section 9.06. Defense of Claims. The Lessee or its insurers shall have
the right (in each such case at the Lessee's sole expense) to investigate,
defend (and control the defense of) any such claim covered by insurance for
which indemnification is sought pursuant to this Article 9 (in the case of any
such defense by the Lessee, but not the Lessee's insurers, with counsel
reasonably satisfactory to the relevant Indemnitee) and each Indemnitee shall
cooperate with the Lessee or its insurers with respect thereto, provided, that,
without limiting the right of the Lessee's insurers to assume and control the
defense of, or to compromise, any such claim, the Lessee shall not be entitled
to assume and control the defense of or compromise any such claim (A) during the
continuance of any Event of Default arising under Section 14(a) of the Lease,
(B) if such Indemnitee reasonably objects to such control on the ground that an
actual or potential material conflict of interest exists making it advisable (on
the basis of prevailing standards of professional responsibility) for such
Indemnitee to be represented by separate counsel or on the grounds that such
proceeding involves the potential imposition of criminal liability on such
Indemnitee or (C) such proceeding will involve any material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than Permitted Liens)
on the Aircraft or the Trust Estate (unless the Lessee posts a bond or other
security reasonably acceptable in form and substance to such Indemnitee) or
involve any material risk of civil liability to such Indemnitee for which it is
not indemnified hereunder and, in any such case, the relevant Indemnitee will,
in good faith, undertake the defense of such claim at the expense of the Lessee.
Subject to the immediately foregoing sentence, where the Lessee or the insurers
under a policy of insurance maintained by the Lessee undertake the defense of an
Indemnitee with respect to such a claim, no additional legal fees or expenses of
such Indemnitee in connection with the defense of such claim shall be
indemnified hereunder unless the fees or expenses were incurred at the written
request of the Lessee or such insurers or as the result of the prohibition of
the dual representation of Lessee and the relevant Indemnitee under the
applicable rules of legal ethics. Subject to the requirement of any policy of
insurance applicable to a claim, an Indemnitee may participate at its own
expense at any judicial proceeding controlled by the Lessee or its insurers
pursuant to the preceding provisions, to the extent that such party's
participation does not, in the opinion of the independent counsel appointed by
the Lessee or its insurers to conduct such proceedings, interfere with such
control; and such participation shall not constitute a waiver of the
indemnification provided in this Section 9.06. No Indemnitee shall enter into
any settlement or other compromise with respect to any claim described in this
Section 9.06 without the prior written consent of the Lessee (except during the
continuance of an Event of Default arising under Section 14(a) of the Lease),
which consent shall not be unreasonably withheld or delayed, unless such
Indemnitee waives its right to be indemnified under this Article 9 with respect
to such claim. The Lessee shall not enter into any settlement or compromise
which the Lessee has not agreed to discharge or with respect to which the Lessee
has not agreed to indemnify such Indemnitee to such Indemnitee's satisfaction or
which admits any criminal violation, gross negligence or willful misconduct on
the part of any Indemnitee without the prior written consent of such Indemnitee.
Section 9.07. Survival of Obligations. The representations, warranties,
indemnities and agreements of the Lessee provided for in this Article 9 and the
Lessee's obligations under any and all of them shall survive the expiration or
other termination of this Agreement, the Tax Indemnity Agreement, the Trust
Agreement, the Indenture, the Purchase Agreement Assignment, the Lease and the
other Operative Agreements but, as to such indemnities after the expiration or
other termination of the Lease, only with respect to losses, liabilities,
obligations, damages, penalties, claims, actions, suits, costs, Expenses and
disbursements caused by events occurring or existing prior to such termination
or expiration or incurred in the process of (i) the return or disposition of the
Aircraft under Section 5 or Section 15 of the Lease, or (ii) the termination of
the Lease or the Indenture or, if later, the return of the Aircraft.
Section 9.08. Effect of Other Indemnities. The Lessee's obligations
under the indemnities provided for in this Agreement shall be those of a primary
obligor whether or not the Person indemnified shall also be indemnified with
respect to the same matter under the terms of this Agreement, the Lease, the
Indenture, the Trust Agreement, or any other document or instrument, and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement may proceed directly against the Lessee without first seeking to
enforce any other right of indemnification.
Section 9.09. Interest. The Lessee will pay to each Indemnitee on
demand, to the extent permitted by applicable law, interest on any amount of
indemnity not paid when due pursuant to this Article 9 until the same shall be
paid, at the Past Due Rate.
Section 9.10. Special Indemnity. Notwithstanding anything in this
Article 9 to the contrary, the Lessee shall hold the Owner Participant harmless
on an After-Tax Basis from any losses arising from or in connection with the
transactions contemplated by Section 17.02 hereof.
ARTICLE 10
TRANSACTION COSTS
Section 10.01. Transaction Costs and Other Costs. (a) Transaction
Costs. Except as otherwise provided in any amendment to this Agreement, the
Lessee (or the Owner Participant following a transfer of the Initial Owner
Participant's Beneficial Interest) shall pay (or reimburse the Lessee if the
Lessee shall have previously made such payment) all fees and expenses of the
following persons relating to the offering of the Pass-Through Certificates
contemplated by the Placement Agreement and related to the transactions
contemplated hereby on the Certificate Closing Date and the Delivery Date: (i)
the fees and expenses of counsel for any Owner Participant (including any
special Canadian counsel); (ii) the fees and expenses of the transaction
documentation counsel for the Lessee and counsel for the Owner Trustee, the
Indenture Trustee, the Manufacturer, SDIQ, the Seller, the Subordination Agent,
the Pass-Through Trustee, each Liquidity Provider and the Placement Agent (other
than those fees, expenses and disbursements payable by the Placement Agent
pursuant to the Placement Agreement); (iii) the fees and expenses of Special
Aviation Counsel; (iv) any initial fees and expenses of the Pass-Through Trustee
and each Liquidity Provider and the fees and expenses of the Owner Trustee, the
Subordination Agent and the Indenture Trustee; (v) any compensation, commissions
and discounts payable to the Placement Agent pursuant to the Placement
Agreement; (vi) the fees, if any, incurred in printing the Pass-Through
Certificates; (vii) the fees and expenses incurred in connection with printing
any offering memorandum for the offering of the Pass-Through Certificates;
(viii) the fees and expenses of BDO Seidman LLP; (ix) the fees and expenses of
Moody's and S&P; (x) the fees and expenses (including computer time-sharing
charges) of Babcock & Brown, Inc.; (xi) the reasonable out-of-pocket expenses of
the Owner Participant, including, without limitation, any amounts paid in
connection with any appraisal report prepared for the Owner Participant; (xii)
reimbursement to the Owner Participant, any Owner Participant Guarantor, the
Owner Trustee, the Indenture Trustee, the Subordination Agent, each Liquidity
Provider and the Pass-Through Trustee for any and all fees, expenses and
disbursements of the character referred to above or otherwise incurred in
connection with the negotiation, preparation, execution and delivery, filing and
recording of the Operative Agreements and the documents contemplated thereby,
including, without limitation, travel expenses and disbursements which shall
have been paid by such party; (xiii) printing and duplicating expenses and all
fees, Taxes and other charges payable in connection with the recording or filing
on or before the Delivery Date of the instruments described in this Agreement;
(xiv) initial fees, initial expenses, initial disbursements and the initial
costs of distributing the Certificates (but not the continuing fees, expenses,
disbursements and costs of distribution) of SSB, as lessor under the Lease and
as Owner Trustee under the Trust Agreement and with respect to the
administration of the Lease and the Lessor's Estate, of the Indenture Trustee as
trustee under the Indenture with respect to the administration of the Trust
Indenture Estate and of the Subordination Agent acting under the Intercreditor
Agreement; and (xv) any other amounts approved by the Lessee and the Owner
Participant. The fees and expenses described in clauses (ii) through (x) of this
paragraph shall be allocable to the Owner Participant under this Agreement (1)
to the extent incurred specifically with respect to the Owner Participant, and
(2) to the extent such fees and expenses are incurred but are not specifically
attributable to the Owner Participant, in the proportion that the principal
amount of the Certificates bears to the total amount of the Pass-Through
Certificates.
The Owner Participant, the Owner Trustee and the Lessee acknowledge
that the indicative percentages for Basic Rent, Stipulated Loss Value and
Termination Value and the indicative EBO Price to be set forth in the Lease have
been prepared assuming the aggregate amount payable by the Owner Participant
pursuant to the preceding paragraph is 2.9% of the Purchase Price (the
"Estimated Expense Amount").
(b) Continuing Expenses. The continuing fees, expenses and
disbursements (including reasonable counsel fees and expenses) of the entity
acting as Owner Trustee, as lessor under the Lease and as Owner Trustee under
the Trust Agreement with respect to the administration of the Lease and the
Lessor's Estate and the continuing fees, expenses and disbursements (including
reasonable counsel fees and expenses and initial fees relating to the
establishment of any replacement trustee) of the Indenture Trustee, as trustee
under the Indenture with respect to the administration of the Trust Indenture
Estate, the continuing fees, expenses and disbursements (including reasonable
counsel fees and initial fees relating to the establishment of a replacement
trustee) of the Pass-Through Trustee and the Subordination Agent and the
continuing fees, expenses and disbursements (including reasonable counsel fees
and initial fees relating to the establishment of a replacement liquidity
provider) of the Liquidity Providers under each Liquidity Facility shall be paid
as Supplemental Rent by the Lessee, including without limitation any amounts
payable to the Indenture Trustee or on account of requests by the Indenture
Trustee for indemnification under Article XI of the Indenture.
(c) Amendments, Supplements and Appraisal. Without limitation of the
foregoing, the Lessee agrees:
(i) to pay as Supplemental Rent to the Owner Trustee, the
Owner Participant, any Owner Participant Guarantor, the Indenture
Trustee, the Subordination Agent, the Liquidity Providers and the
Pass-Through Trustee all costs and expenses (including reasonable legal
fees and expenses) incurred by any of them in connection with (a) any
Default and any enforcement or collection proceedings resulting
therefrom, or (b) the enforcement of the obligations of the Lessee
hereunder or under the other Operative Agreements, including, without
limitation, the entering into or giving or withholding of any
amendments or supplements or waivers or consents (whether or not
consummated), including without limitation, any amendment, supplement,
waiver or consent resulting from any work-out, restructuring or similar
proceeding relating to the performance or nonperformance by the Lessee
of its obligations under the Operative Agreements or (c) any amendment,
supplement, waiver or consent (whether or not entered into) under this
Agreement, the Lease, the Indenture, the Certificates, the Tax
Indemnity Agreement, the Purchase Agreement Assignment or any other
Operative Agreement or document or instrument delivered pursuant to any
of them, which amendment, supplement, waiver or consent is required by
any provision of any Operative Agreement (including any adjustment
pursuant to Section 3(d) of the Lease) or is requested by the Lessee or
necessitated by the action or inaction of the Lessee; provided,
however, that the Lessee shall not be responsible for fees or expenses
incurred in connection with the offer, sale or other transfer (whether
pursuant to Section 7.03(d) hereof or otherwise) by the Owner
Participant, the Owner Trustee, the Indemnitee Trustee, or any Holder
after the Certificate Closing Date of any interest in the Aircraft, the
Lessor's Estate, the Beneficial Interest or the Trust Agreement or any
similar interest (and the offeror, seller, or transferor shall be
responsible for all such fees and expenses), unless such offer, sale or
transfer shall occur (A) pursuant to the exercise of remedies under
Section 15 of the Lease, or (B) in connection with the termination of
the Lease or action or direction of the Lessee pursuant to Section
3(g), 11, or 16 of the Lease; and
(ii) to pay one-half of the fees, costs and expenses of all
appraisers involved in an independent appraisal of the Aircraft to the
extent required under Section 16 of the Lease; provided that the Lessee
shall pay all such fees, costs, and expenses of any appraisal conducted
pursuant to Section 15 of the Lease.
ARTICLE 11
SUCCESSOR OWNER TRUSTEE
Section 11.01. Appointment of Successor Owner Trustee. (a) Resignation
and Removal. The Owner Trustee or any successor Owner Trustee may resign or may
be removed by the applicable Owner Participant, and a successor Owner Trustee
may be appointed and a Person may become Owner Trustee under the Trust Agreement
only in accordance with the provisions of Section 3.11 of the Trust Agreement
and the provisions of paragraphs (b) and (c) of this Section 11.01.
(b) Conditions to Appointment. The appointment in any manner of a
successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be
subject to the following conditions:
(i) such successor Owner Trustee shall be a Citizen of the United States;
(ii) such successor Owner Trustee shall be a bank or a trust
company having combined capital, surplus and undivided profits of at
least $100,000,000 or a bank or trust company fully guaranteed by a
direct or indirect parent thereof having a combined capital, surplus
and undivided profits of at least $100,000,000;
(iii) such appointment shall not violate any provisions of the
Transportation Code or any applicable rule or regulation of the
applicable regulatory agency or body of any other jurisdiction in which
the Aircraft may then be registered or create a relationship which
would be in violation of the Transportation Code or any applicable rule
or regulation of the applicable regulatory agency or body of any other
jurisdiction in which the Aircraft may then be registered;
(iv) such successor Owner Trustee shall enter into an
agreement or agreements, in form and substance reasonably satisfactory
to the Lessee, the Owner Participant, the Pass-Through Trustee and the
Indenture Trustee whereby such successor Owner Trustee confirms that it
shall be deemed a party to this Agreement, the Trust Agreement, the
Lease, the Lease Supplement, the Purchase Agreement Assignment, [the
Engine Warranty Assignment], the Indenture, the Indenture Supplement
and any other Operative Agreement to which the Owner Trustee is a party
and agrees to be bound by all the terms of such documents applicable to
the Owner Trustee and makes the representations and warranties
contained in Section 7.04 hereof (except that it may be duly
incorporated, validly existing and in good standing under the laws of
the United States of America or any State thereof); and
(v) all filings of Uniform Commercial Code financing and
continuation statements, filings in accordance with the Transportation
Code and amendments thereto shall be made and all further actions taken
in connection with such appointment as may be necessary in connection
with maintaining the validity, perfection and priority of the Lien of
the Indenture and the valid and continued registration of the Aircraft
in accordance with the Transportation Code.
(c) Appointment. For so long as the Aircraft remains registered under
the Transportation Code, the Owner Participant agrees to appoint promptly a
successor Owner Trustee meeting the requirements of Section 11.01 (b) hereof in
the event the Owner Participant has knowledge that the Owner Trustee at any time
shall not be a Citizen of the United States.
ARTICLE 12
LIABILITIES AND INTERESTS OF THE
OWNER PARTICIPANT AND HOLDERS
Section 12.01. Liabilities of the Owner Participant. No Owner
Participant shall have any obligation or duty to the Lessee or to any Holder
with respect to the transactions contemplated by this Agreement, except those
obligations or duties expressly set forth in this Agreement, the Indenture, the
Trust Agreement, the Tax Indemnity Agreement, the Lease or any other Operative
Agreement to which the Owner Participant is a party and no Owner Participant
shall be liable for the performance by any other party hereto of such other
party's obligations or duties hereunder. Under no circumstances shall the Owner
Participant as such be liable to the Lessee, nor shall the Owner Participant be
liable to any Holder, in each case for any action or inaction on the part of the
Owner Trustee or the Indenture Trustee in connection with this Agreement, the
Indenture, the Lease, the Trust Agreement, the Purchase Agreement Assignment,
any other Operative Agreement, the ownership of the Aircraft, the administration
of the Lessor's Estate or the Trust Indenture Estate or otherwise, whether or
not such action or inaction is caused by the willful misconduct or gross
negligence of the Owner Trustee or the Indenture Trustee, except to the extent
of any action or inaction taken pursuant to the Owner Participant's directions
or instructions.
Section 12.02. Interest of Holders of Certificates. A Holder of a
Certificate shall have no further interest in, or other right with respect to,
the Trust Indenture Estate when and if the principal and interest on all
Certificates held by such Holder and all other sums payable to such Holder under
this Agreement, under the Indenture and under such Certificates shall have been
paid in full.
ARTICLE 13
OTHER DOCUMENTS
Section 13.01. Consent of Lessee to Other Documents. The Lessee hereby
consents in all respects to the execution and delivery of the Indenture, the
Trust Agreement, the Intercreditor Agreement and the Liquidity Facilities as
initially executed and to all of the terms of such documents, and the Lessee
acknowledges receipt of an executed counterpart of such documents; it being
agreed that such consent shall not be construed to require the Lessee's consent
to any future supplement to, or amendment, waiver or modification of the terms
of the Indenture, the Intercreditor Agreement or the Liquidity Facilities, the
Trust Agreement or the Certificates, in each case as originally executed, except
that prior to the occurrence and continuance of an Event of Default, no section
of the Indenture, the Trust Agreement, the Intercreditor Agreement or the
Liquidity Facilities, in each case as originally executed, shall be amended or
modified in any manner materially adverse to the Lessee without its consent.
Section 13.02. Further Assurances. The Lessee hereby confirms to the
Owner Participant its covenants set forth in and obligations under the Lease.
The Lessee agrees that, except as otherwise provided in the Indenture, the Owner
Trustee may not enter into any amendment, modification or supplement of, or give
any waiver or consent with respect to, or approve any matter or document as
being satisfactory under the Lease without the prior consent of the Indenture
Trustee and the Owner Participant and that, except as otherwise provided in the
Indenture, upon an Indenture Event of Default, the Indenture Trustee may act as
the Lessor under the Lease to the exclusion of the Owner Trustee. The Lessee
further agrees to deliver to the Indenture Trustee and the Owner Participant a
copy of each notice, statement, request, report or other communication given or
required to be given to the Owner Trustee under the Lease.
Section 13.03. Pass-Through Trustee's and Subordination Agent's
Acknowledgment. The Pass-Through Trustee and the Subordination Agent hereby
acknowledge and agree to be bound by all of the terms and conditions of the
Indenture, including without limitation, Section 8.01 thereof regarding the
rights of the Owner Participant to purchase the Certificates under the
circumstances specified therein.
ARTICLE 14
NOTICES
Section 14.01. Notices. All notices, demands, declarations and other
communications required by this Agreement shall be in writing and shall be
deemed received (a) if given by telecopier, when transmitted and the appropriate
telephonic confirmation received if transmitted on a Business Day and during
normal business hours of the recipient, and otherwise on the next Business Day
following transmission, or (b) if given by certified mail, return receipt
requested, by courier service, or by any other commercially customary means,
when received or personally delivered, addressed:
(a) if to the Lessee, to its office at 515A Shaw Road, Dulles,
Virginia 20166, Attention: General Counsel, telephone (703) 925-6000,
facsimile (703) 925-6294; or to such other address as the Lessee shall
from time to time designate in writing to the Lessor, the Indenture
Trustee and any Owner Participant;
(b) if to the Lessor or the Owner Trustee, to its office at
225 Asylum Street (Goodwin Square), Hartford, CT 06103, Attention:
Corporate Trust Department, telephone (860) 244-1822 facsimile (860)
244-1889; or to such other address as the Lessor shall from time to
time designate in writing to the Lessee and the Indenture Trustee, with
a copy to the Owner Participant;
(c) if to the Indenture Trustee, the Subordination Agent or
the Pass-Through Trustee, to its office at 25 South Charles Street,
Baltimore, MD 21201, Attention: Corporate Trust Department, telephone
(410) 244-4626, facsimile (410) 244-4236; or to such other address as
the Indenture Trustee or the Pass-Through Trustee, as the case may be,
shall from time to time designate in writing to the Lessor, the Lessee
and the Owner Participant; and
(d) if to the Liquidity Provider, to its office at ING Bank
N.V., Department of Bankgarantie Zaken-Jurisdische Zaken, Amsterdamse
Poort, Bijlmer plein 888, 1102 MG Amsterdam, The Netherlands, telephone
011-31-20-652-3260, facsimile 011-31-20-652-3235, with a copy to ING
Lease (Ireland) B.V. 48 St. Stephen's Green, Dublin 2, Ireland,
telephone 011-353-1-662-2211, facsimile 011-353-1-662-2240; or to such
other address as a Liquidity Provider shall from time to time designate
in writing to the Lessor, the Lessee and the Indenture Trustee.
ARTICLE 15
REFINANCING/REOPTIMIZATION
Section 15.01. Refinancing. (a) Subject to the terms and conditions of
this Section 15.01, the Lessee may request an Owner Participant to participate
in one refinancing in whole but not in part, of the Certificates prior to the
end of the Basic Term (a "Refinancing"). Such Refinancing may be placed in
either the private or public markets and shall be denominated in United States
dollars and shall be on terms reasonably satisfactory to the Owner Participant.
The Owner Participant will agree to negotiate promptly in good faith to conclude
an agreement with the Lessee as to the terms of any such Refinancing transaction
(including the terms of any debt to be issued in connection with such
refinancing and the documentation to be executed in connection therewith).
Without the prior written consent of the Owner Participant, the prospectus and
other offering materials relating to any Refinancing in the form of a public
offering shall not identify the Owner Participant and shall not include any
financial statements of the Owner Participant or any Affiliate thereof. In
connection with any such Refinancing in the form of a public offering, the
Lessee shall indemnify the Owner Participant in a manner satisfactory to it for
any liabilities under federal, state or foreign securities laws resulting from
such offering. The aggregate principal amount of the new Certificates issued in
connection with any Refinancing shall be the same as the aggregate principal
amount outstanding on the Certificates being refinanced.
(b) Notwithstanding anything herein to the contrary, no Refinancing
will be permitted unless the Owner Participant and the Indenture Trustee shall
have received at least 15 days' prior written notice of the scheduled closing
date of such Refinancing and the Owner Participant shall have been provided such
longer period as it shall have required for a reasonable opportunity to review
the relevant documentation and the Owner Participant shall have determined in
good faith that neither it nor the Owner Trustee shall suffer any loss or
expense or bear any increased risk as a result of such Refinancing (including,
without limitation, any risk with respect to taxes or other adverse consequences
to the Owner Participant including the application of Revenue Procedures 75-21
and 75-28 and Section 467 of the Code) for which it has not been or will not
have been indemnified by the Lessee in a manner reasonably satisfactory to the
Owner Participant and, if an additional indemnity is then provided by the Lessee
as the result of such Refinancing and the Owner Participant or the Indenture
Trustee reasonably deems itself insecure with respect to such indemnity, the
Lessee shall have provided security or collateral for such indemnity which is
reasonably satisfactory to such Person nor would such transaction materially and
adversely affect the rights and obligations of Owner Participant.
Prior to the consummation of any Refinancing pursuant to this Section
15.01, the Owner Participant and the Lessee shall agree upon a schedule setting
forth each installment of Basic Rent and setting forth Stipulated Loss Values
and Termination Values payable pursuant to the Lease as a result of the
Refinancing in accordance with Section 3(d) of the Lease, and thereafter the
amounts set forth in such schedule shall become the amounts payable under the
Lease. Upon the consummation of the Refinancing, the evidence of indebtedness
issued pursuant to the Refinancing shall be considered "Certificates" for
purposes of this Agreement, the Lease and the Indenture.
(c) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any Refinancing transaction as contemplated by this
Section 15.01 unless the Lessee indemnifies the Owner Trustee and the Owner
Participant by agreement in form and substance satisfactory to each of them, for
any liability, obligation (other than the obligation to pay principal and
interest in respect of the refinanced indebtedness), cost or expense (including,
without limitation, reasonable attorneys' fees and Make-Whole Premium or other
amounts due under the Indenture), including any adverse tax consequences or
impact, related to or arising out of any such Refinancing transaction and, if
the Owner Participant reasonably deems itself insecure with respect to such
indemnity, the Lessee shall have provided security or collateral for such
indemnity which is reasonably satisfactory to the Owner Participant.
(d) Without the prior written consent of the Owner Participant, which
consent may be withheld in its sole discretion, no such refinancing shall (1)
cause the aggregate principal amount of the indebtedness to be substituted for
the Certificates to exceed the aggregate principal amount of the then
outstanding Certificates, (2) cause the weighted average life of such
indebtedness to be different by more than three months than the remaining
weighted average life of the then outstanding Certificates, or (3) cause the
date of maturity of such indebtedness to be later than the date of maturity of
the Certificates being refinanced.
(e) Each party agrees to take or cause to be taken all requested
action, including, without limitation, the execution and delivery of any
documents and instruments, including, without limitation, amendments or
supplements to the Lease, which may be reasonably necessary or desirable to
effect such Refinancing, including, in the case of the Owner Participant,
direction to the Owner Trustee by the Owner Participant to prepay the
Certificates then outstanding; provided, however, that such Refinancing shall be
subject to the satisfaction of each of the following conditions:
(i) Payment of principal, accrued interest, Make-Whole Premium
and breakage costs, if any, and all other sums due and owing on the
Certificates payable under the Indenture;
(ii) Payment in full of all other amounts then due and owing
by the Lessee under this Agreement, the Indenture, the Lease, the Trust
Agreement, and the Certificates then outstanding shall have been made
by the Lessee;
(iii) Such party shall have received such opinions of counsel
(including, without limitation, an opinion received by the Owner
Participant from independent tax counsel reasonably satisfactory to the
Lessee that such Refinancing shall not result in any adverse tax
consequences to such Owner Participant, unless the Lessee shall have
agreed to provide an indemnity in respect thereof reasonably
satisfactory in form and substance to the Owner Participant),
certificates and other documents as it may reasonably request, each in
form and substance reasonably satisfactory to such party;
(iv) All authorizations, approvals and consents which in the
reasonable judgment of the Owner Participant are necessary for such
Refinancing shall have been obtained;
(v) The Lessee shall have provided or agreed to provide to the
Owner Participant, as Supplemental Rent under the Lease, sufficient
funds to pay any breakage costs, Make-Whole Premium and any other
amounts due under the Indenture;
(vi) The satisfaction or waiver by each other party to this
Agreement of the conditions set forth in this Section 15.01 to such
party's obligations under this Section 15.01;
(vii) No Specified Default shall exist or would occur
immediately after giving effect to such Refinancing;
(viii) In the event the Lessee shall not prohibit the purchase
of the Refinancing loan certificates by, or with the assets of, an
employee benefit plan, as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA or a plan or individual retirement account,
which is subject to Section 4975(c) of the Code, (individually or
collectively, an "ERISA Plan"), the Lessee will permit the placement of
the Refinancing loan certificates with an ERISA Plan only if either (A)
if such placement is in the form of pass-through certificates, the sole
underwriter or the manager or co-manager of the underwriting syndicate
or the selling or placement agent of such pass-through certificates
represents to the Lessee that it has a prohibited transaction exemption
from the U.S. Department of Labor with respect to Pass-Through
certificates (such as Prohibited Transaction Exemption 89-88 or any
other comparable exemption) or (B) purchasers of the Refinancing loan
certificates (or if the Refinancing involves the issuance and sale of
pass-through certificates, purchasers of such pass-through
certificates) provide a representation (which may be in the form of a
deemed representation) regarding their source of funds used in
acquiring the Refinancing loan certificates (or such pass-through
certificates, as the case may be) and, if such purchasers represent
that they are using funds of an ERISA Plan in acquiring the Refinancing
loan certificates (or such pass-through certificates, as the case may
be), such purchasers further represent that (1) either they are relying
on a prohibited transaction exemption from the U.S. Department of Labor
with respect to their purchase and holding of the Refinancing loan
certificates (or such pass-through certificates, as the case may be)
and they provide representations regarding the satisfaction of the
relevant conditions of such an exemption or (2) their purchase and
holding of the Refinancing loan certificates (or such pass-through
certificates, as the case may be) will not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code. The reliance on any such exemption will not be conditional on
the Owner Participant's representation concerning its party in interest
or other status with respect to ERISA Plans; and
(ix) The Lessee shall pay all costs and expenses (including
legal fees) incurred in connection with any proposed or actually
consummated Refinancing.
. (a) Upon the Lessee's request, at the Lessee's expense, and subject to the
conditions in Section 15.02(c), the Owner Trustee, any Owner Participant, the
Lessee and the Indenture Trustee will cooperate with each other to reoptimize
(but not more than twice) the unpaid principal of the outstanding Certificates
and the amortization schedule therefor in connection with any adjustments to
Basic Rent, EBO Price, EBO Date, Stipulated Loss Values, and Termination Values
pursuant to ss. 3(d) of the Lease as a result of a Refinancing of the
Certificates in accordance with Section 15.01 hereof, provided that, in any such
reoptimization, (1) the outstanding principal amount of the Certificates shall
not be increased, (2) the final maturity of the Certificates shall not be
extended, (3) the average life to maturity of the Certificates shall not vary
from the average life to maturity of the initial Certificates by more than three
months, (4) any installment of principal of the Certificates will not vary by
more than 5% from such installment in the initial Loan Certificate, (5) there
shall be no change in the Debt Portion, (6) the adjusted Stipulated Loss Values
and Termination Values shall not exceed the original Stipulated Loss Values and
Termination Values under the Lease (as adjusted in accordance with clauses (1)
and (2) of ss. 3(d) of the Lease), and (7) any change to the EBO Price or EBO
Date must be supported by an appraisal reasonably satisfactory to the Owner
Participant. As promptly as practicable following such request, the Owner
Participant shall deliver to the Lessee, the Owner Trustee, and the Indenture
Trustee, a certificate of an authorized representative of the Owner Participant
(the "Reoptimization Certificate") setting forth (x) the amortization schedules
which, taking into account the requirements of ss. 3(d) and (e) of the Lease,
would result in the lowest Net Present Value of Rents, and the lowest net
present value (to the Lessee) of Basic Rent over the Basic Term, discounted
semi-annually at the Debt Rate, and (y) the corresponding changes in Basic Rent,
EBO Price, EBO Date, Stipulated Loss Values, and Termination Values, computed in
a manner consistent with ss. 3(d) of the Lease. Upon the Lessee's acceptance of
the adjustments set forth in the Reoptimization Certificate, or the
redetermination thereof pursuant to the verification procedures in ss. 3(d) of
the Lease, and subject to compliance in full with the conditions set forth in
Section 15.02(c), the Owner Participant shall (aa) deliver a copy of the
Reoptimization Certificate to the Owner Trustee, and the Indenture Trustee, and
(bb) cause the Owner Trustee (xx) to execute and deliver amendments to the Lease
and Indenture setting forth the adjustments (the date of such amendment, being
the "Reoptimization Date"), and (yy) to issue or exchange new Certificates
containing the revised amortization thereof for the outstanding Certificates.
The Lessee shall give to the Owner Participant at least 30 days' prior written
notice of the Lessee's intent to effect a reoptimization hereunder. Such notice
shall be revocable, and need not specify any particular date as of which such
reoptimization shall be effected.
(b) Adjustments to Refinancing Certificates. On the Reoptimization
Date, subject to the satisfaction on or before the Reoptimization Date of the
conditions set forth in Section 15.02(c), the Owner Trustee will issue and
deliver and the Indenture Trustee will authenticate, and each holder of a
Refinancing Certificate will accept delivery of, a new Refinancing Certificate
or Refinancing Certificates (in replacement of each Refinancing Certificate then
held by such holder, which Refinancing Certificates shall be surrendered to the
Indenture Trustee for cancellation) containing such changed principal
installments (expressed as a percentage of the original principal amount of such
Refinancing Certificate) as shall have been recalculated by the Owner
Participant, but in the same principal amount as, and containing terms identical
to, except as otherwise contemplated by Section 15.02(d) hereof, the Refinancing
Certificates originally issued in connection with the Operative Agreements.
(c) Conditions. Any such reoptimization shall be subject to the
satisfaction of the following conditions:
(1) no Specified Default shall exist;
(2) appropriate agreements, amendments, or supplements, in
form and substance reasonably satisfactory to the Lessee, the Owner
Participant, the Owner Trustee, and the Indenture Trustee, shall be
executed and delivered;
(3) Basic Rent, EBO Price, EBO Date, Termination Values, and
Stipulated Loss Values shall, subject to ss. 3(e) of the Lease, be
adjusted in the manner set forth in ss. 3(d) of the Lease;
(4) all necessary authorization, approvals, consents, and
recordings (including any recordings or filings with the FAA) shall be
obtained or accomplished; and
(5) neither the Owner Participant nor the Owner Trustee nor
the Indenture Trustee shall suffer any loss or expense or adverse tax
or other consequences (including with respect to matters arising under
ERISA and any adverse tax consequences resulting from the application
of Revenue Procedure 75-21 or 75-28 or Code ss. 467) or bear any
increased risk (including, with respect to the Owner Participant and
the Owner Trustee, any material risk of a change in accounting
treatment of the Lease) as a result of such reoptimization for which
the Lessee has not agreed to indemnify in a manner reasonably
satisfactory to such Person, and, in connection with the foregoing,
(aa) the Owner Participant shall be entitled to receive an opinion
(reasonably satisfactory to the Owner Participant) of counsel (selected
by the Owner Participant and reasonably satisfactory to the Lessee) of
any adverse tax or other consequences resulting from such
reoptimization, and (bb) the Owner Participant shall be entitled to
receive an opinion of the accounting firm regularly used by the Owner
Participant of any material risk of a change in accounting treatment of
the Lease resulting from such reoptimization.
ARTICLE 16
CONFIDENTIALITY
Section 16.01. Confidentiality. Each party hereto agrees (on behalf of
itself and each of its Affiliates, agents, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature, the Operative Agreements other than the Lease, the Lease
Supplement, the Indenture, the Indenture Supplement, and FAA Bill of Sale (the
"Confidential Documents") and any non-public information supplied to it pursuant
to this Agreement which is identified by the Person supplying the same as being
confidential at the time the same is delivered to such party, provided that
nothing herein shall limit the disclosure of any such Confidential Document or
any such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the parties hereto, (iii) to bank
examiners or similar regulatory authorities, auditors or accountants, (iv) in
connection with any litigation to which any one or more of the parties hereto is
a party relating to the transactions contemplated hereby or by any of the
Operative Agreements, (v) to an Affiliate of the parties hereto, (vi) to any
assignee or participant (or prospective assignee or participant) or other
transferee so long as such assignee or participant (or prospective assignee or
participant) or other transferee first executes and delivers to the respective
party making such assignment or participation an agreement in writing to be
bound by the provisions of this Section 16.01 or (vii) in the case of the Owner
Participant or the Owner Trustee (in its individual or trust capacity) to the
Owner Trustee (in its individual or trust capacity) or to the Owner Participant,
as the case may be.
ARTICLE 17
MISCELLANEOUS
Section 17.01. Reserved.
Section 17.02. Collateral Account. (a) The Indenture Trustee shall
notify the Owner Trustee and the Lessee of any losses incurred on the Specified
Investments in the Collateral Account promptly upon the realization thereof, as
well as any fees, commissions and other costs, Taxes (other than income taxes)
and expenses, if any, incurred by the Indenture Trustee in connection with its
administration of the Collateral Account (collectively, "Losses"). Promptly upon
receipt of such notification but, in any event, no later than the earlier of the
Delivery Date (or, if later, the last day of any investment period referred to
in Section 2.14(b) of the Indenture during which the Delivery Date occurs) and
the 15th day after the Cut-Off Date, the Lessee shall pay to the Indenture
Trustee, on behalf of the Owner Trustee, for deposit into the Collateral
Account, an amount equal to such Losses (net of any investment earnings not
previously applied pursuant to this Section 17.02).
(b) The Lessee shall pay to the Indenture Trustee (or will provide for
payment thereof pursuant to a permitted drawing by the Indenture Trustee under
the Letter of Credit), on behalf of the Owner Trustee (A) on each Payment Date
prior to the Delivery Date an amount equal to the aggregate amount of interest
accrued on the Certificates from (and including) the Certificate Closing Date or
previous Payment Date, as the case may be, to, but excluding, such Payment Date
(net of any investment earnings in the Collateral Account not previously applied
pursuant to this Section 17.02) and (B) on the Delivery Date, interest accrued
on the Certificates from and including the last Payment Date (or, if none, the
Certificate Closing Date), to, but excluding, the Delivery Date (net of any
investment earnings in the Collateral Account not previously applied pursuant to
this Section 17.02) (and the Indenture Trustee shall provide the Lessee prior
written notice of any such amount due from the Lessee on any such Payment Date
or the Delivery Date). In addition, the Lessee will pay to the Indenture Trustee
on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to
clause (b) of the last paragraph of Section 2.04 of the Indenture.
(c) If the Aircraft has not been purchased by the Owner Trustee on or
before the Cut-Off Date and the Certificates have not been assumed by the Lessee
in accordance with Section 3.05(a) hereof, the Lessee agrees to pay to the
Indenture Trustee, on behalf of the Owner Trustee, on the 15th day following the
Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1)
of the Indenture over the amounts released from the Collateral Account under
Section 2.16 of the Indenture.
(d) All amounts payable by the Lessee pursuant to this Section 17.02
shall be paid to the Indenture Trustee at its principal office at 25 South
Charles Street, Baltimore, Maryland 21201, Attention: Corporate Trust
Department, or as the Indenture Trustee may otherwise direct within the United
States, by wire transfer of immediately available funds in U.S. Dollars no later
than 10:30 a.m., New York City time, on the due date of such payment.
Section 17.03. Counterparts. This Agreement may be executed by the
parties in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section 17.04. No Oral Modifications. Neither this Agreement nor any of
its terms may be terminated, amended, supplemented, waived or modified orally,
but only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver or modification is
sought. No such written termination, amendment, supplement, waiver or
modification shall be effective unless a signed copy shall have been delivered
to and executed by the Owner Trustee and the Indenture Trustee. A copy of each
such termination, amendment, supplement, waiver or modification shall also be
delivered to each other party to this Agreement.
The consent of each of the Pass-Through Trustee and the Subordination
Agent, in its capacity as a party to this Agreement and not as a Holder, shall
not be required to modify, amend or supplement this Agreement or to give any
consent, waiver, authorization or approval with respect to this Agreement under
the circumstances in which the consent of the Indenture Trustee would not be
required for such modification, amendment, supplement, consent, waiver or
approval in accordance with Section 8.01(b) of the Indenture, provided that the
Pass-Through Trustee shall be entitled to receive an Opinion of Counsel (as
defined in the Pass-Through Agreement) necessary, in its sole discretion, to
establish that the Indenture Trustee's consent would not be required under such
circumstances.
Section 17.05. Captions. The table of contents preceding this Agreement
and the headings of the various Articles and Sections of this Agreement are for
convenience of reference only and shall not modify, define, expand or limit any
of the terms or provisions of this Agreement.
Section 17.06. Successors and Assigns. The terms of this Agreement
shall be binding upon, and shall inure to the benefit of, the Lessee and its
successors and permitted assigns, the Subordination Agent and its successors and
permitted assigns, including without limitation each Holder of a Certificate,
the Owner Participant and its successors and permitted assigns, the Owner
Trustee and its successors as Owner Trustee (and any additional owner trustee
appointed) under the Trust Agreement, the Indenture Trustee and its successors
as Indenture Trustee (and any additional indenture trustee appointed) under the
Indenture and the Pass-Through Trustee and its successors as Pass-Through
Trustee (and any additional Pass-Through trustee appointed).
Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the
Pass-Through Trustee. Each of SSB and FNBM is entering into this Agreement
solely in its capacities (except to the extent otherwise expressly indicated),
in the case of SSB, not in its individual capacity but solely as Owner Trustee
under the Trust Agreement, in the case of FNBM, not in its individual capacity
but solely as Indenture Trustee under the Indenture and as Pass-Through Trustee
under the Pass-Through Agreement, and except as otherwise expressly provided in
this Agreement or in the Lease, the Indenture, the Pass-Through Agreement or the
Trust Agreement, neither SSB nor FNBM shall be personally liable for or on
account of its statements, representations, warranties, covenants or obligations
under this Agreement; provided, however, that each of SSB and FNBM accepts the
benefits running to it under this Agreement, and each agrees that (except as
otherwise expressly provided in this Agreement or any other Operative Agreement
to which it is a party) it shall be liable in its individual capacity for (a)
its own gross negligence or willful misconduct (whether in its capacity as
trustee or in its individual capacity), (b) any breach of representations and
warranties or any breach of covenants made in its individual capacity pursuant
to or in connection with this Agreement or the other Operative Agreements to
which it is a party, (c) any breach, in the case of the Owner Trustee, of its
covenants contained in Sections 3.05 and 3.08 of the Indenture, (d) the failure
to use ordinary care in receiving, handling and disbursing funds, (e) in the
case of the Owner Trustee, Lessor's Liens attributable to it in its individual
capacity, (f) in the case of the Indenture Trustee, Indenture Trustee's Liens,
and (g) taxes, fees or other charges on, or based on, or measured by, any fees,
commissions or compensation received by it in connection with the transactions
contemplated by the Operative Agreements.
Section 17.08. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 17.09. Public Release of Information. Subject to applicable
legal requirements (including, without limitation, securities laws requirements,
other regulatory requirements and other legally compelled disclosures), so long
as there shall not have occurred an Event of Default or Indenture Event of
Default, each party to this Agreement shall in each instance obtain the prior
written approval of each other party to this Agreement concerning the exact text
and timing of news releases, articles and other information releases to the
public media concerning any Operative Agreements [; provided that the Lessee
may, without the prior written approval of each other party hereto, make such
disclosures and announcements concerning its fleet constitution as are customary
in the airline industry so long as no such disclosure or announcement
specifically identifies any other party hereby by name without the prior written
consent of such party].
Section 17.10. Certain Limitations on Reorganization. The Indenture
Trustee and the Pass-Through Trustee agree that, if (i) the Owner Trustee
becomes or all or any part of the Lessor's Estate or the trust created by the
Trust Agreement becomes the property of, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any other applicable bankruptcy or
insolvency statutes, (ii) pursuant to any such reorganization provisions, the
Owner Participant is held to have recourse liability to the debtor, the Owner
Trustee or the trustee of the debtor directly or indirectly on account of any
amount payable as Make-Whole Premium, principal or interest on the Certificates,
or any other amount payable on any Certificate that is provided in the Operative
Agreements to be nonrecourse to the Owner Participant and (iii) the Indenture
Trustee actually receives any Recourse Amount which reflects any payment by the
Owner Participant on account of (ii) above, then the Indenture Trustee shall
promptly refund to the Owner Participant such Recourse Amount. For purposes of
this Section 17.10, "Recourse Amount" means the amount by which the portion of
such payment by the Owner Participant on account of clause (ii) above received
by the Indenture Trustee exceeds the amount which would have been received by
the Indenture Trustee if the Owner Participant had not become subject to the
recourse liability referred to in (ii) above. Nothing contained in this Section
shall prevent the Indenture Trustee from enforcing any individual obligation
(and retaining the proceeds thereof) of the Owner Participant under this
Agreement or, any other Operative Agreement to the extent herein or therein
provided, for which the Owner Participant has expressly agreed by the terms of
this Agreement to accept individual responsibility.
Section 17.11. GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE
SATE OF NEW YORK, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.
Section 17.12. Section 1110 Compliance. The parties hereto agree that
the transactions contemplated by the Operative Agreements are expressly intended
to be, shall be, and should be construed so as to be entitled to the benefits
and protection of Section 1110 of the Bankruptcy Code.
Section 17.13. Reliance of Liquidity Providers. Each of the parties
hereto agrees and acknowledges that each Liquidity Provider shall be a third
party beneficiary of each of the representations and warranties made herein by
such party (and of each covenant herein made by such party to each Liquidity
Provider), and that each Liquidity Provider may rely on such representations,
warranties and covenants to the same extent as if such representations,
warranties and covenants were made to such Liquidity Provider directly. The
terms of this Agreement shall inure to the benefit of each Liquidity Provider,
their respective successors and permitted assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Participation
Agreement to be executed by their respective, duly authorized officers and this
Participation Agreement shall be effective this __ day of September, 1997.
Lessee:
ATLANTIC COAST AIRLINES
By:
Name:
Title:
By:
Name:
Title:
Initial Owner Participant:
ATLANTIC COAST AIRLINES
By:
Name:
Title:
By:
Name:
Title:
<PAGE>
Owner Trustee:
STATE STREET BANK
AND TRUST COMPANY
OF CONNECTICUT,
NATIONAL
ASSOCIATION not in
its individual
capacity, except
as otherwise
expressly provided
herein but solely
as Owner Trustee
By:
Name:
Title:
Indenture Trustee:
THE FIRST NATIONAL
BANK OF MARYLAND,
not in its
individual
capacity except as
otherwise
expressly provided
herein, but solely
as Indenture
Trustee
By: ,
Name:
Title:
Pass-Through Trustee:
THE FIRST NATIONAL
BANK OF MARYLAND,
not in its
individual
capacity except as
otherwise
expressly provided
herein, but solely
as Pass-Through
Trustee
By:
Name:
Title:
<PAGE>
Subordination Agent:
THE FIRST NATIONAL
BANK OF MARYLAND,
not in its
individual
capacity except as
otherwise
expressly provided
herein, but solely
as Subordination
Agent
By:
Name:
Title:
<PAGE>
SCHEDULE II
CERTIFICATE INFORMATION
1 Atlantic Coast Airlines 1997-1 Pass-Through Trust Class A Atlantic Coast Airlines Trust No. _____
---------------------------------------
Interest Rate:
Maturity:
Principal Amount:
2. Atlantic Coast Airlines 1997-1 Pass-Through Trust Class B Atlantic Coast Airlines Trust No._____
Interest Rate:
Maturity:
Principal Amount:
3. Atlantic Coast Airlines 1997-1 Pass-Through Trust Class C Atlantic Coast Airlines Trust No. _____
Interest Rate:
Maturity:
Principal Amount:
4. Atlantic Coast Airlines 1997-1 Pass-Through Trust Class D Atlantic Coast Airlines Trust No. _____
Interest Rate:
Maturity:
Principal Amount:
<PAGE>
SCHEDULE III
DEBT PORTION
Debt Portion
<PAGE>
SCHEDULE IV
MANDATORY ECONOMIC TERMS
Any amendment and restatement of the Operative Documents on the
Delivery Date or, if earlier, the Transfer Date shall require that:
(i) with respect to each series of Certificates issued with
respect to the Aircraft the schedule of principal payments may
be changed but:
(a) the final maturity may not be extended beyond January
1, 2014, for the Series A Certificates, January 1,
2011, for the Series B Certificates, January 1, 2007,
for the Series C Certificates, and January 1, 2000,
for the Series D Certificates;
(b) the average life of any series of Certificates may
not be so great as to cause the average life of the
corresponding Class of Pass-Through Certificates to
be more than 10.2 years in the case of Class A
Pass-Through Certificates, 8.3 years in the case of
Class B Pass-Through Certificates, 5.6 years in the
case of the Class C Pass-Through Certificates and 1.0
years in the case of Class D Pass-Through
Certificates (but in each case may be decreased by
any amount);
(c) the interest rate and the January 1 and July 1 payment dates may not be changed; and
(d) the loan to aircraft value ratio on any July 1
Distribution Date (as defined in the Pass-Through
Agreement) shall not exceed 35.0% in the case of the
Series A Certificates, 50.0% in the case of the
Series B Certificates, 65.0% in the case of the
Series C Certificates and 70.0% in the case of the
Series D Certificates.
(ii) Basic Rent, Stipulated Loss Values and Termination Values
under the Lease must be sufficient to pay amounts due with
respect to the Certificates;
(iii) the amounts payable under the all-risk aircraft hull insurance
maintained with respect to the Aircraft must be sufficient to
pay the Stipulated Loss Value, subject to rights of
self-insurance; and
(iv) (a) the Past Due Rate in the Indenture and the Lease;
(b) the Make-Whole Premium payable under the Indenture;
(c) the provisions relating to the prepayment and purchase of the Certificates in the
Indenture;
(d) the minimum liability insurance amount on the Aircraft in the Lease; and
(e) the indemnification of the Indenture Trustee,
Subordination Agent, Liquidity Providers,
Pass-Through Trustee and Holders of the Certificates
with respect to certain taxes and expenses;
in each case, must be provided as set forth in the Participation
Agreement, Lease and Indenture, as the case may be as in effect on the
Certificate Closing Date.
<PAGE>
SCHEDULE V
MANDATORY DOCUMENT TERMS
Any amendment and restatement of the Operative Agreements on the
Delivery Date or, if earlier, the Transfer Date:
1. May not modify in any material adverse respect the Granting
Clause of the Indenture so as to deprive the Holders of a
first priority security interest in and mortgage lien on the
Aircraft and the Lease or to eliminate any of the obligations
secured thereby or otherwise modify in any material adverse
respect as regards the interests of the Holders, the
Subordination Agent, the Liquidity Providers or the Indenture
Trustee the provisions of Article II, V, or VI or Section
7.01, 7.02, 7.10, 7.11, 9.08, 13.01, 13.02, 13.07 or 15.04 or
Article VIII of the Indenture;
2. May not modify in any material adverse respect as regards the
interests of the Holders, the Subordination Agent, the
Liquidity Providers or the Indenture Trustee the provisions of
Section 3(e), 3(f), 4, 7, 11(a)(i)(dd), 12(c)(1), the second
sentence of 23(f) or 26 of the Lease or otherwise modify the
terms of the Lease so as to deprive the Indenture Trustee of
rights expressly granted to the "Indenture Trustee" therein;
3. May not modify in any material adverse respect as regards the interests of the Holders, the
Subordination Agent, the Liquidity Providers or the Indenture Trustee the provisions of Section
4.02(e), 4.02(f), 17.02, 17.11, 17.12 or 17.13 of the Participation Agreement or of the
provisions of Section 4.01(k) of the Participation Agreement so as to eliminate the requirement
to deliver to the Indenture Trustee the legal opinions to be provided to such Persons
thereunder (recognizing that the lawyers rendering such opinions may be changed) or of the
provisions of Section 6.03(b) of the Participation Agreement as regards the rights of the
Indenture Trustee thereunder or otherwise modify the terms of the Participation Agreement to
deprive the Subordination Agent, the Liquidity Providers or the Indenture Trustee of any
indemnity or right of reimbursement in its favor for Expenses or Taxes.
4. May not modify in any material adverse respect as regards the
interests of the holders of the Pass Through Certificates, the
Subordination Agent, the Liquidity Providers or the Indenture
Trustee, the definition of "Make-Whole Premium" or
"Supplemental Rent" in Schedule I to the Participation
Agreement; and
5. Shall contain representations and warranties of the Owner
Participant substantially similar to those set forth on
Exhibit A attached hereto.
Notwithstanding the foregoing, any such Mandatory Document Term may be
modified to correct or supplement any such provision which may be defective or
to cure any ambiguity or correct any mistake, provided that any such action
shall not materially adversely affect the interests of the Holders, the
Subordination Agent, the Liquidity Providers, the Indenture Trustee or the
holders of the Pass Through Certificates.
<PAGE>
EXHIBIT A TO SCHEDULE V
Section ___. Representations, Warranties and Covenants of Owner Participant. (a) Representations,
Warranties and Covenants. In addition to and without limiting its other representations and warranties provided
for in this Article __, the Owner Participant represents and warrants that:
(i) it is a corporation duly incorporated and validly existing
in good standing under the laws of the State of __________ and it has
full corporate power, authority and legal right to carry on its present
business and operations, to own or lease its Properties and to enter
into and to carry out the transactions contemplated by this Agreement,
the Tax Indemnity Agreement, the Trust Agreement and the other
Operative Agreements to which it is party;
(ii) the execution, delivery and performance by it of this
Agreement, the Tax Indemnity Agreement, and the Trust Agreement and the
other Operative Agreements to which it is party have been duly
authorized by all necessary corporate action on its part and, assuming
the accuracy of the Lessee's representations in Section 6.01(n) hereof,
do not require any governmental approvals that would be required to be
obtained by the Owner Participant;
(iii) based on the representations, warranties and covenants
contained in Sections 6.01(l)(viii), 6.02 and 7.09 hereof and
compliance with Section 10.06 of the Indenture, neither the execution,
delivery or performance by the Owner Participant of the Operative
Agreements to which it is party, nor compliance with the terms and
provisions hereof or thereof, conflicts or will conflict with or
results or will result in a breach or violation of any of the terms,
conditions or provisions of, or will require any consent or approval
under any law, governmental rule or regulation applicable to the Owner
Participant or the charter documents, as amended, or bylaws, as
amended, of the Owner Participant or any order, writ, injunction or
decree of any court or governmental authority against the Owner
Participant or by which it or any of its Properties is bound or any
indenture, mortgage or contract or other agreement or instrument to
which the Owner Participant is a party or by which it or any of its
Properties is bound, or constitutes or will constitute a default
thereunder or results or will result in the imposition of any Lien upon
any of its Properties;
(iv) the Operative Agreements to which it is party have been
or on the Certificate Closing Date will be duly executed and delivered
by the Owner Participant and constitute or on the Certificate Closing
Date will constitute the legal, valid and binding obligation of the
Owner Participant enforceable against it in accordance with their terms
except as such enforceability may be limited by bankruptcy, insolvency,
or other similar laws or general equitable principles;
(v) it is not in default under any mortgage, deed of trust,
indenture, lease or other instrument or agreement to which the Owner
Participant is a party or by which it or any of its Properties may be
bound, or in violation of any applicable law, which default or
violation would have a material adverse effect on the financial
condition, business or operations of the Owner Participant or an
adverse effect on the ability of the Owner Participant to perform its
obligations under this Agreement and the other Operative Agreements to
which it is or is to be a party;
(vi) there are no pending or, to the knowledge of the Owner
Participant, threatened actions, suits, investigations or proceedings
against the Owner Participant before any court, administrative agency
or tribunal which are expected to materially adversely affect the
ability of the Owner Participant to perform its obligations under this
Agreement and the other Operative Agreements to which it is or is to be
a party and the Owner Participant knows of no pending or threatened
actions or proceedings before any court, administrative agency or
tribunal involving it in connection with the transactions contemplated
by the Operative Agreements;
(vii) neither the execution and delivery by it of this
Agreement or the other Operative Agreements to which it is a party nor
the performance of its obligations hereunder or thereunder requires the
consent or approval of or the giving of notice to, the registration
with, or the taking of any other action in respect of, any governmental
authority or agency that would be required to be obtained or taken by
the Owner Participant except for filings contemplated by this
Agreement;
(viii) no part of the funds to be used by it to acquire the
interests to be acquired by the Owner Participant under this Agreement
constitutes assets (within the meaning of ERISA and any applicable
rules and regulations) of any employee benefit plan subject to Title I
of ERISA or any applicable regulation thereunder or of any plan or
individual retirement account subject to Section 4975 of the Code; and
(ix) it is a "U.S. Person" as defined in Section 7701(a)(30)
of the Code and is not a tax resident of another country.
Notwithstanding the foregoing or anything else contained in
this Agreement, the Owner Participant makes no representation or
warranty in this Agreement with respect to laws, rules or regulations
relating to aviation or to the nature or use of the equipment owned by
the Owner Trustee, including, without limitation, the airworthiness,
value, condition, workmanship, design, patent or trademark
infringement, operation, merchantability or fitness for use of the
Aircraft, other than such laws, rules or regulations relating to the
citizenship requirements of the Owner Participant under applicable
aviation law.
(b) Lessor's Liens. The Owner Participant further represents, warrants
and covenants that there are no Lessor's Liens attributable to it (or an
Affiliate thereof) and that there will not be any Lessor's Lien attributable to
it (or an Affiliate thereof) on the Certificate Closing Date. The Owner
Participant agrees with and for the benefit of the Lessee, the Owner Trustee,
the Indenture Trustee and the Pass-Through Trustee that the Owner Participant
will, at its own cost and expense, take such action as may be necessary to duly
discharge and satisfy in full, promptly after the same first becomes known to
the Owner Participant, any Lessor's Lien attributable to the Owner
Participant(or an Affiliate thereof), provided, however, that the Owner
Participant shall not be required to discharge or satisfy such Lessor's Lien
which is being contested by the Owner Participant in good faith and by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Aircraft or the Lessor's Estate or
the Trust Indenture Estate or any interest in any thereof or otherwise
materially adversely affect the validity or priority of the Lien of the
Indenture.
(c) Reimbursement. Without limiting any other rights the parties hereto
may have as a result of any breach by the Owner Participant of its obligations
in Section ____(b) hereof, the Owner Participant agrees to reimburse each other
party hereto for all reasonable legal fees and expenses of counsel that may be
incurred by any such party as a result of the failure of the Owner Participant
to discharge and satisfy any such Lessor's Lien in accordance with the terms of
Section ____(b) hereof.
(d) Assignment of Interests of Owner Participant. At any time after the
Delivery Date and subject to Section _____(f) and the conditions set forth in
this Section ____(d), the Owner Participant may assign, convey or otherwise
transfer to a single institutional investor or an Affiliate of an institutional
investor all (but not less than all) of the Beneficial Interest, provided that
it gives the Lessee and the Indenture Trustee at least 10 days' notice of such
assignment, conveyance or other transfer and provided that the Owner Participant
and any Owner Participant Guarantor shall remain liable for all obligations of
the Owner Participant under the Trust Agreement and the Operative Agreements to
which the Owner Participant is a party to the extent (but only to the extent)
relating to the period on or before the date of such transfer and provided that
the transferee agrees by a written instrument substantially in the form attached
hereto as Exhibit F-1 to assume liability for all obligations as an Owner
Participant under the Trust Agreement and the other Operative Agreements to
which such Owner Participant is a party relating to the period after the date of
transfer. Any such transferee shall (a) be (i) a bank, savings institution,
finance company, leasing company or trust company, national banking association
acting for its own account or in a fiduciary capacity as trustee or agent under
any pension, retirement, profit sharing or similar trust or fund, insurance
company, fraternal benefit society or corporation acting for its own account
having a combined capital and surplus (or, if applicable, consolidated net worth
or its equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described in clause (i) where such Person provides (A) support for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee, the Owner Trustee and the Indenture Trustee or (B) an unconditional
guaranty substantially in the form of Exhibit F-2 attached hereto of such
transferee subsidiary's obligations, or (iii) an Affiliate of the transferring
Owner Participant, so long as such Affiliate has a combined capital and surplus
(or, if applicable, consolidated net worth or its equivalent) of not less than
$50,000,000, (b) be legally capable of binding itself to the obligations of the
Owner Participant and shall expressly agree to assume all obligations of the
Owner Participant under the Trust Agreement and this Agreement and (c) provide
representations, warranties, and covenants substantially similar to those
contained in Sections 7.02(a), 7.03(a) and 7.03(f) hereof; provided that,
without the prior written consent of the Lessee (unless an Event of Default
described in ss. 14(a), (b), (f), (g), (h), or (i) of the Lease is continuing),
such transferee shall not be an airline or other aircraft operator or competitor
of the Lessee or an Affiliate of any thereof; and provided further that neither
such transferee nor any Affiliate thereof shall (x) be a party to any litigation
or arbitration (whether as plaintiff or defendant) with the Lessee or any
Affiliate of the Lessee or (y) be attempting a hostile takeover of the Lessee or
any Affiliate of the Lessee. In the event of any such assignment, conveyance or
transfer, the transferee shall become a party to the Trust Agreement and shall
agree to be bound by all the terms of and will undertake all of the obligations
of the Owner Participant contained in the Trust Agreement and the other
Operative Agreements in the manner set forth in the form attached as Exhibit
F-1. A transferee hereunder shall be (i) a "U.S. Person" as defined in Section
7701(a)(30) of the Code (or any successor provision thereto) and such transferee
shall be personally liable for any debt service to the extent that its receipt
of rentals is reduced by reason of any withholding Taxes that result from such
transferee's failure to be such a "U.S. Person" and (ii) a Citizen of the United
States or has established a voting trust, voting powers or other arrangement
reasonably satisfactory to the Indenture Trustee, the Owner Trustee, and the
Lessee to permit the Owner Trustee to be the registered owner of the Aircraft
under the Transportation Code. A transferee hereunder shall not be, and in
acquiring the Beneficial Interest shall not use the assets of, an employee
benefit plan subject to Title I of ERISA or an individual retirement account or
a plan subject to Section 4975 of the Code. Assuming the truth of the
representations made in Sections 6.01(l) and 7.06 hereof and compliance with
Section 10.06 of the Indenture, no such assignment, conveyance or transfer shall
violate any provision of law or regulation or create a relationship which would
be in violation thereof. The Owner Trustee shall not be on notice of or
otherwise bound by any such assignment, conveyance or transfer unless and until
it shall have received an executed counterpart of the instrument of such
assignment, conveyance or transfer. Upon any such disposition by the Owner
Participant to a transferee as above provided, the transferee shall be deemed
the "Owner Participant" or "Trustor" for all purposes of the Operative
Agreements, and shall be deemed to have made all the payments previously made by
its transferor and to have acquired the same interest in the Lessor's Estate as
theretofore held by its transferor; and each reference therein to the "Owner
Participant" or "Trustor" shall thereafter be deemed a reference to such
transferee. No assignment, conveyance or transfer by the Owner Participant of
the Beneficial Interest shall increase the amount of the liability of the Lessee
under Article 8 hereof or under the Tax Indemnity Agreement over the amount of
liability the Lessee would have incurred had such assignment, conveyance or
transfer not occurred. Notwithstanding the other provisions of this Section
___(d), the right of the Owner Participant to assign, convey or transfer the
Beneficial Interest shall be subject to the right of the Lessee to match any
bona fide offer (other than by an Affiliate of the Owner Participant to purchase
the Beneficial Interest). The Lessee agrees that it will reasonably cooperate
with the Owner Participant in effecting an assignment of the Owner Participant's
interests including, without limitation, providing letters to any successor
Owner Participant permitting such successor Owner Participant to rely on any
opinions provided by the Lessee on the Delivery Date. The Owner Participant
shall pay all costs (including the Lessee's costs) in connection with any such
assignment, conveyance or transfer (other than an assignment, conveyance or
transfer which occurs pursuant to the exercise of remedies under Section 15 of
the Lease while an Event of Default is continuing).
(e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant
agrees that it will not take any action to subject the Lessor's Estate or the
trust established by the Trust Agreement, as debtor, to the reorganization or
liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy
or insolvency statute.
(f) ERISA. The Owner Participant agrees and covenants that it will take
no action with respect to its participation in the transactions contemplated
hereby and by the other Operative Agreements which would cause such
participation to be a "Prohibited Transaction" within the meaning of Section 406
of ERISA or Section 4975 of the Code or any applicable regulations under such
sections.
(g) Citizenship. The Owner Participant agrees, solely for the benefit
of the Lessee, the Pass-Through Trustee, the Indenture Trustee and the Owner
Trustee, that if at any time on or after the Delivery Date when the Aircraft is
registered or the Lessee proposes to register the Aircraft in the United States
(i) either the Owner Participant shall cease to be, or an event which has been
publicly disclosed has occurred of which the Owner Participant has knowledge and
which will cause the Owner Participant to cease to be, a Citizen of the United
States, and (ii) the Aircraft shall or would therefore become ineligible for
registration in the name of the Owner Trustee under the Transportation Code and
regulations then applicable thereunder (such eligibility to be determined
without regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used), then the Owner Participant
shall give notice thereof to the Lessee, the Owner Trustee and the Indenture
Trustee and shall (at its own expense and without any reimbursement or
indemnification from the Lessee) promptly effect (x) effect a voting trust or
other similar arrangement, (y) transfer in accordance with the terms of this
Agreement and the Trust Agreement all its rights, title and interest in and to
such Trust Agreement, the Lessor's Estate and this Agreement, or (z) take any
other alternative action that would prevent any deregistration, or maintain or
permit the United States registration, of the Aircraft (determined without
regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting where it is based or used). It is agreed that the Owner
Participant shall be liable to pay promptly on request (A) to each of the other
parties hereto any actual damages (but not consequential damages) suffered by
any such other party to the extent the same shall result from the representation
and warranty of the Owner Participant in the first sentence of Section 7.02(a)
hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee, the
Indenture Trustee and the Pass-Through Trustee for any damages actually (but not
consequentially) incurred by the Lessee, the Indenture Trustee and the
Pass-Through Trustee as a result of the Owner Participant's failure to comply
with its obligations pursuant to the first sentence of this Section 7.02(c);
provided, that, the foregoing shall not restrict the Pass-Through Trustee or the
Indenture Trustee from asserting against the Owner Participant any damages
actually incurred by the holders of any Pass-Through Certificates. Each party
hereto agrees, upon the request and at the sole expense of the Owner
Participant, to cooperate with the Owner Participant in complying with its
obligations under the provisions of the first sentence of this Section 7.02(c),
but without any obligation on the part of such other party to take any action
believed by it in good faith to be unreasonably burdensome to such party or
materially adverse to its business interests.
<PAGE>
Certain of the Lessor's rights under this Lease and in the Aircraft covered
hereby have been assigned to, and are subject to a security interest in favor
of, The First National Bank of Maryland, as Indenture Trustee under a Trust
Indenture and Security Agreement. This Lease has been executed in counterparts;
see ss. 23(e) for information concerning the rights of holders of the various
counterparts.
===================================================================================================================
LEASE AGREEMENT
(Atlantic Coast Airlines Trust No. ___)
dated as of , 199_
between
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
as Owner Trustee, Lessor
and
ATLANTIC COAST AIRLINES,
Lessee
One Canadair Regional Jet Series 200 ER Aircraft
===================================================================================================================
<PAGE>
iii
EX10_50D.DOC 0108996.01
TABLE OF CONTENTS
Page
1. Definitions; Usage.............................................................................................1
(a) Definitions...................................................................................................1
(b) Usage.........................................................................................................1
2. Agreement to Lease Aircraft; Delivery..........................................................................1
(a) Agreement to Lease............................................................................................1
(b) Delivery......................................................................................................1
3. Term and Rent; Voluntary Termination; Renewal..................................................................1
(a) Term..........................................................................................................1
(b) Basic Rent....................................................................................................1
(c) Supplemental Rent.............................................................................................1
(d) Adjustments to Basic Rent, EBO, SLV, and TV After the Delivery Date...........................................2
(e) Minimum Rent..................................................................................................2
(f) Payment.......................................................................................................3
(g) Voluntary Termination.........................................................................................3
(h) Renewal Option................................................................................................5
(i) Termination with Respect to Engines...........................................................................5
4. Net Lease......................................................................................................5
5. Return of Aircraft.............................................................................................6
6. Lessor Disclaimer..............................................................................................6
7. Ownership by Lessor............................................................................................7
8. Liens..........................................................................................................7
9. Registration; Maintenance; Records; Compliance and Use; Replacement Parts; Improvements; Pooling of Parts;
Insignia..........................................................................................................7
(a) Registration..................................................................................................7
(b) Maintenance; Records..........................................................................................7
(c) Compliance and Use............................................................................................8
(d) Replacement of Parts..........................................................................................8
(e) Improvements..................................................................................................9
(f) Pooling of Parts.............................................................................................10
(g) Insignia.....................................................................................................10
10. Inspection...................................................................................................10
11. Loss or Destruction; Requisition of Use......................................................................11
(a) Event of Loss to the Airframe................................................................................11
(b) Event of Loss to an Engine...................................................................................13
(c) Risk of Loss; No Release of Obligations......................................................................13
(d) Requisition of Use...........................................................................................13
(e) Application of Proceeds for Events of Loss...................................................................14
(f) Payments During Default......................................................................................14
12. Insurance....................................................................................................15
(a) Liability Insurance..........................................................................................15
(b) Casualty Insurance...........................................................................................15
(c) Endorsements.................................................................................................15
(d) Reports, etc.................................................................................................16
(e) Other Insurance..............................................................................................16
(f) Indemnification by United States Government..................................................................16
13. Subleasing; Possession.......................................................................................16
(a) Subleasing, Pooling, etc.....................................................................................16
(b) Security Assignment of Subleases.............................................................................18
(c) Lessor Waiver................................................................................................18
14. Events of Default............................................................................................19
15. Remedies.....................................................................................................20
(a) Generally....................................................................................................20
(b) Expenses.....................................................................................................21
(c) Lessee Waiver................................................................................................21
(d) Remedies Cumulative..........................................................................................21
16. Purchase Options.............................................................................................21
(a) Options......................................................................................................21
(b) Purchase.....................................................................................................22
17. Notices......................................................................................................22
18. Successors, Assigns, and Indemnified Parties.................................................................23
19. Lessor's Right to Perform for Lessee.........................................................................23
20. Further Assurances...........................................................................................23
21. Successor Trustee and Rights of Trustee as Lessor............................................................23
22. Capacity of Lessor...........................................................................................24
23. Amendments and Miscellaneous.................................................................................24
(a) Amendments...................................................................................................24
(b) Survival of Agreements.......................................................................................24
(c) Severability.................................................................................................24
(d) Entire Agreement.............................................................................................24
(e) Counterparts.................................................................................................24
(f) Governing Law................................................................................................24
(g) Headings.....................................................................................................24
24. Performance by Sublessee.....................................................................................25
25. Quiet Enjoyment..............................................................................................25
26. Security For Lessor's Obligations............................................................................25
27. Submission to Jurisdiction; Venue............................................................................25
Schedule I - Definitions
Exhibit A - Lease Supplement
Exhibit B - Financial Terms
Exhibit C - Stipulated Loss Values
Exhibit D - Termination Values
Exhibit E - Lists of Countries
Exhibit F - Return Conditions
<PAGE>
25
LEASE AGREEMENT
(Atlantic Coast Airlines Trust No. ___)
This Lease Agreement (Atlantic Coast Airlines Trust No. ___) is entered
into as of ___________, 199_ by State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, not in its
individual capacity, except as expressly set forth herein, but solely as owner
trustee under the Trust Agreement as defined in ss. 1(a) of this Agreement (the
"Lessor"), and Atlantic Coast Airlines, a California corporation (the "Lessee").
. 1. Definitions; Usage
. Unless the context otherwise requires, the capitalized terms herein shall have
the meanings given in Schedule I hereto, for all purposes of this Lease and
shall be equally applicable to both the singular and plural forms of the terms
defined.
. Unless the context otherwise requires, any agreement or instrument referred to herein, or the term "Agreement"
or "Lease", means such agreement or instrument as from time to time supplemented and amended. "Including" means
"including but not limited to". "Or" means one or more, or all, of the alternatives listed or described.
"Herein", "hereof", "hereunder", etc. mean in, of, under, etc. this Agreement (and not merely in, of, under, etc.
the section or provision where the reference appears). References to sections, exhibits, and the like refer to
those in or attached to this Agreement unless otherwise specified.
. 2. Agreement to Lease Aircraft; Delivery
. Subject to satisfaction or waiver of the conditions set forth in the
Participation Agreement, on the Delivery Date the Lessor hereby agrees to lease
the Aircraft to the Lessee hereunder, and the Lessee hereby agrees to lease the
Aircraft from the Lessor hereunder, such lease to be evidenced by the execution
by the Lessor and the Lessee of a Lease Supplement.
. The Lessor hereby authorizes one or more persons designated by the Lessee as
the authorized representative or representatives of the Lessor to accept
delivery of the Aircraft. By executing and delivering Lease Supplement No. 1,
Lessee confirms to Lessor that Lessee has, on behalf of the Lessor, duly and
irrevocably accepted delivery of the Aircraft from the Seller in accordance with
Lessee's normal practices under the Purchase Agreement for all purposes of this
Agreement.
. 3. Term and Rent; Voluntary Termination; Renewal
. The basic term of this Lease (the "Basic Term") shall commence on the Delivery
Date and end on the Expiration Date unless this Lease is terminated earlier, or
cancelled, in accordance with its terms.
. The Lessee shall pay to the Lessor, as Basic Rent for the Aircraft on each
Rent Payment Date during the Basic Term, an amount for that Rent Payment Date as
set forth in Exhibit B and allocated to the Payment Period ending on such Rent
Payment Date, if designated as a payment in arrears, or allocated to the Payment
Period commencing on such Rent Payment Date, if designated as a payment in
advance, in each case as specified in Exhibit B, as such amount may be adjusted
pursuant to ss. 3(d) hereof.
. The Lessee shall pay or cause to be paid to the Lessor, or to whomever shall
be entitled to it, any and all Supplemental Rent promptly as the same shall
become due. The Lessee will also pay to Lessor, on demand, to the extent
permitted by applicable law, interest (computed on the basis of a 360-day year
of twelve 30-day months) at the Past Due Rate on any payment of Rent to the
extent not paid when due, for any period during which it is overdue. The
expiration or other termination of the Lessee's obligation to pay Basic Rent
shall not limit or modify the Lessee's obligations to pay Supplemental Rent.
. If (1) prior to the first Rent Payment Date, the aggregate of all Transaction
Costs shall be other than as shown on Exhibit B (unless, if such aggregate
exceeds the amount shown on Exhibit B, the Lessee elects (with the Owner
Participant's consent) to pay such excess directly, in which case the Owner
Participant shall identify those transaction costs payable directly by the
Lessee) or (2) a Refinancing of the Certificates is effected in accordance with
ss. 15 of the Participation Agreement, then the amounts of Basic Rent,
Stipulated Loss Value, and Termination Value, the EBO Price and the EBO Date,
shall be appropriately adjusted upwards or downwards by such amount or amounts
as will (aa) cause the Owner's Economic Return through the EBO Date as well as
the end of the Basic Term to be at least equal to the Owner's Economic Return
computed using the same assumptions (other than the changed assumptions giving
rise to the adjustment in question), constraints (including tax and appraisal
constraints, taking into account the law (with respect to Code ss. 467, any
proposed regulation issued thereunder or administrative interpretation thereof)
applicable at the time of adjustment), and methodology originally used by the
Owner Participant in computing Basic Rent, Stipulated Loss Values, Termination
Values, and the EBO Price, and (bb) to the extent consistent with the preceding
clause (aa), minimize the Net Present Value of Rents to the Lessee. Stipulated
Loss Values, Termination Values, and the EBO Price also shall be adjusted to
reflect any loss, recapture, or unavailability of Assumed Tax Benefits (as
defined in the Tax Indemnity Agreement).
Any such adjustment of Basic Rent, EBO Price, EBO Date, Stipulated Loss
Values, or Termination Values shall be determined in good faith by the Owner
Participant, subject to verification on a confidential basis by the Lessee and
Babcock & Brown, Inc., or such other financial advisor chosen by the Lessee and
shall be effective as soon as possible. Such adjustment shall be evidenced by
the execution and delivery by the Lessor and the Lessee of a lease amendment,
but failure to execute and deliver such an amendment shall not prevent or delay
the effectiveness of the adjustment required by the preceding paragraph. If
requested by the Lessee, any computation of the amount payable by the Lessee
under this ss. 3(d) shall be provided by the Owner Participant to the Lessee in
a notice setting forth in reasonable detail the computations and methods used in
computing such amount (not including confidential methodology and assumptions).
Within 30 days following the Lessee's receipt of such notice, the Lessee may
request that a "Big 6" (or successor) accounting firm or nationally recognized
lease advisory firm selected by the Owner Participant and reasonably
satisfactory to the Lessee (the "Verifying Firm"), verify whether the
calculations submitted by the Owner Participant are based on the correct
assumptions and are mathematically correct. The Verifying Firm shall enter into
a confidentiality agreement reasonably acceptable to the Owner Participant and
shall be requested to make its determination within 30 days. The Owner
Participant shall provide to the Verifying Firm, on a confidential basis, within
three days of its appointment, all the information within the possession or
control of the Owner Participant and reasonably necessary for the verification
of the Owner Participant's calculation (including any and all related
confidential methodology and assumptions); provided that the Verifying Firm
shall not release such confidential methodology or assumptions or other
confidential information except as and to the extent permitted in such
confidentiality agreement. If the Verifying Firm determines that such
computations are inaccurate or based on incorrect assumptions, then the
Verifying Firm shall determine what it believes to be the appropriate
computations. The Verifying Firm shall make available for inspection by the
Lessee and the Lessor such Verifying Firm's working papers and shall discuss the
verification with the Lessor. In the absence of manifest error, such
verification shall be final and binding on the parties hereto. The costs and
expenses of such verification shall be paid by the Lessee unless, as result of
such verification, the Owner Participant's computation of the Net Present Value
of Rents or the EBO Price is adjusted by more than $10,000 in favor of the
Lessee (in which case the Owner Participant shall pay such costs and expenses).
The Lessor and the Lessee shall execute and deliver an amendment to this Lease
to reflect each such adjustment under this ss. 3(d).
. Notwithstanding any other provisions of the Operative Agreements to the
contrary, both before and after giving effect to any adjustment referred to in
this ss. 3, under any circumstances and in any event, (1) Stipulated Loss Value
and Termination Value, and the EBO Price, on any date, shall be an amount at
least sufficient to pay in full on that date the aggregate unpaid principal
amount of the Certificates then scheduled to be outstanding, as adjusted
pursuant to ss. 15 of the Participation Agreement, and accrued and unpaid
interest (assuming interest has been timely paid) and any Make-Whole Premium
thereon, and (2) Basic Rent payable on any Rent Payment Date shall (without
giving effect to any acceleration of the Certificates as a result of an
Indenture Event of Default) at least equal the aggregate amount of principal and
interest scheduled to be paid on the Certificates outstanding on such Rent
Payment Date, as adjusted pursuant to ss. 15 of the Participation Agreement.
. All payments of Rent hereunder shall be made in immediately available funds
and in U.S. dollars no later than 12:00 noon, New York City time, on the date
payable hereunder. So long as any Certificate is outstanding, all Rent due or to
become due hereunder (other than Excepted Payments) shall be paid to the
Indenture Trustee in accordance with the payment instruction set forth in
Schedule II to the Participation Agreement or at such other address in the
United States or to such other Person as the Indenture Trustee shall direct by
written notice to the Lessee. All Excepted Payments and, upon payment of all
outstanding Certificates, all payments of Rent thereafter made hereunder, shall
be paid to the Lessor or, in the case of any payment of Supplemental Rent
expressly payable to a Person other than Lessor, to such other Person, as
appropriate, in accordance with the payment instructions set forth in Schedule
II to the Participation Agreement or at such other address or to such further
Person as the Lessor or such other Person shall direct by written notice to the
Lessee, except that all indemnity payments under any Operative Agreement shall
be paid to the appropriate Indemnitee at its payment address set forth in the
Participation Agreement or as otherwise directed by such Indemnitee by written
notice to the Lessee. If any date on which any Rent becomes payable is not a
Business Day, then the applicable payment of Rent shall be made on the following
Business Day without additional interest or penalty (provided that payment is
made on such following Business Day).
. So long as no Specified Default shall have occurred and be continuing, the
Lessee shall have the right at its option (not exercisable more than twice) to
terminate this Lease, on any Rent Payment Date occurring after the fifth
anniversary of the Delivery Date (a "Termination Date"), on at least 120 days'
prior written notice given by the Lessee to the Lessor, provided that the Lessor
has received a certificate from the president or chairman of the board of the
Lessee certifying that the Aircraft is obsolete, surplus to the Lessee's
business, or to be disposed of as part of a program of jet fleet renewal that
has been implemented for valid business reasons and not with a discriminatory
purpose of terminating only the Aircraft and aircraft under Related Leases. That
notice shall specify the Payment Date on which the Lessee intends to terminate
this Lease in accordance with this ss. 3(g). The Lessee shall have the right to
revoke its notice of termination (but not more than twice) not less than 5 days
prior to the Termination Date so specified.
Until the 60th day before the proposed Termination Date, the Lessor may
notify the Lessee that the Lessor elects to take possession of the Aircraft on
the Termination Date instead of receiving any payment of Termination Value. In
that event, the Lessee shall have no obligation to obtain bids under this ss.
3(g).
Commencing on the date the Lessee gives such notice, the Lessee (or a
Person authorized by the Lessee, acting as agent for the Lessor for a
commercially reasonable commission) shall use commercially reasonable efforts to
obtain the highest bid for the cash purchase of the Aircraft on or before the
Termination Date. The Lessee shall have no liability to the Lessor or any other
Person for failure to obtain the best price for the Aircraft, shall act in its
sole discretion, and shall be under no duty to solicit bids publicly or in any
particular market. The Manufacturer or an Affiliate thereof, the Owner
Participant, and any Person contacted by the Lessor or the Owner Participant may
submit a bid. The Lessee shall certify to the Lessor in writing the amount and
terms of each bid submitted to the Lessee, and the name and address of the party
or parties submitting such bid. Neither the Lessee nor any Affiliate of the
Lessee may (directly or through any agreement with any other Person concerning
the purchase or use of the Aircraft by the Lessee) bid for or buy the Aircraft
under this ss. 3(g).
If the Lessor exercises its option to take possession of the Aircraft
as provided above, then, provided the Lessee does not exercise its right to
revoke its notice of termination, on the Termination Date, (x) the Lessor shall
pay the then-unpaid principal amount of all Certificates then outstanding, and
all interest thereon; and (y) the Lessee shall pay any Make-Whole Premium on the
Certificates, and shall deliver the Aircraft to or at the direction of the
Lessor in the same manner and condition as if delivery were made to the Lessor
pursuant to ss. 5 and shall pay to the Lessor (A) any unpaid Basic Rent in
respect of Rent Payment Dates occurring before the Termination Date (less, if
the Termination Date is not a Rent Payment Date, the pro rata portion of Basic
Rent payable in advance in respect of the period commencing on the Termination
Date and ending on the next Rent Payment Date), plus (B) either (i) if the
Termination Date is a Rent Payment Date, that portion of Basic Rent payable in
arrears on such Rent Payment Date, or (ii) if the Termination Date is not a Rent
Payment Date, that pro rata portion of Basic Rent payable in arrears due on the
following Rent Payment Date in respect of the period commencing on the Rent
Payment Date immediately preceding the Termination Date and ending on the
Termination Date, plus (C) any unpaid Supplemental Rent due on or before the
Termination Date, whereupon the Term shall terminate as of the Termination Date,
and the Lessee's obligation to pay all installments of Basic Rent due after the
Termination Date shall terminate. If the Lessor elects to retain the Aircraft
pursuant to this ss. 3(g), the Lessee shall deliver the Airframe and the Engines
(provided that the Airframe may be delivered with engines meeting the
requirements set forth herein for Replacement Engines in lieu of the Engines so
long as the aggregate number of Engines and engines being delivered with the
Airframe equals two) to the Lessor in the same manner as if delivery were made
to the Lessor pursuant to ss. 5 hereof, and shall duly transfer to the Lessor
right, title and interest to any such engines not owned by the Lessor, all in
accordance with ss. 5. Upon delivery of the Airframe and Engines or engines to
the Lessor and payment by the Lessee of any amounts required to be paid by the
Lessee pursuant to this ss. 3(g), the Lessor will transfer to the Lessee,
without recourse or warranty (except as to the absence of Lessor's Liens), all
of the Lessor's right, title and interest in and to any Engines which were
replaced by engines pursuant to this ss. 3(g), and shall deliver to the Lessee
such instrument as the Lessor shall have received from the Indenture Trustee,
releasing such Engines from the Lien of the Indenture.
If the Lessor does not exercise its option to take possession of the
Aircraft, then, on the Termination Date, the Lessor shall sell the Aircraft for
immediately available funds to the purchaser named in the highest bid certified
to it by the Lessee, "as is, where is" and without recourse or warranty (except
as to the absence of Lessor's Liens) and subject to the payment of all amounts
due under this ss. 3(g). The total sales price realized at such sale shall be
retained by the Lessor or its assignee and, in addition, on or before the date
of such sale, the Lessee shall pay to the Lessor the sum of (1) the amount, if
any, by which (aa) the Termination Value (including any Make-Whole Premium with
respect to the Certificates), computed as of the Termination Date, exceeds (bb)
the sales price of the Aircraft sold by the Lessor less all reasonable
out-of-pocket expenses incurred by the Lessor and the Owner Participant in
connection with such sale and any sales taxes or similar transfer taxes (and
without deducting any sales commissions or marketing expenses for brokers or
agents engaged by the Lessor unless engaged by the Lessee or a Sublessee on
behalf of, and with the consent of, the Lessor), (2) any unpaid Basic Rent due
before the Termination Date (less, if the Termination Date is not a Rent Payment
Date, the pro rata portion of Basic Rent payable in advance in respect of the
period commencing on the Termination Date and ending on the next Rent Payment
Date), plus (3) either (i) if the Termination Date is a Rent Payment Date, that
portion of Basic Rent payable in arrears on such Rent Payment Date, or (ii) if
the Termination Date is not a Rent Payment Date, the pro rata portion of Basic
Rent payable in arrears due on the following Rent Payment Date in respect of the
period commencing on the Rent Payment Date immediately preceding the Termination
Date and ending on the Termination Date, plus (4) unpaid Supplemental Rent due
on or before the Termination Date. Except as provided in the next paragraph, a
sale of the Aircraft pursuant to this ss. 3(g) shall take place only on a
Termination Date.
If the Lessee revokes its notice of intent to terminate (any such
notice of revocation to be effective only if given at least 5 days before the
Termination Date), or if no sale occurs or the Lessor retention fails to occur
on or before the Termination Date, (x) the Lessee shall reimburse the Lessor,
the Owner Participant, and the Indenture Trustee for any reasonable costs that
such Person incurs in connection with the proposed termination, and (y) this
Lease shall continue in full force and effect, and the Lessee shall have the
right to reinstate the termination procedure described in this ss. 3(g). If no
sale has occurred on the Termination Date because the proposed buyer failed to
purchase on that date, a sale to that buyer may be consummated within 30 days
thereafter, and the Lessee shall be liable for Basic Rent during that period
equal to the daily equivalent (per day) of the average Basic Rent during the
Basic Term. Neither the Lessor nor the Owner Participant shall be under any duty
to solicit bids, to inquire into the efforts of the Lessee to obtain bids, or
otherwise to take action in connection with any sale pursuant to this ss. 3(g),
other than the Lessor's duty to transfer to the purchaser named in the highest
bid certified by the Lessee to the Lessor, "as is, where is", without recourse
or warranty, express or implied (except as to the absence of Lessor's Liens),
all right, title, and interest in and to the Aircraft against receipt of the
payment provided in this ss. 3(g). Effective on full payment of all the
foregoing amounts in connection with the sale or retention of the Aircraft by
the Lessor under this ss. 3(g), the Term shall terminate, and the Lessee's
obligation to pay all installments of Basic Rent due after such payment date
shall terminate, whereupon the Lessee shall deliver the Aircraft to the
purchaser or (in the case of a Lessor retention) to the Lessor.
. Subject to the conditions set forth below in this ss. 3(h), the Lessee, at its
option, may renew this Lease for one or more successive one-year renewal terms
(each a "Renewal Term") not to exceed six years in the aggregate, with each such
Renewal Term to commence upon the expiration of the Basic Term or then-expiring
Renewal Term, as the case may be. This renewal right shall be exercised upon
irrevocable written notice from the Lessee to the Lessor of the Lessee's
election so to renew this Lease given not less than 180 days before the end of
the Basic Term or any Renewal Term. If the Lessee fails to exercise any option
to extend the term of this Lease for any Renewal Term in accordance with the
provisions of this paragraph, all of the Lessee's rights to extend the term
hereof for such Renewal Term and any subsequent Renewal Term shall expire.
All provisions of this Lease shall apply during each Renewal Term,
except that (1) the Lessee shall pay to the Lessor for each semi-annual period
during the Renewal Term, on the applicable Rent Payment Date during that Renewal
Term, an amount equal to (i) with respect to the first two such Renewal Terms,
the lower of (x) $66,000 per month ($396,000 for such semi-annual period and (y)
the Fair Market Rental of the Aircraft for such period and (ii) with respect to
each other such Renewal Term, the Fair Market Rental of the Aircraft for such
period (provided that, if prior to the commencement of the third such Renewal
Period the Lessee provides to the Lessor a "20-20" appraisal reasonably
acceptable to the Lessor, the holder of fixed rate renewals shall be increased
to the number supported by such appraisal; provided further that the total
number of renewal periods shall not exceed six in total), and (2) Stipulated
Loss Value and Termination Value for the Aircraft shall be equal to such Values
as of the last day of the Basic Term.
The Lessee's right to renew this Lease pursuant to this ss. 3(h) shall
be subject to the following conditions: (i) no Specified Default shall exist on
the date of the Lessee's notice of renewal or the date of commencement of the
Renewal Term; and (ii) the Lessee shall have caused to be delivered to the Owner
Participant a residual value agreement which is either (a) a renewal of the RVG
or (b) a residual value agreement that is substantially identical to the RVG or
otherwise fully acceptable to the Owner Participant from or guaranteed by an
institution rated "A" or better by S&P or Moody's, and which (as to clauses (a)
and (b)) is in an amount which protects the Owner's Economic Return through the
end of the applicable Renewal Term and providing residual value protection as
provided in Exhibit B hereto.
. On any date selected by the Lessee, the Lessee shall have the right at its
option at any time during the Term, if no Specified Default exists, on at least
five Business Days' prior written notice to the Lessor, to terminate this Lease
with respect to any Engine by replacing such Engine, effective the termination
date, by complying with the terms of ss. 11(b) to the same extent as if an Event
of Loss had occurred to such Engine. Such termination and replacement shall
occur simultaneously. Upon the Lessee's compliance with its obligations under
the previous sentence, the Lessor will transfer to the Lessee (or a Person
designated by the Lessee) the Engine so terminated, "as is, where is" without
recourse or warranty, express or implied (except as to the absence of Lessor's
Liens), each such Engine shall no longer be an "Engine," and each such
Replacement Engine substituted therefor shall become an Engine. The Lessee shall
be responsible for any sales taxes or similar transfer taxes resulting from such
replacement.
. This Lease is a net lease, and the Lessee's obligation to pay all costs and
expenses of every character, whether seen or unforeseen, ordinary or
extraordinary, or structural or nonstructural, in connection with the use,
operation, maintenance, repair and reconstruction of the Airframe and each
Engine by the Lessee and the Lessee's obligation to pay all Rent payable
hereunder, and the rights of the Lessor in and to such Rent, shall be absolute
and unconditional and shall not be subject to any abatement, reduction,
suspension, deferment, set-off, or recoupment ("Abatements") for any reason
whatsoever, including Abatements due to any present or future claims of the
Lessee against the Lessor or any other Indemnitee under this Lease or otherwise,
or against any other Person for whatever reason. Except as otherwise expressly
provided herein, this Lease shall not terminate, nor shall the obligations of
the Lessee be affected, by reason of (a) any defect in or damage to, or any loss
or destruction of, the Aircraft or any part thereof, (b) any defect in the
title, airworthiness, condition, design, merchantability, operation, or fitness
for use of the Aircraft or any interest therein, (c) the interference with the
use thereof by any Person, (d) the invalidity or unenforceability or lack of due
authorization of this Lease, any other Operative Agreement, or any instrument or
document executed in connection herewith, (e) any insolvency, bankruptcy,
reorganization, or similar proceeding by or against the Lessee or any Sublessee,
or (f) any other cause, whether similar or dissimilar to the foregoing, and, to
the extent permitted thereby, any present or future law or regulation to the
contrary notwithstanding, it being the express intention of the Lessor and the
Lessee that all Basic Rent payable by the Lessee hereunder shall be, and
continue to be, payable in all events unless the obligation to pay that Basic
Rent is terminated pursuant to the express provisions of this Lease. If for any
reason whatsoever this Lease is terminated in whole or in part by operation of
law or otherwise, except as specifically provided herein, the Lessee nonetheless
agrees, to the extent permitted by law, to pay to the Lessor or to the Person
entitled thereto an amount equal to each Basic Rent payment at the time such
payment would have become due and payable in accordance with the terms hereof
had this Lease not been terminated in whole or in part. To the extent permitted
by applicable law, the Lessee hereby waives 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 Lease except in
accordance with the express terms hereof. Each payment of Basic Rent made by the
Lessee shall be final, and the Lessee shall not seek to recover all or any part
of such payment for any reason whatsoever, except for any payments made in
error. Notwithstanding the foregoing, the Lessee may assert any claims it may
have against any Person in an independent proceeding.
. Unless the Aircraft is purchased pursuant to ss. 3(g) or 16, at the expiration
of the Term or upon termination of this Lease pursuant to ss. 3(g) or 15, the
Lessee, at its own risk and expense, shall return the Aircraft in accordance
with Exhibit F.
. The Lessor's warranties in the Participation Agreement are in lieu of all
other warranties of the Lessor with respect to the Aircraft, and the Lessor
shall not be deemed to have modified in any respect the Lessee's obligations
pursuant to ss. 4, which obligations are absolute and unconditional. LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR, THE INDENTURE TRUSTEE AND THE
OWNER PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF,
(ii) THE AIRFRAME AND ENGINES ARE OF A DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY AND ACCEPTABLE TO LESSEE, (iii) LESSEE IS SATISFIED THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR THEIR RESPECTIVE PURPOSES AND (iv) NONE OF LESSOR,
THE INDENTURE TRUSTEE, OR THE OWNER PARTICIPANT MAKES, HAS MADE OR SHALL BE
DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(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 ENGINEOR 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.
LESSEE FURTHER WAIVES, DISCLAIMS, RELEASES AND RENOUNCES ANY LIABILITY, RIGHT,
CLAIM, REMEDY OR OBLIGATION WHETHER OR NOT ARISING FROM THE NEGLIGENCE (WHETHER
ACTIVE, PASSIVE OR IMPUTED) OF LESSOR, THE INDENTURE TRUSTEE OR THE OWNER
PARTICIPANT, ARISING OUT OF OR ATTRIBUTABLE TO THE USE, OPERATION OR PERFORMANCE
OF THE AIRFRAME, ANY ENGINEOR ANY PART.
. The Aircraft is and shall at all times remain the property of the Lessor,
except as otherwise expressly provided in the Operative Agreements.
. The Lessee shall not directly or indirectly create, incur, assume, or suffer
to exist any Lien on or with respect to the Lessor's Estate or this Lease or the
Aircraft, the Airframe or any Engine or any Part or title thereto or any
interest therein except: (a) the rights of the Lessor, the Owner Participant,
the Indenture Trustee, the Holders, and the Lessee as contemplated by the
Operative Agreements, (b) the rights of others under agreements or arrangements
to the extent permitted by ss. 9(f) and ss. 13, (c) Lessor's Liens, (d)
Indenture Trustee's Liens, (e) Liens for Taxes either not yet due or being
contested in good faith with due diligence and by appropriate proceedings so
long as there is no material risk of sale, forfeiture, loss, or loss of use of
any Item and so long as such contest does not extend beyond the end of the Term,
(f) inchoate materialmen's, mechanics', worker's, repairer's, employees', or
other like Liens arising in the ordinary course of business and for amounts the
payment of which either is not yet due or is being contested in good faith with
due diligence and by appropriate proceedings so long as there is no material
risk of sale, forfeiture, loss, or loss of use of the Aircraft, the Airframe or
any Engine or any interest therein and so long as such contest does not extend
beyond the end of the Term, (g) any Lien arising out of any judgment or award
with respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith by appropriate proceedings diligently conducted and
with respect to which there shall have been secured a stay of execution pending
such appeal or proceeding for review and so long as such appeal or proceeding
does not extend beyond the end of the Term, and (h) any Lien against which the
Lessee causes to be provided a bond in such amount and under such terms and
conditions as are reasonably satisfactory to the Lessor. The Lessee will
promptly, at its own expense, take or cause to be taken such action as may be
necessary to discharge any Lien which is not permitted by this ss. 8.
9. Registration; Maintenance; Records; Compliance and Use; Replacement Parts; Improvements;
.ooling of Parts; Insignia
. The Lessee shall, at its expense, cause the Aircraft to be duly registered, at
all times (except as provided below and except to the extent that such
registration is prevented by the legal status, or an act or omission, of the
Lessor, the Owner Participant, the Indenture Trustee, or any Holder) from and
after the Delivery Date, in the United States in the Lessor's name (except as
otherwise required by the Transportation Code) under the Transportation Code,
shall not (except as provided below) register the Aircraft under the laws of any
jurisdiction other than the United States, and shall not cause the Aircraft to
be ineligible for such registration; provided, that the Lessee may, in
connection with any Sublease, and in accordance with and subject to ss. 6.03(b)
of the Participation Agreement, cause the Aircraft to be registered under the
laws of a foreign jurisdiction.
. The Lessee shall cause each Item to be maintained, inspected, serviced,
repaired, overhauled, and tested (1) in accordance with an FAA-approved program
or (if the Aircraft has been re-registered in accordance with ss. 6.03(b) of the
Participation Agreement) a program of another governmental authority having
jurisdiction (but in any event in accordance with maintenance standards at least
comparable to those required by the FAA or JAA ("Minimum Maintenance
Standards")), (2) so as to keep each Item in as good operating condition as it
was in when delivered to the Lessee by the Manufacturer, reasonable wear and
tear excepted, and so as to enable the airworthiness certificate for the
Aircraft to remain in good standing at all times, except when the FAA or (if the
Aircraft has been re-registered in accordance with ss. 6.03(b) of the
Participation Agreement) other applicable aeronautical authority grounds all
Canadair Regional Jet, 200 ER Series Aircraft, (3) in the same manner and with
the same care as used by the Lessee (or a Permitted Sublessee) with respect to
similar aircraft and engines owned or leased and operated by the Lessee (or such
Permitted Sublessee), and (4) so as to comply with the applicable regulations of
the FAA or (if the Aircraft has been re-registered in accordance with ss.
6.03(b) of the Participation Agreement) other governmental authority having
jurisdiction (but in any event in accordance with Minimum Maintenance
Standards), except during a good-faith contest of the validity, applicability,
or alleged violation of the pertinent rule or regulation in any reasonable
manner that does not involve any material risk of sale, forfeiture or loss of
the Aircraft or any Engine or the interests of the Indenture Trustee or the
Owner Participant therein, and that does not involve any material risk of civil
liability or any risk of criminal liability against Lessor, the Indenture
Trustee or the Owner Participant and which does not extend beyond the end of the
Term if the pendency of such contest would adversely affect the Aircraft or the
remarketing thereof in any material respect; provided, that no contest shall
excuse the failure to maintain the airworthiness certification for the Aircraft
in good standing without the Lessor's written consent, nor shall the pendency of
any contest prevent a prohibition of use from becoming an Event of Loss. The
Lessee shall maintain all logs, manuals, certificates, data, and inspection,
modification, repair, and overhaul records required by the FAA (or any other
governmental body having jurisdiction) to be maintained in respect of each Item
(collectively, the "Manuals and Technical Records"), and such Manuals and
Technical Records shall be maintained in English (or be translated into English
on an ongoing basis) to the extent that they would need to be in English in
order to place the Aircraft on an FAA-approved maintenance program. Those
Manuals and Technical Records which are specific to the Aircraft (but not those
Manuals and Technical Records which are applicable to Canadair Regional Jet 200
ER series aircraft in general) shall, as between the Lessor and the Lessee and
all parties claiming through the Lessee, be the property of the Lessor but shall
become the property of the Lessee upon purchase by the Lessee of the Aircraft
pursuant to the terms of this Lease or upon the occurrence of an Event of Loss
and the Lessee's compliance with ss. 11(a)(1). The Lessee shall prepare for the
Lessor, and file, any reports required by any governmental authority as a result
of the Lessor's ownership of the Aircraft (and the Lessor shall furnish to the
Lessee and any Permitted Sublessee all reasonable co-operation in connection
therewith, at the Lessee's expense).
. The Lessee shall not cause or permit the Aircraft to be maintained, operated,
or used in violation of any law or any rule, regulation, treaty, statute, or
order of any government or governmental authority having jurisdiction, or in
violation of any airworthiness certificate, license, or registration relating to
the Aircraft issued by any such authority, except during a good-faith contest of
the validity, application, or alleged violation thereof in any reasonable manner
that does not involve any material risk of sale, forfeiture or loss of the
Aircraft or any Engine or the interests of the Indenture Trustee or the Owner
Participant therein (excluding any interests indemnified for under the Tax
Indemnity Agreement) and that does not involve any material risk of civil
liability or any risk of criminal liability against the Lessor, the Indenture
Trustee, or the Owner Participant, and which does not extend beyond the end of
the Term if the pendency of such contest would adversely affect the Aircraft or
the remarketing thereof in any material respect. If any such law, rule,
regulation, treaty, statute, order, certificate, license, or registration
requires alteration of the Aircraft, the Lessee shall obtain conformance
therewith at no expense to the Lessor and shall cause the Aircraft to be
maintained in proper operating condition thereunder. The Lessee and any
Sublessee shall have the right to operate the Aircraft or any Engine in any
geographical area; provided that neither the Lessee nor any Sublessee shall
operate the Aircraft or any Engine in any area excluded from coverage by any
insurance policy required by the terms of ss. 12, unless the Lessee or such
Sublessee has obtained, prior to such operation in such area, indemnification
from the Government, or other insurance, against the risks and in the amounts
required by ss. 12 covering such area or unless the Aircraft or Engine is only
temporarily located in such area as a result of an isolated occurrence
attributable to a hijacking, medical emergency, equipment malfunction, weather
conditions, navigational error or other similar unforeseen circumstances and the
Lessee or Sublessee is using good faith efforts to remove the Aircraft or Engine
from such area. Throughout the Term, as between the Lessee and the Lessor, the
possession, use, and maintenance of the Aircraft shall be at the risk and
expense of the Lessee. The Aircraft may not be operated, used, or located in any
declared war zone or in any area which is an area of recognized hostilities
(except to leave such a zone or area).
. Except as otherwise provided in ss. 11(e), the Lessee shall, at its own cost
and expense, promptly replace all Parts (other than Removable Improvements)
which become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair, or permanently rendered unfit for use for any reason whatsoever
(such substituted parts being "Replacement Parts"). In addition, in the ordinary
course of maintenance, overhaul, or testing, the Lessee may, at its own cost and
expense, remove any Parts, whether or not worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair, or permanently rendered unfit for
use, provided that such Parts (other than Removable Improvements) are promptly
replaced. All Replacement Parts (other than Removable Improvements) shall be
free and clear of all Liens (except for pooling arrangements to the extent
permitted by ss. 9(f) and other Permitted Liens) and shall be in good and
operable condition and capable of performing their intended purpose within
manufacturer's specifications. All Parts at any time removed from any Item shall
remain the property of the Lessor, no matter where located, until they have been
replaced by Replacement Parts which have been incorporated in such Item and
which meet the requirements for Replacement Parts specified above. Immediately
upon the incorporation of any Replacement Part (other than Removable
Improvements) in such Item as above provided, without further act, (1) title to
the removed Part shall vest in the Lessee, free and clear of all rights of the
Lessor, and such replaced Part shall no longer be a "Part" hereunder, (2) title
to such Replacement Part shall vest in the Lessor, subject only to a pooling
arrangement to the extent permitted by ss. 9(f), and (3) such Replacement Part
shall become subject to this Lease and shall be part of such Item to the same
extent as the removed Part. Notwithstanding the foregoing, the Lessee or any
Permitted Sublessee may remove, and not replace, up to $100,000 in aggregate
original cost (cumulative throughout the Term) of Parts that it reasonably deems
to be obsolete, the removal of which does not materially impair the value,
remaining useful life or utility of the Aircraft.
. The Lessee shall incorporate in the Aircraft any accessory, equipment, or
device, or make any improvement, modification, alteration, or addition thereto
(any such accessory, equipment, device, improvement, modification, alteration,
or addition being an "Improvement"), as is necessary from time to time to meet
the requirements of the FAA or any other governmental authority having
jurisdiction over the Aircraft. In addition, the Lessee may from time to time
install (or allow a Permitted Sublessee to install) any Improvement as the
Lessee (or any Permitted Sublessee) deems desirable in the proper conduct of its
business, provided that no such Improvement diminishes the value, utility, or
remaining useful life of any Item below the value, utility, and remaining useful
life that it would have had if that Improvement had not been made. Title to all
Improvements (other than Removable Improvements) shall, without further act,
vest in the Lessor.
Any Improvement that (1) is in addition to, and not in replacement of
or in substitution for, any Part originally incorporated in any Item or any
Replacement Part that replaced such an original Part, (2) is not required to be
incorporated in any Item pursuant to the first sentence of this ss. 9(e), and
(3) can be removed from such Item without impairing the value, utility, or
remaining useful life that such Item would have had at such time had such
Improvement not been made (a "Removable Improvement") shall not become an
accession to that Item or be subject to the Lien of the Indenture. At or before
the time that the Aircraft is returned to the Lessor, the Lessee may remove or
cause to be removed any Removable Improvement and shall repair or cause to be
repaired any damage to the Aircraft resulting from the installation or removal
of such Removable Improvement so as to restore the Aircraft to the value,
utility, and remaining useful life that it would have had at such time had such
Removable Improvement not been made, reasonable wear and tear excepted. Any
Removable Improvement not so removed before the time of return of the Aircraft
shall, at such time, become the property of the Lessor without further action by
the parties hereto.
If any Removable Improvement is owned by any third party or is subject
to a conditional sale contract or other security interest, then the Lessor
hereby agrees for the benefit of any such owner, conditional vendor, or secured
party that the Lessor will not acquire or claim, as against such owner,
conditional vendor, or secured party, any right, title, or interest in any such
Removable Improvement as the result of its installation on any Item; provided,
that the Lessor's agreement in this sentence shall be ineffective unless such
owner, conditional vendor, or secured party agrees in writing (a copy thereof to
be provided by the Lessee to the Lessor) and in a legally enforceable manner (a)
not to acquire or claim, as against the Lessor, any right, title, or interest in
any Item by reason of the installation of such Removable Improvement thereon,
and (b) promptly, after notice, to remove such Removable Improvement if the
Lessor declares this Lease to be in default.
. Any Part removed from any Item as provided in ss. 9(d) may be subjected to a
normal pooling arrangement customary in the airline industry entered into in the
ordinary course of the Lessee's or a Permitted Sublessee's business, provided
that (except for any removed Part that is a Removable Improvement) a Replacement
Part is incorporated in that Item in accordance with ss. 9(d) promptly after the
removal of the removed Part. In addition, any Replacement Part when incorporated
in an Item in accordance with ss. 9(d) may be owned by a Permitted Air Carrier
or a lessor to a Permitted Air Carrier subject to such a normal pooling
arrangement, provided that (unless the Replacement Part replaces a Removable
Improvement) the Lessee, promptly, either (1) causes title to such Replacement
Part to vest in the Lessor in accordance with ss. 9(d) by acquiring title
thereto for the benefit of, and transferring such title to, the Lessor free and
clear of all Liens (other than Permitted Liens), or (2) replaces such
Replacement Part by incorporating in that Item a further Replacement Part owned
by the Lessee free and clear of all Liens (other than Permitted Liens) and by
causing title to such further Replacement Part to vest in the Lessor in
accordance with ss. 9(d).
. The Lessee shall (1) cause each Item to be kept numbered with the
identification or serial numbers therefor as specified in the applicable Lease
Supplement, and (2) before locating the Airframe or any Engine outside the
United States, affix and maintain in such Airframe adjacent to and not less
prominent than the airworthiness certificate, or on such Engine in a prominent
location, a nameplate or stencil bearing the following legend:
This [Aircraft] [Engine] is subject to a security interest in
favor of The First National Bank of Maryland (as loan trustee)
and is leased from State Street Bank and Trust Company of
Connecticut, National Association (as owner trustee).
and such other markings as from time to time are required by law or otherwise
deemed necessary by the Lessor or the Indenture Trustee in order to protect the
Lessor's title to the Aircraft, the Lessor's rights under this Lease, and the
Indenture Trustee's rights with respect to the Aircraft. The Lessee shall
promptly replace any such required nameplate marking which has been removed,
defaced, or destroyed. Except as above provided, the Lessee will not allow the
name of any Person to be placed on any Item as a designation that might
reasonably be interpreted as a claim of ownership; provided, that nothing in
this ss. 9(g) shall prohibit the Lessee (or any Permitted Sublessee) from
placing appropriate lettering, painting, or markings (including its customary
colors and insignia, or those of any code-sharing affiliate) on any Item.
. At all reasonable times during the Term (but, except when a Specified Default
is then continuing, and except during the last six months of the Term, no more
than once per year for the Lessor and the Owner Participant and no more than
once per year for the Indenture Trustee), the Lessor, the Owner Participant and
the Indenture Trustee (or not more than two of their agents or authorized
representatives) may, upon not less than five days' prior written notice, at
their own cost and expense, inspect the Aircraft, the Airframe or any Engine and
the Lessee's books and records related thereto; provided, that, unless this
Lease has been declared to be in default in accordance with its terms, such
inspection shall be conducted so as not to interfere with the business of the
Lessee or the operation or maintenance by the Lessee (or a Permitted Sublessee)
of any aircraft and, as to any aircraft, shall be a visual, walk-around
inspection which may include going on board the aircraft, and shall not include
opening any panels, bays, or other apertures (but may include inspecting those
that are open); provided further, that the costs of inspection shall be borne by
the Lessee (and paid promptly upon demand) in the case of an inspection
conducted by such inspecting party after the occurrence of a Specified Default
which is then continuing. Promptly after the request of the Lessor, the Owner
Participant, or the Indenture Trustee, the Lessee or any Permitted Sublessee
shall provide the Lessee's or such Permitted Sublessee's schedule for upcoming
heavy maintenance checks and shall use commercially reasonable efforts to permit
such inspections by the Lessor, the Owner Participant or the Indenture Trustee
during such maintenance checks. Upon the request of the Lessor, the Owner
Participant, or the Indenture Trustee, the Lessee shall confirm the location of
any Item and shall, at any reasonable time, make any Item and all Manuals and
Technical Records relative thereto available to such requesting party (or its
agents or authorized representatives) for inspection and copying. The Lessor,
the Owner Participant and the Indenture Trustee shall have no duty to make any
such inspection nor shall the Lessor, the Owner Participant or the Indenture
Trustee incur any liability or obligation by reason of not making any such
inspection. Upon the request of the Lessor, the Lessee shall provide to the
Lessor, not more frequently than once per calendar month, a written report with
respect to the flight hours and cycles of operation of the Airframe and each
Engine during the period since the end of the period to which the most recent
such report related (or, if there has been no such previous report, since the
commencement of the Term) through the last day of the calendar month most
recently ended prior to the date of the current report.
. 11. Loss or Destruction; Requisition of Use
. If an Event of Loss occurs to the Airframe, the Lessee shall within 15 days
after such occurrence give to the Lessor and the Indenture Trustee written
notice of such Event of Loss and, within 60 days after such Event of Loss,
written notice of its election to perform one of the following two options (and
if the Lessee does not give the Lessor and the Indenture Trustee the notice of
such election within 60 days, the Lessee shall be deemed to have elected to
perform the option set forth in clause (2) of this ss. 11(a)):
(1) If this clause (1) is elected and no Event of Default
shall have occurred and then be continuing, the Lessee shall, within
180 days following such Event of Loss, convey or cause to be conveyed
to the Lessor, as replacement for the Airframe, good and marketable
title to an airframe of the same make and the same or a later model and
year of manufacture, having at least the value, utility, and remaining
useful life, and being in as good an operating condition, as the
Airframe subject to such Event of Loss (assuming that the Airframe had
been maintained and was in the condition required in accordance with
the terms of this Lease so as to enable the airworthiness certificate
for the Aircraft to remain in good standing) and otherwise meeting the
requirements set forth below (a "Replacement Airframe"), good and
marketable title to the same number of Replacement Engines as the
Engines, if any, installed on the Airframe when such Event of Loss
occurred, such Replacement Airframe and any such Replacement Engine(s)
to be free and clear of all Liens (other than Permitted Liens). In such
case, the Lessee shall promptly, at its expense: (aa) furnish the
Lessor with bills of sale, in form and substance reasonably
satisfactory to the Lessor, with respect to such Replacement Airframe
and any such Replacement Engine(s), (bb) cause such Replacement
Airframe to be duly registered in the Lessor's name at the FAA (or such
foreign jurisdiction as is permitted by ss. 9(a)), (cc) cause
amendments and/or supplements hereto and to the Indenture (subjecting
such Replacement Airframe and any such Replacement Engines to the Lien
of the Indenture), in form and substance reasonably satisfactory to the
Lessor and the Indenture Trustee, with respect to such Replacement
Airframe and any such Replacement Engine(s) to be duly executed by the
appropriate parties and recorded at the FAA (or such foreign
jurisdiction), (dd) furnish the Lessor and the Indenture Trustee with
evidence reasonably satisfactory to each of them of the value, utility,
and remaining useful life of, and good title to, such Replacement
Airframe and any such Replacement Engine(s) (including an appraisal by
a qualified independent appraiser reasonably satisfactory to the Owner
Participant certifying that such Replacement Airframe has a value,
utility and remaining useful life at least equal to, and is in as good
operating condition as, the Airframe replaced, assuming such Airframe
was in the condition required by the terms of this Lease immediately
prior to the occurrence of such Event of Loss and that any such
Replacement Engine satisfies the requirements for a "Replacement
Engine" as set forth in the definition thereof in Schedule I hereto, an
opinion of counsel addressed to the Lessor and the Indenture Trustee
that such Replacement Airframe and Replacement Engine(s) shall be
subject to the Lien of the Indenture, and an opinion of counsel expert
in FAA (or such foreign jurisdiction) matters as to the absence of all
Liens of record), (ee) furnish the Lessor and the Indenture Trustee
with evidence of compliance with the insurance provisions of ss. 12
with respect to such Replacement Airframe and any such Replacement
Engine(s) as such party may reasonably request, (ff) assign to the
Lessor the benefit of all assignable manufacturer's and vendor's
warranties with respect to such Replacement Airframe and any such
Replacement Engines, (gg) furnish the Lessor and the Indenture Trustee
with a certificate of the Lessee certifying compliance with this ss.
11(a)(1) and to the effect that, upon consummation of such replacement,
no Event of Default will exist, (hh) furnish the Lessor and the
Indenture Trustee with an opinion of counsel reasonably acceptable to
such party to the effect that, upon such conveyance, the Lessor's title
to such Replacement Airframe and any such Replacement Engines will be
free and clear of all Liens of record at the FAA (or such foreign
jurisdiction) and that such Replacement Airframe and any such
Replacement Engines will be leased hereunder and be subject to the Lien
of the Indenture to the same extent as the Aircraft replaced thereby,
(ii) furnish the Lessor with all documents, certificates, and other
opinions necessary to enable the Lessor to comply with the requirements
of ss. 9.08 of the Indenture, and (jj) take such other action as the
Lessor or the Indenture Trustee reasonably requests in order that such
Replacement Airframe and any such Replacement Engine(s) be properly
titled in the Lessor free and clear of all Liens (except Permitted
Liens), leased hereunder, and subjected to the Lien of the Indenture to
the same extent as the Airframe and any Engine(s) replaced thereby.
Upon compliance by the Lessee with this ss. 11(a) (1), the Lessor shall
transfer to the Lessee or its designee (subject to any insurer's
salvage rights), "as is, where is", without recourse or warranty,
express or implied (except as to the absence of Lessor's Liens), all
right, title, and interest conveyed to the Lessor in and to the
Airframe and any Engine(s) with respect to which such Event of Loss
occurred, together with any insurance proceeds relating to property
damage, if any. In connection with such transfer, the Lessee shall
prepare and the Lessor shall execute, all in recordable form, a bill of
sale evidencing such transfer, a release of the Airframe and any
Engine(s) to which such Event of Loss occurred, and such other
documents as the Lessee reasonably requests (all at the expense of the
Lessee). Any Engine not installed on the Airframe when such Event of
Loss occurred shall continue to be the property of the Lessor and
leased hereunder as part of the Aircraft. Upon such replacement, each
such Replacement Airframe and Replacement Engine shall be deemed part
of the property leased hereunder; the Replacement Airframe shall be an
"Airframe" and each such Replacement Engine shall be an "Engine" as
defined herein; and each such Replacement Airframe and Replacement
Engine shall be deemed part of the Aircraft. An Event of Loss covered
by this ss. 11(a)(1) shall not result in any change in Basic Rent,
Stipulated Loss Value, Termination Value, Renewal Rent and EBO Price.
The Lessee shall be responsible for any sales taxes or similar transfer
taxes resulting from such replacement.
(2) If the Lessee does not elect (or is deemed to have not
elected) to perform clause (1) of this ss. 11(a), or if the Lessee
fails to perform its obligations under clause (1) of this ss. 11(a),
the Lessee shall pay or cause to be paid to the Lessor an amount equal
to (v) the Stipulated Loss Value of the Aircraft, determined as of the
applicable date determined in accordance with the following sentence if
such date is a Stipulated Loss Value Date or, if such date is not a
Stipulated Loss Value Date, determined as of the following Stipulated
Loss Value Date (the date as of which Stipulated Loss Value is
determined as provided herein being referred to as the "SLV
Determination Date"), plus (w) all unpaid Basic Rent (and, if
applicable, Renewal Rent) due prior to the SLV Determination Date, less
(x) if such SLV Determination Date is not a Rent Payment Date, the pro
rata portion of Basic Rent (or, if applicable, Renewal Rent) paid in
advance on the most recent Rent Payment Date in respect of the period
commencing on the Loss Payment Date (as defined below) and ending on
the next Rent Payment Date, plus (y) that portion of Basic Rent (or, if
applicable, Renewal Rent) payable in arrears on such SLV Determination
Date, or, if such SLV Determination Date is not a Rent Payment Date,
the pro rata portion of the Basic Rent (or, if applicable, Renewal
Rent) payable in arrears on the following Rent Payment Date in respect
of the period commencing on the Rent Payment Date immediately preceding
the SLV Determination Date and ending on such SLV Determination Date,
plus (z) all other amounts of Supplemental Rent due on or before the
Loss Payment Date and any reasonable expenses and costs incurred in
connection with such Event of Loss by the Lessor, the Owner Participant
or the Indenture Trustee (including with respect to the related
prepayment of the Certificates). Such amount shall be paid (including
by application of proceeds from insurance carried under ss. 12(b)) on
the earlier of (x) the date within 180 days after the Event of Loss as
designated by the Lessee, and (y) three Business Days following receipt
of all proceeds (or, if earlier, proceeds in an amount at least equal
to Stipulated Loss Value) of the insurance carried under ss. 12(b)
(provided, that if the Lessee has not yet determined whether to elect
to perform the replacement option described in clause (1) of this ss.
11(a), then this clause (y) shall not require payment earlier than the
Business Day after the Lessee makes (or is deemed to have made) an
election of clause (2) of this ss. 11(a)) (the applicable date on which
Stipulated Loss Value is paid being referred to herein as the "Loss
Payment Date"). Upon payment in full of such Stipulated Loss Value and
all such other amounts, (aa) the Lessee's obligation to pay all
succeeding installments of Basic Rent, and the Term, shall terminate,
and (bb) the Lessor shall transfer to the Lessee or its designee
(subject to any insurer's salvage rights) "as is, where is", without
recourse or warranty, express or implied (except as to the absence of
Lessor's Liens), all right, title, and interest conveyed to the Lessor
in and to the Aircraft (and in connection with such transfer, the
Lessee shall prepare and the Lessor shall execute, all in recordable
form, a bill of sale evidencing such transfer, and a termination of
this Lease, and the Lessee shall prepare and the Indenture Trustee
shall execute, in recordable form, an Indenture release, all at the
Lessee's expense). The Lessee shall be responsible for any sales taxes
or similar transfer taxes resulting from such transfer.
. If an Event of Loss occurs to any Engine under circumstances in which no Event
of Loss occurs to the Airframe, the Lessee shall notify the Lessor and the
Indenture Trustee thereof within 30 days of obtaining knowledge thereof and
shall, within 90 days after the date of occurrence of such Event of Loss, duly
convey to the Lessor, as replacement for such Engine, title to a Replacement
Engine, free and clear of all Liens (other than Permitted Liens). At the time of
any such conveyance, the Lessee shall, at its expense: (1) furnish the Lessor
with a bill of sale, in form and substance reasonably satisfactory to the
Lessor, for such Replacement Engine, (2) cause supplements hereto and to the
Indenture (subjecting such Replacement Engine(s) to the Lien of the Indenture),
in form and substance reasonably satisfactory to the Lessor, for such
Replacement Engine to be duly executed by the appropriate parties and recorded
at the FAA or as appropriate under the laws of the country of registry for the
Aircraft, (3) execute and, if necessary, file such documents as the Lessor
reasonably requests to confirm the Lessor's ownership of, and title, to such
Replacement Engine, (4) furnish the Lessor and the Indenture Trustee with such
evidence of compliance with the insurance provisions of ss. 12 for such
Replacement Engine as such party reasonably requests, (5) assign to the Lessor
the benefit of all assignable manufacturer's and vendor's warranties with
respect to such Replacement Engine(s), (6) furnish the Lessor with all
documents, certificates, and opinions necessary to enable the Lessor to comply
with the requirements of ss. 9.08 of the Indenture, (7) upon request, furnish
the Lessor and the Indenture Trustee with an opinion of counsel reasonably
acceptable to each such party to the effect that, upon such conveyance, the
Lessor's title to such Replacement Engine will be free and clear of all Liens of
record at the FAA or in the country of registry for the Aircraft and that such
engine will be leased hereunder and be subject to the Lien of the Indenture to
the same extent as the Engine replaced thereby, (8) furnish the Lessor with a
certificate of the Lessee or any Permitted Sublessee certifying that such
Replacement Engine has a value, utility, and remaining useful life at least
equal to, and is in as good operating condition as, the Engine so replaced (in
each case without regard to the number of hours or cycles remaining until the
next scheduled maintenance visit, and assuming that such Engine was in the
condition and repair required by the terms hereof immediately before such Event
of Loss), (9) furnish the Lessor with a certificate of an aircraft advisor
reasonably satisfactory to the Owner Participant (who must be a nationally
recognized aircraft authority) certifying that such Replacement Engine satisfies
the requirements for a "Replacement Engine" as set forth in the definition
thereof in Schedule I hereto, (10) furnish the Lessor and the Indenture Trustee
with a certificate of the Lessee or any Permitted Sublessee certifying as to
compliance with this ss. 11(b), and (11) take such other action as the Lessor or
the Indenture Trustee reasonably requests in order that such Replacement Engine
be properly titled in the Lessor free and clear of all Liens (except Permitted
Liens), leased hereunder, and subjected to the Lien of the Indenture to the same
extent as the Engine replaced thereby.
Upon compliance by the Lessee with the terms of this ss. 11(b), (x) the
Lessor shall transfer to the Lessee or its designee (subject to any insurer's
salvage rights), "as is, where is", without recourse or warranty, express or
implied (except as to the absence of Lessor's Liens), all right, title, and
interest conveyed to the Lessor in and to the Engine to which such Event of Loss
occurred, together with any insurance proceeds relating to property damage, if
any, and (y) the Lessor and the Indenture Trustee shall (at the Lessee's
expense) release such replaced Engine from this Lease and the Indenture. Each
such Replacement Engine shall, upon such conveyance, be deemed part of the
property leased hereunder, shall be deemed an "Engine" and shall be deemed part
of the Aircraft. No Event of Loss to an Engine under the circumstances
contemplated by the terms of this ss. 11(b) shall result in any reduction in
Basic Rent. The Lessee shall be responsible for any sales taxes or similar
transfer taxes resulting from any such replacement.
. The Lessee hereby assumes and agrees to bear the risk of loss to each Item
and, except as provided in ss. 11(a) and ss. 11(b), shall not be released from
its obligations hereunder in the event of any damage to the Aircraft or any part
thereof or any Event of Loss relating thereto.
. A requisition of use which does not constitute an Event of Loss shall not
terminate this Lease, and each and every obligation of the Lessee with respect
thereto shall remain in force to the same extent as if such requisition had not
occurred, except to the extent that any failure or delay in the performance of
such obligations (other than any obligations for the payment of money) are
prevented or delayed by such requisition of use. The Lessee shall be entitled to
all sums, attributable to the period the Item(s) involved is/are subject to this
Lease, received by reason of any such requisition of use. All payments received
for the use of any Item after the Term shall be paid over to, or retained by,
the Lessor in the same manner as Rent under ss. 3(f) (or paid over to or
retained by the Lessee if it purchases the Aircraft in accordance with the
provisions hereof). The Lessee shall promptly notify the Lessor of any such
requisition.
. Any payments received at any time by the Indenture Trustee, the Lessor, or the
Lessee from any insurer under insurance (other than liability insurance and
other than insurance carried by the Lessee (or any Permitted Sublessee) in
excess of the insurance required to be maintained by the Lessee pursuant to ss.
12(b) or insurance maintained by the Lessor, the Owner Participant or the
Indenture Trustee at its own expense) maintained hereunder or from any
governmental authority or other Person with respect to an Event of Loss will be
applied as follows:
(1) if such payments are received as a result of an Event of
Loss to the Airframe (and any Engine then installed thereon), and the
Lessee does not make a replacement pursuant to ss. 11(a)(1), (aa) so
much of such payments as shall not exceed the Stipulated Loss Value for
the Aircraft shall be applied in reduction of the Lessee's obligation
to pay such Stipulated Loss Value if not already paid, or, if already
paid, shall be applied by the Lessor (or its assignee) to reimburse the
Lessee or its designee for the payment of such Stipulated Loss Value,
and (bb) the balance, if any, of such payments remaining thereafter
shall be paid over to, or retained by, the Lessee;
(2) if such payments are received as the result of an Event of
Loss to the Airframe, and the Lessee has made or is making a
replacement thereof pursuant to ss. 11(a)(1), such payments shall be
paid over to, or retained by, the Lessor in the same manner as Rent
under ss. 3(f), until the Lessee fully performs the terms of ss.
11(a)(1), after which such payments shall be paid over to, or retained
by, the Lessee; and
(3) if such payments are received as the result of an Event of
Loss to an Engine under the circumstances contemplated by ss. 11(b),
such payments shall be paid over to, or retained by, the Lessor in the
same manner as Rent under ss. 3(f), until the Lessee fully performs the
terms of ss. 11(b) with respect to that Event of Loss, after which such
payments shall be paid over to, or retained by, the Lessee.
If (x) the Lessor and the Indenture Trustee have received notice from
the Lessee pursuant to ss. 11(a) that, in connection with an Event of Loss, the
Lessee elects to replace the Airframe, or (y) an Event of Loss occurs to an
Engine under the circumstances contemplated by ss. 11(b), or (z) the Lessor or
the Indenture Trustee receives any proceeds of insurance maintained under ss.
12(b) pending completion of repairs to an Item, then each of the Lessor and the
Indenture Trustee shall use its reasonable efforts to invest, at the Lessee's
written request, direction, and risk, any payments that it receives with respect
to such Item from any insurer under insurance required to be maintained
hereunder or from the Lessee or any Permitted Sublessee or from any governmental
authority or other party. Any such investments shall be in obligations of the
type described in clause (a) of the definition of Permitted Investments, except
to the extent that another Permitted Investment is selected in writing by the
Lessee. All profits and losses on such investments and any taxes in respect
thereof shall be for the account of the Lessee. In order to make the payments to
the Lessee provided for in clauses (2) and (3) of this ss. 11(e) or in ss.
12(c), the Lessor and the Indenture Trustee are authorized to sell any
obligations so purchased and shall not be required to make such payments to the
Lessee until the Lessor or the Indenture Trustee (as the case may be) has had a
reasonable time to sell such obligations and to obtain the sale proceeds.
. Any amount referred to in this ss. 11 or in ss. 12(b) or (f) which is
otherwise payable to the Lessee shall not be paid to the Lessee if a Specified
Default exists at the time of payment, but shall be paid to and held by the
Lessor as security for the Lessee's obligations hereunder, and at such time as
no Specified Default exists, such amount shall be paid to the Lessee.
. 12. Insurance
. The Lessee shall maintain in effect, at all times during the Term,
comprehensive aircraft and general liability insurance (including passenger
legal liability insurance and property damage insurance (excluding
manufacturer's product liability insurance)) with respect to the Aircraft (1) in
amounts which are not less than the comprehensive aircraft and general liability
and property damage insurance applicable from time to time to similar aircraft
and engines which then comprise the Lessee's (or a Sublessee's) fleet on which
the Lessee (or such Sublessee) carries insurance, but in no event less than
$200,000,000 combined single limit per occurrence, (2) of the types and which
cover risks of the kind customarily insured against by the Lessee with respect
to similar aircraft and engines which it operates, and (3) maintained with
independent insurers of favorably-recognized responsibility (or, as to a foreign
Sublessee, recognized as responsible in the world aviation community). The
insurance required by this ss. 12(a) may be subject to self-insurance on a per
occurrence or fleet-wide basis, by way of deductible or premium adjustment
provisions in insurance policies or otherwise, in any amounts not to exceed the
greater of 5% of the net worth of ACA Inc. (based on the most-recent quarterly
financial statements of ACA Inc.) and $1,000,000.
During any period that the Aircraft is grounded and not in operation
for any reason, the Lessee may modify the insurance required by this ss. 12(a)
(i) to reduce the amounts of public liability and property damage insurance and
(ii) to modify the scope of the risks covered and the type of insurance, in both
circumstances to conform to such insurance customary in the United States
airlines industry for regional air carriers similarly situated with the Lessee
in respect of similar aircraft which are grounded, not in operation, and stored
or hangared, except that the amounts of coverage and scope of risk covered and
the type of insurance shall be the same as from time to time applicable to
aircraft owned or leased by Lessee on the ground, not in operation, and stored
or hangared.
. The Lessee shall maintain or cause a Permitted Sublessee to maintain in
effect, at all times during the Term (including any period during which the
Aircraft is grounded for any reason), with insurers of favorably-recognized
responsibility (or, as to a foreign Sublessee, recognized as responsible in the
world aviation community), all-risk ground and flight aircraft hull insurance
covering the Airframe and all-risk coverage for Engines and Parts while not
incorporated in the Airframe or an Engine, in an amount which, when paid
hereunder for an Event of Loss to the Airframe and any Engine(s) and engine(s)
then installed thereon, will be not less than the Stipulated Loss Value for the
Aircraft (computed for the following Payment Date); provided that neither the
Lessee nor any Permitted Sublessee shall be required to maintain all-risk flight
aircraft hull insurance with respect to any period in which the Aircraft is
grounded for any reason and properly stored or hangared. The Lessee may
self-insure, by way of deductible or premium adjustment provisions in insurance
policies or otherwise, the risks required to be insured against under this ss.
12(b), in any amounts not to exceed the greater of (x) $1,000,000, or (y) 5% of
the net worth of ACA Inc. (based on the most-recent quarterly financial
statements of ACA Inc.) (or, in either case, such higher amount as may be
approved by the Owner Participant). The Lessee shall maintain war risk insurance
(including political hijacking and governmental confiscation insurance) or
obtain indemnification from the Government with respect to the Aircraft only if
and to the extent that the Aircraft is operated in a war zone or area of
recognized hostilities.
. Any policies of insurance carried in accordance with this ss. 12: (1) shall
include the Additional Insureds as their interests appear as additional
insureds, (2) with respect to insurance carried in accordance with ss. 12(b),
shall be payable to the Indenture Trustee so long as the Lien of the Indenture
shall not have been discharged, and thereafter to the Lessor, and, if no
Specified Default exists, shall be disbursed to the Lessee (or other appropriate
Person specified by the Lessee) upon completion of repairs made to the Aircraft
so as to restore it to the operating condition required by ss. 9 or shall be
disbursed as otherwise required by this Lease; provided, that unless the Lessor
or the Indenture Trustee has notified the insurers that a Specified Default
exists, insurance proceeds not exceeding $3,000,000 for any single occurrence
and not involving an Event of Loss to the Aircraft may be payable directly to
the Lessee or any Permitted Sublessee, (3) shall provide that if the insurers
cancel such insurance for any reason whatever, or any change adverse to any
Additional Insured is made in policy terms or provisions, or the insurance is
allowed to lapse for nonpayment of premium or such insurance coverage is
reduced, such cancellation, change, lapse, or reduction shall not be effective
as to any Additional Insured for 30 days (seven days, or such other period as is
then customary in the airline insurance industry, in the case of any war risk
coverage) after such Additional Insured receives written notice of such
cancellation, change, lapse, or reduction, (4) shall provide that, in respect of
the interest of each Additional Insured in such policies, the insurance shall
not be invalidated by any action or inaction of the Lessee, any Sublessee, or
any other Person except such Additional Insured, (5) shall provide that the
insurers waive any rights of subrogation against the Additional Insureds, except
to the extent of any loss caused by the gross negligence or willful misconduct
of an Additional Insured, (6) shall provide that the Additional Insureds shall
have no obligation or liability for payment of any premiums, commissions, calls,
or assessments, and (7) shall provide that all proceeds in excess of $3,000,000
shall be paid to the Indenture Trustee so long as the Lien of the Indenture
shall not have been discharged, and thereafter to the Lessor, unless the insurer
has received notice that a Specified Default exists, in which case all proceeds
shall be paid to the Indenture Trustee so long as the Lien of the Indenture
shall not have been discharged, and thereafter to the Lessor. Each liability
policy (x) shall be primary without right of contribution from any other
insurance which is carried by the Additional Insureds, (y) shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured, and (z) shall provide that the insurers waive any right of setoff,
counterclaim, or other deduction against the Additional Insureds. In connection
with any insurance proceeds payable to the Additional Insureds for the repair of
any Item, the Additional Insureds shall respond as soon as possible to requests
of the Lessee to turn over such funds for the repair of such Item. With respect
to any Item, any amount received by an Additional Insured pursuant to insurance
carried under ss. 12 which exceeds such Item's Stipulated Loss Value on the date
such payment is received shall be promptly remitted to the Lessee or its
designee.
. At least once each year during the Term, the Lessee shall furnish to the
Additional Insureds a report signed by an independent broker certifying that
policies of insurance in the forms, covering the risks, and in the amounts
required by this ss. 12 are in full force and effect and that, in the opinion of
such broker, the insurance then carried and maintained in respect of the
Aircraft complies with the terms of this ss. 12, and including (i) confirmation
that the insurance has been placed with insurers, giving the name of each
insurer, the amount for which it insures (and any portion thereof which is
subject to a deductible), and the period of the policy, and (ii) confirmation
that all premiums due to the insurers have been paid. The Lessee (or any
Sublessee) shall instruct such firm to notify the Additional Insureds in writing
promptly of any defaults in the payment of any premium and of any other act or
omission on the part of the Lessee or any Sublessee or of any event of which
such broker has knowledge which might invalidate or render unenforceable, in
whole or in part, any insurance for the Airframe or any Engine.
. If the Lessee fails to cause insurance to be maintained as required by this
ss. 12, any Additional Insured may, after giving reasonable advance notice to
the Lessee of such Additional Insured's intent to do so, provide such insurance
and, in such event, the Lessee shall, upon demand, reimburse such Additional
Insured, as Supplemental Rent, for the cost thereof, without waiver of any other
rights such Additional Insured may have. Nothing in this Lease shall prohibit
the Lessor, the Owner Participant or the Indenture Trustee from insuring the
Airframe or any Engine, or its interest therein at its own expense in an amount
in excess of that required to be maintained hereunder, provided that such excess
insurance in no way increases the cost or limits the availability of any
insurance required to be maintained hereunder; provided further, that any
insurance policies of the Lessor, the Owner Participant or the Indenture Trustee
insuring the Airframe or any Engine shall provide for a release to the Lessee of
any and all salvage rights in and to the Airframe or any Engine.
. The Lessor (and the other Additional Insureds) shall accept, in lieu of
insurance against any risk with respect to any Item, indemnification from the
United States government against such risk in any amount which, when added to
the amount of any insurance against such risk maintained by or for the benefit
of the Lessee (including permitted deductibles and self-insurance) with respect
to any Item, shall be to the combined effect substantially the same as to amount
and risk (and in favor of the same parties) as insurance otherwise required by
this ss. 12.
. 13. Subleasing; Possession
. The Lessee shall not, without the Lessor's prior written consent, sublease, or
sublet or otherwise relinquish possession of the Aircraft, the Airframe or any
Engine, or permit any Engine to be installed on any airframe other than the
Airframe; provided that if no Specified Default shall have occurred and be
continuing at the time of commencement of such sublease or subletting or at the
time of such relinquishment of possession or such installation, the Lessee (and,
except as otherwise provided in this ss. 13(a) as to clause (6), any Sublessee)
may, without the Lessor's prior written consent:
(1) subject any Engine to normal interchange or pooling
arrangements customary in the airline industry and entered into in the
ordinary course of its business (and with any Permitted Air Carrier, in
the case of interchange arrangements), provided that no transfer of the
title of such Engine is required in connection therewith (but if the
Lessor's title to any such Engine is divested under any such
arrangement, such divestiture shall be deemed to be an Event of Loss to
such Engine and the Lessee shall comply with ss. 11(b) in respect of
such deemed Event of Loss);
(2) deliver possession of any Item to any qualified
organization for testing, maintenance, or overhaul work or for
Improvements to the extent required or permitted by ss. 9(e);
(3) install any Engine on an airframe owned by the Lessee (or
such Sublessee) free and clear of all Liens, except (aa) Permitted
Liens, (bb) Liens that do not apply to such Engine, (cc) the Lien of
any agreement which effectively provides that such Engine shall not
become subject to the Lien thereof, notwithstanding the installation of
such Engine on any airframe subject to the Lien of such agreement,
unless and until the Lessee (or such Sublessee) becomes the owner of
such Engine, and (dd) those created by the rights of other air carriers
under normal interchange or pooling agreements which are customary in
the airline industry and do not require the transfer of title to such
Engine;
(4) install any Engine on an airframe leased to the Lessee (or
such Sublessee) or owned by the Lessee (or such Sublessee) subject to a
conditional sale or other security agreement, so long as such Engine
does not become subject to a Lien (other than a Permitted Lien);
(5) install any Engine on an airframe owned by the Lessee (or
such Sublessee), leased to the Lessee (or such Sublessee), or owned by
the Lessee (or such Sublessee) subject to a conditional sale or other
security agreement under circumstances where neither clause (3) nor
clause (4) above applies (but if the Lessor's title to such Engine is
divested in connection with such installation, such divestiture shall
be deemed an Event of Loss to such Engine and the Lessee shall comply
with ss. 11(b) in respect of such deemed Event of Loss, the Lessor not
intending hereby to waive any right or interest it may have to or in
such Engine under applicable law until compliance by the Lessee with
such ss. 11(b));
(6) sublease any Item to any Permitted Sublessee; and
(7) subject any Item to (a) contracts with the United States
of America or any instrumentality or agency thereof, (b) wet leases
with third parties under which the Lessee has effective control of the
Aircraft in the ordinary course of the Lessee's business which shall
not be considered a transfer of possession hereunder, provided that the
Lessee's obligations under this Lease shall continue in full force and
effect notwithstanding any such wet lease, or (c) the CRAF Program;
provided, further, that (aa) the rights of any transferee shall be effectively
subject and subordinate (and, in the case of a sublease, shall be made expressly
subject and subordinate) to all the terms of this Lease including the Lessor's
right to repossession pursuant to ss. 15 and to avoid such sublease upon such
repossession, (bb) the 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, (cc) any such Sublease shall be for a period or
periods not to exceed the Term unless the Lessee has notified the Lessor of its
exercise of the purchase option pursuant to ss. 16, and (dd) no Sublessee may
sub-sublease any Item, except that a Permitted Sublessee who is an airframe or
engine manufacturer, or Affiliate thereof, may sub-sublease to any Permitted
Sublessee to whom a sublease would be permitted under this ss. 13(a). Any such
Sublease will require maintenance, use, and operation standards in accordance
with this Lease. The Lessee shall notify the Lessor and the Indenture Trustee of
any sublease promptly after entering into it, and shall provide the Lessor and
the Indenture Trustee with a copy of such Sublease. No relinquishment of
possession of any Item or Part shall in any way discharge or diminish any of the
Lessee's obligations.
As security for the Lessee's due and punctual payment of all Rent and
performance of all of its other covenants and obligations in the Operative
Documents, the Lessee hereby grants to the Lessor a security interest in all of
the Lessee's right, title, and interest in and to each Sublease, and all
payments, including payments of rent, insurance proceeds (other than public
liability insurance proceeds), and other amounts due or to become due
thereunder. The Lessee shall enter into a "Sublease Assignment" with respect to
each Sublease of the Airframe having a term of one year or longer. The Lessee
hereby (1) acknowledges and consents to the Lessor's assignment of all the
Lessor's right, title, and interest in and to the Lessee's right, title, and
interest in and to each Sublease, and all payments, including rent, insurance
proceeds (other than public liability insurance proceeds), and other amounts due
or to become due thereunder (excluding Excepted Payments), to the Indenture
Trustee under and pursuant to the Indenture, and (2) acknowledges that so long
as the Lien of the Indenture has not been discharged, all the Lessor's rights in
respect of such Sublease shall be exercisable as set forth in the Indenture. In
furtherance of the provisions of this paragraph, the Lessee agrees that each
Sublease for more than one year of the Airframe (x) shall contain a provision
substantially to the effect that the Sublessee agrees to pay all amounts due
under the Sublease to the Indenture Trustee (or to the Owner Trustee after the
Lien of the Indenture is discharged) after the Sublessee receives written notice
from the Indenture Trustee or the Owner Trustee to such effect (until the
Sublessee receives written notice from the Indenture Trustee to contrary effect)
and stating that a Specified Default exists under the Lease, and (y) shall be
accompanied by such Uniform Commercial Code financing statements as shall, in
the Lessor's reasonable opinion, be required to perfect and protect the security
interests of the Lessor and the Indenture Trustee in such Sublease.
. The Lessor hereby agrees for the benefit of each lessor or secured party of
any engine leased to the Lessee or owned by the Lessee subject to a conditional
sale or other security agreement that the Lessor shall not acquire or claim, as
against such lessor or secured party, any right, title, or interest in any
engine as the result of the installation of such engine on the Airframe at any
time while such engine is subject to such lease or conditional sale or other
security agreement and owned by such lessor or subject to a security interest in
favor of such secured party.
(d) Civil Reserve Air Fleet Program. The other provisions of this Lease
to the contrary notwithstanding, the Lessee may transfer possession of the
Aircraft or any Engine to the United States of America or any other
instrumentality or agency thereof as part of the Civil Reserve Air Fleet Program
("CRAF Program") for a period not to extend beyond the end of the Term;
provided, that if, at any time during the Term, the Aircraft is called into
service by the Government pursuant to the CRAF Program and is not returned or
released by the Government on or before the last scheduled day of the Term, the
Term shall be extended automatically for up to an additional six months
thereafter. The Lessee will promptly notify the Lessor in writing in the event
of the requisition for use of the Aircraft under CRAF Program activation by the
Government ("Civil Reserve Air Fleet Requisition"). All of the Lessee's
obligations under this Lease will continue to the same extent as if such
requisition had not occurred. If there is a requisition for use of the Aircraft
pursuant to the CRAF Program or CRAF Program activation, there may be
substituted for all or any part of the insurance required by ss. 12 insurance
provided under 49 U.S.C. ss. 44301 et seq. or Government indemnification;
provided, that the Lessee will remain responsible for full compliance with all
the provisions of this Lease whether or not Government insurance or Government
indemnification satisfies the Lessee's obligations under this Lease. If there is
a requisition for use of the Aircraft pursuant to the CRAF Program or CRAF
Program activation, there will be no limitation on the geographic area in which
the Aircraft may be operated. The Lessee hereby assigns to the Lessor all rights
to payment for the Aircraft by the Government under the CRAF Program to secure
all the Lessee's obligations to pay Rent and to perform its other obligations
under the Operative Agreements. At such time as the Lessor is paid in full for
all amounts it is due and owed by the Lessee, the aforesaid assignment shall
terminate without further act of the parties and all such amounts owed by the
Government under the CRAF Program to the Lessee but paid to the Lessor, which
the Lessor has not previously applied to compensate itself for amounts due
hereunder from the Lessee, shall be paid to the Lessee.
. Each of the following shall constitute an "Event of Default" (whether any such
event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body) so long as it has not been remedied:
(a) Basic Rent. The Lessee fails to make any payment of Basic Rent,
Renewal Rent, Stipulated Loss Value or Termination Value or a payment of
Supplemental Rent constituting any Make-Whole Premium payable with respect to
any Certificate under the terms of the Indenture when due and such failure
continues for five Business Days after the due date.
(b) Other Supplemental Rent. The Lessee fails to make any other payment
of Supplemental Rent (other than Stipulated Loss Value, Termination Value or any
Make-Whole Premium payable with respect to any Certificate under the terms of
the Indenture) when due and such failure continues for ten Business Days after
the Lessee receives written notice thereof (except that with respect to any
failure to pay Excepted Payments for such period, such failure shall constitute
an Event of Default at the discretion of the Owner Participant).
(c) Insurance. The Lessee fails to cause insurance to be maintained in
accordance with ss. 12.
(d) Covenants. The Lessee or ACA Inc. fails to perform or observe any
of the other covenants to be performed or observed by it hereunder or under any
Operative Agreement and such failure continues for at least 30 days after the
Lessee receives written notice thereof, unless such failure cannot be remedied
with diligent effort during such 30-day period and the Lessee (i) determines in
good faith that such failure may be remedied with additional efforts and (ii) is
diligently proceeding by appropriate proceedings to correct such failure, in
which case such failure continues for such longer period (not exceeding 180 days
from the date of notice) as may be necessary to remedy such failure with
diligent effort of the Lessee.
(e) Representations. Any representation or warranty of the Lessee or
ACA Inc. in any Operative Agreement (excluding those in the Tax Indemnity
Agreement) is incorrect in a material respect when made, remains material when
discovered, and, if the effect of such misrepresentation is curable, is not
cured within 30 days after the Lessee's receipt of written notice from the
Lessor.
(f) Appointment of Receiver, etc. The Lessee or ACA Inc. consents to
the appointment of a receiver, trustee, or liquidator of itself or substantially
all of its property, shall generally not pay its debts as they come due, admits
in writing its inability to pay its debts generally as they come due, or makes a
general assignment for the benefit of creditors.
(g) Voluntary Bankruptcy. The Lessee or ACA, Inc. (1) files a voluntary
petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation or other relief in a proceeding under any bankruptcy
laws or other insolvency laws, as now or hereafter in effect, or an answer
admitting the material allegations of a petition filed against the Lessee or
ACA, Inc. in any such proceeding, or (2) by voluntary petition, answer, or
consent, the Lessee or ACA Inc. seeks relief under the provisions of any other
existing or future bankruptcy or other similar law providing for the
reorganization or winding-up of corporations or providing for an agreement,
composition, extension, or adjustment with its creditors.
(h) Involuntary Appointment. An order, judgment, or decree is entered
in any proceeding by any court of competent jurisdiction appointing, without the
Lessee's or ACA Inc.'s consent, a receiver, trustee, or liquidator of the Lessee
or ACA, Inc. or of substantially all of its property, or sequestering
substantially all of the Lessee's or ACA, Inc.'s property, and any such order,
judgment, decree, or sequestration remains in force undismissed, unstayed, and
unvacated for at least 90 days after the date of entry.
(i) Involuntary Bankruptcy. A petition against the Lessee or ACA, Inc.
in a proceeding under applicable bankruptcy laws or other insolvency laws, as
now or hereafter in effect, is filed and is not withdrawn or dismissed within 90
days thereafter, or, under any law providing for reorganization or liquidation
of corporations which shall apply to the Lessee or ACA, Inc., any court of
competent jurisdiction assumes jurisdiction, custody, or control of the Lessee
or ACA, Inc. or of substantially all of its property and such jurisdiction,
custody, or control remains in force unrelinquished, unstayed, and unterminated
for at least 90 days.
(j) Air Carrier Status. The Lessee fails or ceases to be a Section 1110
Person.
(k) ACA Guaranty. The ACA Guaranty ceases to be in full force and
effect, or ACA Inc. repudiates the validity of the ACA Guaranty, in each case,
at any time prior to the termination of such ACA Guaranty in accordance with its
terms.
. 15. Remedies
. Upon the occurrence of (x) any Event of Default specified in ss. 14(f), (g),
(h), or (i), this Lease shall be deemed to be in default without any act or
notice of any kind, all of which are hereby waived, and (y) any other Event of
Default, so long as it continues, the Lessor may, at its option, declare this
Lease to be in default, and in either case at any time thereafter, the Lessor
may exercise one or more of the following remedies as the Lessor in its sole
discretion shall lawfully elect:
(1) cancel (in the sense of UCC ss. 2A 505(1)), terminate or
rescind this Lease or cause the Lessee, upon the Lessor's written
demand and at the Lessee's cost and expense, to return promptly (and
the Lessee thereupon shall return promptly), all or such part of the
Aircraft as the Lessor so demands, to the Lessor or its order in the
manner and condition required by, and otherwise in accordance with all
the provisions of, ss. 5 as if the Aircraft were being returned at the
end of the Term, or if the Lessee does not so deliver such Item(s), the
Lessor may enter upon the premises where all or any part of the
Aircraft is located and take immediate possession of and remove the
same (together with any engine that is installed on the Airframe,
subject to the rights of any owner, lessor, lienor, or secured party of
such engine) by summary proceedings or otherwise, all without becoming
liable for or by reason of such entry or taking of possession or
removal, whether for the restoration of damage to property caused by
such action or otherwise;
(2) with or without taking possession thereof, sell any Item
at public or private sale, free and clear of any rights of the Lessee,
or otherwise dispose of, hold, use, operate, lease to others, or keep
idle any Item as the Lessor, in its sole discretion, may determine, all
free and clear of any rights or claims of the Lessee or any Sublessee
and without any duty to account to the Lessee with respect to such
action or inaction or for any proceeds with respect thereto, except as
otherwise provided herein;
(3) whether or not the Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under clause (1) or
(2) above with respect to any Item, the Lessor, by written notice to
the Lessee specifying a payment date (the "Default Payment Date") which
shall be the Stipulated Loss Value Date next occurring not less than 10
days after the date of such notice, may cause the Lessee to pay to the
Lessor, and the Lessee shall pay to the Lessor, on the Default Payment
Date, as liquidated damages for loss of a bargain and not as a penalty
(in lieu of all Basic Rent accruing on or after the Default Payment
Date), any unpaid Basic Rent due prior to the Default Payment Date
(together with interest on such amount at the Past Due Rate from the
Payment Date as of which such Basic Rent was not paid until the actual
date of payment of such amount) plus an amount equal to the excess, if
any, of (aa) the Basic Rent for the Aircraft for the remainder of the
Basic Term or then effective Renewal Term (disregarding any
cancellation under this ss. 15) over (bb) the aggregate Fair Market
Rental of the Aircraft for such period, after discounting such Basic
Rent and Fair Market Rental semi-annually to present value as of the
Default Payment Date at the rate per annum equal to the Debt Rate;
(4) if the Lessor sells the Aircraft, the Lessor may elect, in
lieu of exercising its rights under clause (3), to require the Lessee
to pay to the Lessor, and the Lessee in such event shall pay to the
Lessor, on the date of such sale, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of all Basic Rent accruing after
such sale occurs), any unpaid Basic Rent due before such sale date
less, if such sale date is not a Rent Payment Date, the pro rata
portion of Basic Rent payable in advance in respect of the period
commencing on the sale date and ending on the next Rent Payment Date
(together with interest on such amount at the Past Due Rate from the
Payment Date(s) as of which such Basic Rent was not paid until the
actual date of payment of such amount) plus the amount of any
deficiency between the net proceeds of such sale and the Stipulated
Loss Value of the Aircraft as of the date of such sale (or, if such
date is not a Stipulated Loss Value Date, then the Stipulated Loss
Value Date following the sale date, which Stipulated Loss Value shall,
if such sale date is a Rent Payment Date, include that portion of Basic
Rent payable in arrears on such date, and if such sale date is not a
Rent Payment Date, include the pro rata portion of Basic Rent payable
in arrears on the next Rent Payment Date in respect of the period
commencing on the Rent Payment Date immediately preceding the sale date
and ending on such sale date), together with interest on such
Stipulated Loss Value at the Past Due Rate from the Stipulated Loss
Value Date as of which such Stipulated Loss Value is determined until
the date of actual payment of such amount;
(5) the Lessor may proceed by appropriate court action or
otherwise to enforce the terms hereof or to recover damages for the
breach hereof, including payment of Basic Rent and Renewal Rent;
(6) the Lessor may exercise any other right or remedy available to it under applicable
laws; or
(7) the Lessor or any other Indemnitee may enforce payment of
Supplemental Rent.
In addition, the Lessee shall be liable, except as otherwise provided
above, to the Lessor and any other Indemnitee for any and all unpaid Rent due
hereunder before, during, and after the exercise of any of the foregoing
remedies, and for all reasonable legal fees and other costs and expenses
incurred by reason of the occurrence of any Event of Default or the exercise of
remedies with respect thereto, including any Make-Whole Premium and including
all costs and expenses incurred in connection with (xx) any bankruptcy or
insolvency proceeding, (yy) any retaking of any Item, or the return of any Item
in accordance with the terms of ss. 5, or (zz) in placing any Item in the
condition and airworthiness required by ss. 5.
. The Lessee shall be liable for all costs, charges, and expenses, including
reasonable legal fees and disbursements, incurred by the Lessor or any other
Indemnitee by reason of the occurrence of any Event of Default or the exercise
of remedies with respect thereto, which amounts shall be reimbursed on an
After-Tax Basis.
. To the extent permitted by applicable law, the Lessee hereby waives any and
all rights that the Lessee may have under any bankruptcy, insolvency, or similar
laws, rules, or regulations to the continued possession or use of the Aircraft,
or with respect to the payment of Rent therefor, or with respect to this Lease.
. No remedy referred to herein is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy referred to in this ss. 15 or
otherwise available to the Lessor at law or in equity. No express or implied
waiver by the Lessor of any Default shall in any way be, or be construed to be,
a waiver of any future or subsequent Default. The failure or delay of the Lessor
in exercising any rights granted to it hereunder shall not constitute a waiver
of any such right upon the continuation or recurrence of the underlying event or
circumstance, and any single or partial exercise of any particular right by the
Lessor shall not exhaust that right or constitute a waiver of any other right
provided herein.
. 16. Purchase Options
. Provided that no Specified Default exists on the purchase date, the Lessee
shall have the option to purchase the Aircraft (i) on the EBO Date shown on
Exhibit B (the "EBO Date") for the EBO Price shown on Exhibit B (the "EBO
Price") plus any applicable Make-Whole Premium owing with respect to the
Certificates and, if such EBO Date is not a Rent Payment Date, less the pro rata
portion of Basic Rent (or Renewal Rent, as the case may be) payable in advance
in respect of the period commencing on the EBO Date and ending on the next Rent
Payment Date, and plus the pro rata portion of Basic Rent payable in arrears on
such next Rent Payment Date in respect of the period commencing on the Rent
Payment Date immediately preceding the EBO Date and ending on such EBO Date (and
if such option is exercised, any Basic Rent otherwise payable in advance on the
date of purchase shall not be due or payable); (ii) at the end of the Basic Term
or any Renewal Term, for the then-current Fair Market Value of the Aircraft; and
(iii) if a Materially Adverse Tax Event occurs with respect to the Aircraft, for
an amount equal to the then-current Fair Market Value of the Aircraft (or, if
greater, the Termination Value thereof), determined as of the date of purchase,
plus all accrued and unpaid Rent with respect to periods prior to the date of
purchase, less the pro rata portion of Basic Rent or Renewal Rent, as the case
may be, paid in advance on the Rent Payment Date immediately preceding the date
of purchase in respect of the period commencing on such purchase date and ending
on the next Rent Payment Date (including any applicable Make-Whole Premium owing
with respect to the Certificates), but excluding any Basic Rent payable in
advance on such payment date.
The Lessee may elect to exercise any such purchase option by providing
to the Lessor and the Indenture Trustee, in the case of the options described in
clauses (i) and (iii) above, not less than 30 days' prior written notice, in the
case of the option described in clause (ii) above, not less than 270 days' prior
written notice (which notice shall become irrevocable 180 days prior to the end
of the Basic Term or the applicable Renewal Term, as applicable, if not
previously revoked, and in the case of the option described in clause (iii)
above, not less than 90 days' prior written notice. Any purchase option
described in this ss. 16 may, at the election of the Lessee, be exercised by a
designee of the Lessee.
. On the purchase date specified by the Lessee under ss. 16(a), the Lessee shall
purchase the Aircraft from the Lessor and the Lessor shall sell the Aircraft to
the Lessee or its assignee or nominee, on an "as is, where is" basis, without
representation or warranty, express or implied (except as to the absence of
Lessor's Liens), for immediately available funds (U.S. dollars). Upon payment of
(1) such purchase price, and (2) all Supplemental Rent then due and owing, the
Lessor shall execute and deliver to the Lessee, or to the Lessee's assignee or
nominee, a bill of sale, without representations or warranties, express or
implied (except as to the absence of Lessor's Liens), for the Aircraft, together
with such other documents as may be required to release the Aircraft from the
terms and scope of this Lease and to transfer title thereto to the Lessee or
such assignee or nominee, and the Indenture Trustee shall execute and deliver an
Indenture release for the Aircraft, all in such form as the Lessee reasonably
requests and all at the Lessee's expense. If no purchase under this ss. 16 shall
have occurred on the applicable purchase date as the result of the Lessee's
failure to meet any condition to such purchase set forth in any Operative
Agreement, this Lease shall continue in full force and effect as if no notice
had been given by the Lessee.
. All notices or consents under this Agreement shall be in writing (including
telecopies), shall be in English, shall be effective on delivery, and shall be
addressed as follows (or to such other address as an addressee shall designate
by notice to the other party):
(a) if to the Lessee:
Atlantic Coast Airlines
515A Shaw Road
Dulles, VA 20166
Attention: General Counsel
Fax: (703) 925-6294
(b) if to the Lessor:
State Street Bank and Trust Company
of Connecticut, National Association
225 Asylum Street (Goodwin Square)
Hartford, CT 06103
Attn: Corporate Trust Department
Fax: (860) 986-7920
(with copies to the Indenture Trustee and to the Owner Participant at
its address specified in the Participation Agreement)
(c) if to the Indenture Trustee:
The First National Bank of Maryland
25 South Charles Street
Baltimore, MD 21201
Attn: Corporate Trust Department
Fax: (410) 244-4236
. This Lease shall bind, and (subject to limitations in the Operative
Agreements) shall benefit and may be enforced by, (a) the Lessor and its
successors and assigns, and (b) the Lessee and its successors and assigns.
Lessee will not, without the prior written consent of Lessor, assign any of its
rights or obligations hereunder or in the Aircraft except as otherwise provided
in the Operative Agreements. Lessor agrees that it will not assign or convey its
right, title and interest in or to this Lease or the Aircraft except as provided
in the Operative Agreements.
. If the Lessee fails to make any required payment of Rent or to perform or
comply with any of its other agreements herein, the Lessor or the Owner
Participant may (but shall not be obligated to), after giving reasonable advance
notice to the Lessee of the Lessor's intent to do so, make such payment or
perform or comply with such agreement, and the amount of such payment and of the
Lessor's and the Owner Participant's reasonable expenses incurred in connection
with such payment or the performance of or compliance with such agreement,
together with interest thereon at the Past Due Rate from (and including) the
date of making such payment or incurring such expenses to the date of payment by
the Lessee, shall be Supplemental Rent, payable by the Lessee upon demand. No
such payment or performance by the Lessor or the Owner Participant shall waive
any Default or relieve the Lessee of its obligations hereunder.
. On the Delivery Date, the Lessee will cause this Lease (including the Lease
Supplement) and the Indenture (including the Indenture Supplement) to be duly
filed and recorded at the FAA. In addition, the Lessee will promptly and duly
execute and deliver to the Lessor such further documents and assurances and take
such further action as the Lessor from time to time reasonably requests in order
to carry out more effectively the intent of this Lease and to establish and
protect the rights and remedies created or intended to be created in favor of
the Lessor hereunder, including the execution and delivery of supplements or
amendments hereto, in recordable form, and the recording or filing of
counterparts hereof or thereof, in accordance with the laws of such
jurisdictions the Lessor from time to time reasonably deems advisable and, if
requested by the Lessor, the execution and delivery of terminations or releases
in connection with any transfer of any Item upon the termination, expiration, or
cancellation of this Lease in accordance with the terms hereof.
. If any successor trustee for the Lessor is appointed pursuant to the terms of
the Trust Agreement, such successor trustee shall, upon giving written notice to
the Lessee, succeed to all the rights, powers, and title of the Lessor hereunder
and shall be the Lessor and the owner of the Aircraft for all purposes hereof,
without the necessity of any consent or approval by the Lessee and without in
any way altering the terms of this Lease or the Lessee's obligations hereunder.
One such appointment and designation of a successor trustee shall not exhaust
the right to appoint and designate further successor trustees pursuant to the
Trust Agreement, but such right may be exercised repeatedly so long as this
Lease is in effect.
. State Street Bank and Trust Company of Connecticut, National Association is
entering into this Lease solely as trustee under the Trust Agreement and not in
its individual capacity, and shall not be personally liable for any of the
statements, representations, warranties, agreements, or obligations of the
Lessor hereunder or for any loss with respect thereto, as to all of which the
Lessee agrees to look solely to the Trust Estate; provided, that SSB shall be
liable hereunder for its own gross negligence or willful misconduct or for a
breach of its representations and warranties made in its individual capacity,
and SSB accepts the benefits of the indemnification granted, and representations
and warranties made, to it hereunder.
. 23. Amendments and Miscellaneous
. The terms of this Lease shall not be waived, modified, amended, supplemented,
or terminated in any manner whatsoever except by written instrument signed by
the Lessor and the Lessee.
. Except as otherwise provided herein or therein, all agreements, indemnities,
representations, and warranties in this Lease or the other Operative Agreements
shall survive the execution and delivery of this Lease and, with respect to
events (or, in the case of Taxes, to periods of time) occurring during the Term,
or relating to a Default or exercise of remedies with respect thereto which
extends beyond the Term, the expiration, cancellation, or other termination of
this Lease.
. Any provision of this Lease that is or becomes 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. To the extent permitted by applicable law, the Lessee and
the Lessor hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
. This Lease and the other Operative Agreements represent the entire agreement
of the parties hereto with respect to the subject matter hereof, and supersede
any and all prior understandings. This Lease is an agreement of lease, and
nothing herein shall be construed as conveying to the Lessee any right, title,
or interest in or to the Aircraft, except as lessee only.
. This Lease Agreement may be executed in any number of counterparts , each of
which shall be an original (except that only the counterpart bearing the receipt
executed by the Indenture Trustee shall be the original for purposes of
perfecting a security interest therein as chattel paper under the Uniform
Commercial Code), but all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Lease Agreement
by signing any such counterpart. To the extent that this Lease Agreement
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction), no security interest in this
Lease Agreement may be created through the transfer or possession of any
counterpart other than the original chattel-paper counterpart, which shall be
the counterpart containing the receipt executed by the Indenture Trustee on its
signature page.
. THIS LEASE IS BEING DELIVERED IN THE STATE OF NEW YORK, AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (EXCLUDING
ANY CONFLICTS-OF-LAWS PRINCIPLE THAT WOULD APPLY THE LAWS OF ANY OTHER
JURISDICTION).
. The headings in this Lease are for convenience of reference only, and are not a substantive part of this Lease.
. 24. Performance by Sublessee
Performance of any or all of the Lessee's obligations under this Lease
by any Sublessee shall, for all purposes hereof, constitute performance by the
Lessee of such obligations to the extent of such performance; provided that the
Lessee shall remain primarily liable hereunder for the performance of all the
terms of this Lease to the same extent as if such sublease had not occurred.
25. Quiet Enjoyment.
So long as no Event of Default shall have occurred and be continuing,
the Lessor covenants that neither it nor any other Person lawfully claiming
through it shall interfere with the Lessee's or any Permitted Sublessee's right
to possess and use the Aircraft or the Lessee's ability to exercise its rights
and privileges under this Lease without hindrance or disturbance by it or any
such other Person.
26. Security For Lessor's Obligations.
(a) Security for Lessor's Obligations to Holders. In order to secure
the indebtedness evidenced by the Certificates, the Indenture provides for the
assignment by the Lessor to the Indenture Trustee of this Lease and for the
creation of a first mortgage and security interest in favor of the Indenture
Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment
(subject to the reservations and conditions therein set forth) and the receipt
of a copy of the Indenture.
(b) Consent of Lessee to Assignment of Lease as Security. The Lessee
hereby acknowledges and consents to the Indenture Trustee's rights pursuant to
the terms of the Indenture to receive payments (other than Excepted Payments)
due under this Lease, to transfer or assign title to the Aircraft subject to
this Lease, to make (jointly with the Lessor where provided in the Indenture)
all waivers and agreements except as otherwise provided in the Indenture
(including ss. 8.01 thereof), to give all notices, consents, and releases and to
take all action upon the happening of an Event of Default (except as otherwise
specifically provided in the Indenture, including ss. 8.01 thereof), or to do
any and all other things whatsoever which the Lessor is or may become entitled
to do under this Lease (except as otherwise provided in the Indenture, including
ss. 8.01 thereof); all or any of which rights, obligations, benefits, and
interests may, pursuant to the terms of the Indenture, be reassigned or
retransferred by the Indenture Trustee at any time and from time to time (except
as otherwise provided in the Indenture); provided, that the Lessor, except to
the extent, and for such time as, it is unable to do so by virtue of the
Indenture, shall remain liable for the performance of all the covenants for
which it is obligated under this Lease notwithstanding such assignment.
. 27. Submission to Jurisdiction; Venue
(a) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTSOF THE STATE OF NEW YORK
IN THE 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.
(b) 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.
(c) 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 ARRISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Lessee and the Lessor have executed this Lease Agreement (Atlantic Coast
Airlines Trust No. ____).
ATLANTIC COAST AIRLINES, Lessee
By:
Title:
By:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION (not
in its individual capacity
(except as expressly
otherwise provided herein)
but solely as owner
trustee), Lessor
By:
Title:
[This is the Original counterpart of the Lease Agreement for chattel paper purposes.]
[or]
[This is a Duplicate executed counterpart of the Lease Agreement, and is not
the original for chattel paper purposes.]
<PAGE>
EXHIBIT A
LESSOR'S INTEREST UNDER THIS LEASE SUPPLEMENT
IS SUBJECT TO A SECURITY INTEREST
LEASE SUPPLEMENT NO. 1
(Atlantic Coast Airlines Trust No. ________)
This Lease Supplement No. 1 (Atlantic Coast Airlines Trust No.
_______), dated ___________ __, ____, is entered into between State Street Bank
and Trust Company of Connecticut, National Association, a national banking
association, not in its individual capacity, but solely as Owner Trustee under
the Trust Agreement (Atlantic Coast Airlines Trust No. _______) dated as of
September 1, 1997 (the "Lessor"), and Atlantic Coast Airlines, a California
corporation (the "Lessee").
Recitals:
The Lessor and the Lessee have entered into a Lease Agreement (Atlantic
Coast Airlines Trust No. ______), dated as of __________, 199_ (the "Aircraft
Lease", the defined terms in the Aircraft Lease being used in this Lease
Supplement with the same meaning as in the Aircraft Lease), which provides for
the execution and delivery of a supplement, substantially in the form of this
Lease Supplement, for the purpose of leasing under the Aircraft Lease the
aircraft and engines described below ("Aircraft") as and when delivered by the
Lessor to the Lessee in accordance with the terms of the Aircraft Lease.
The Aircraft Lease relates to the Aircraft.
A counterpart of the Aircraft Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such attachment,
is being filed for recordation on this date with the FAA as one document.
The Lessor and the Lessee agree as follows:
1. Delivered Aircraft. The Lessor hereby delivers and leases to the
Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor
under the Lease, the following described Canadair Regional Jet, Series 200ER
Aircraft (the "Delivered Aircraft"), which Delivered Aircraft as of the date of
this Lease Supplement consists of the following:
(a) Canadair Regional Jet, Series 200ER Airframe; U.S. Registration Number _____; Manufacturer's
Serial No. ___; and
(b) Two General Electric CF34-3B1 engines bearing manufacturer's serial
nos. _______ and ______ (each of which has 750 or more rated takeoff horsepower
or the equivalent of such horsepower).
2. Delivery Date. The Delivery Date of the Delivered Aircraft is the date of this Lease
Supplement.
3. Lessor's Cost. The Lessor's Cost of the Delivery Aircraft shall be
the amount set forth in Exhibit B to the Lease.
4. Term. The Term for the Delivered Aircraft shall commence on the
Delivery Date, and shall terminate on ______, 201_, unless earlier terminated or
extended pursuant to the terms of the Lease.
5. Rent. The Lessee hereby confirms its obligation to pay Rent for the Delivered Aircraft
throughout the Term thereof in accordance with the terms and provisions of the Lease.
6. Lessee's Acceptance of Delivered Aircraft. The Lessee hereby
confirms that the Lessee has accepted the Delivered Aircraft for all purposes
hereof and of the Lease. Such acceptance by the Lessee shall be without
prejudice to any rights of the Lessor or the Lessee against the Seller, the
Manufacturer, the Engine Manufacturer, or any vendor of equipment included in
the Aircraft.
7. Incorporation of Lease By Reference. All the provisions of the
Aircraft Lease are hereby incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.
8. Governing Law. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICTS-OF-LAWS PRINCIPLE THAT WOULD
APPLY THE LAWS OF ANY OTHER JURISDICTION).
9. Agreement as Chattel Paper. To the extent that this Lease Supplement
constitutes chattel paper (as defined in the Uniform Commercial Code), no
security interest in this Lease Supplement may be perfected through the
possession of any counterpart other than the original chattel paper counterpart,
which shall be the counterpart marked "Original" in its signature page.
10. Counterparts. This Lease Supplement may be executed in any number
of counterparts, each of which shall be an original (except that only the
counterpart marked "Original" shall be the original for purposes of perfecting a
security interest therein as chattel paper under the Uniform Commercial Code),
but all of which taken together shall constitute one and the same instrument and
any of the parties hereto may execute this Lease Supplement by signing any such
counterpart.
<PAGE>
IN WITNESS WHEREOF, the Lessor and the Lessee have executed this Lease Supplement No. 1.
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee (Lessor)
By:
Title:
ATLANTIC COAST AIRLINES (Lessee)
By:
Title:
By:
Title:
<PAGE>
24
Draft 6 - Sept. 29 '97
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SCHEDULE I
DEFINITIONS
(ATLANTIC COAST AIRLINES TRUST NO. ______)
GENERAL PROVISIONS
The following terms shall have the following meanings for all purposes of the
Operative Agreements (other than the Pass Through Agreements, the Intercreditor
Agreement, and the Liquidity Facilities) referred to below, unless otherwise
defined in an Operative Agreement or the context thereof shall otherwise
require. In the case of any conflict between the provisions of this Schedule and
the provisions of any Operative Agreement, the provisions of such Operative
Agreement shall control the construction of such Operative Agreement.
Unless the context otherwise requires, (i) references to agreements shall be
deemed to mean such agreements as amended and supplemented from time to time,
and (ii) references to parties to agreements shall be deemed to include the
successors and permitted assigns of such parties.
DEFINED TERMS:
Abatements: defined in ss. 4 of the Lease.
ACA Guaranty: the Guaranty, dated as of the Certificate Closing Date, issued by ACA Inc. in favor of the
Lessor, the Indenture Trustee, and the Liquidity Providers, pertaining to the Aircraft.
ACA Inc.: Atlantic Coast Airlines, Inc., a Delaware corporation.
Additional Insureds: the Lessor (in its individual and trust
capacities), the Owner Participant, the Indenture Trustee (in its individual and
trust capacities), each Liquidity Provider, and their successors and assigns,
and the directors, officers, members, employees, and agents of each of the
foregoing.
Aeronautics Authority: as appropriate, the Federal Aviation Administration and/or the Administrator of
the Federal Aviation Administration, or any Person, governmental department, bureau, commission or agency located
in the United States succeeding to the functions, of the foregoing.
Affidavits: the affidavits of citizenship of the Owner Trustee and the Owner Participant.
Affiliate: with respect to any Person, any other Person directly or
indirectly controlling 50% or more of any class of voting securities of such
Person or otherwise controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" (including "controlled
by" and "under common control with") shall mean the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or by contract or
otherwise. In no event shall the Owner Trustee or the Lessor be deemed an
Affiliate of the Owner Participant.
After-Tax Basis: a basis such that any payment to be received by a
Person shall be supplemented by a further payment to such Person so that the sum
of the two payments, after deduction of all Taxes (taking into account any
related current credits or deductions actually realized) resulting from the
receipt or accrual of such payments, shall be equal to the payment to be
received.
Air Carrier: any U.S. Air Carrier and any 1'foreign air carrier" (as defined in the Transportation Code)
as to which there is in force a permit granted under ss. 41302 of the Transportation Code.
Aircraft: the Airframe and the two Engines.
Airframe: the Canadair Regional Jet Series 200ER aircraft (excluding
the Engines or engines from time to time installed thereon) to be leased by the
Lessor to the Lessee pursuant to the Lease and the Lease Supplement and having
the United States FAA registration number initially and manufacturer's serial
number specified in the Lease Supplement, including (i) all Parts in respect
thereof and (ii) any Replacement Airframe substituted pursuant to ss. 11(a)(1)
of the Lease.
Application: the application for registration of the Aircraft with the FAA in the name of the Owner
Trustee.
Appraisal: the report prepared by BK Associates, Inc. and to be delivered to the Owner Participant (with
an abbreviated report to the Lessee) on the Delivery Date pursuant to ss. 4.02(h) of the Participation Agreement.
Appraisal Procedure: a procedure whereby an independent appraiser,
chosen by the Lessor from the three appraisers selected by the Lessee as herein
provided and reasonably acceptable to the Lessor, determines the amount in
question. The Lessee shall, within 15 days of a request by the Lessor, provide
the Lessor with the names of three independent appraisers. If any appraiser so
nominated is not reasonably acceptable to the Lessor, the Lessor shall promptly
notify the Lessee, and the Lessee shall have five Business Days to nominate
another appraiser reasonably acceptable to the Lessor. Within 15 days
thereafter, the Lessor shall select and employ one of such appraisers. If the
Lessee or the Lessor fails to make its selection in a timely manner, the other
party may make such selection and proceed with the appraisal. The decision of
the appraiser so appointed shall be given within 10 days after being appointed.
Such appraiser's decision shall be binding and conclusive on the Lessor and the
Lessee. The Lessee and the Lessor shall each pay one-half of the fees and
expenses of such appraiser, provided that the Lessee shall pay all such fees and
expenses in the case of any appraisal pursuant to ss. 15 of the Lease.
Average Life Date: for any Certificate, the date which follows the prepayment date by a period equal to
the Remaining Weighted Average Life of such Certificate.
Bankruptcy Code: Title 11 of the United States Code, as amended, and any successor thereto.
Basic Rent: the aggregate periodic rent payable for the Aircraft throughout the Basic Term pursuant to
ss. 3(b) of the Lease, adjusted pursuant to ss.ss. 3(d) and 3(e) of the Lease.
Basic Rent Rate: set forth in Exhibit D to the Lease.
Basic Term: the period commencing at the beginning of the day on the Delivery Date and ending at the end
of the day on the Expiration Date, or such earlier date on which the Lease shall be terminated as provided
therein.
Beneficial Interest: the interest of the Owner Participant (or the Initial Owner Participant, as the
case may be) under the Trust Agreement.
Business Day: any day other than a Saturday or Sunday on which
commercial banks are not authorized or required to close in New York, NY,
Washington, D.C. and the city in the United States in which the office or agency
is maintained by the Pass Through Trustee for the payment of the Pass Through
Certificates, and after the Lien of the Indenture is discharged, Hartford, CT.
Certificate Closing Date: the date of the closing with respect to the purchase of Certificates by the
Pass-Through Trustee contemplated by ss. 2.01(b) of the Participation Agreement.
Certificate Holder: see "Holder".
Certificates: the Equipment Trust Certificates (Atlantic Coast Airlines Trust No. _________), issued by
the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement
thereof pursuant to the Indenture.
Citizen of the United States: a citizen of the United States as defined in ss. 40102(a)(15) of the
Transportation Code, or any analogous part of any successor or substituted legislation or regulation at the time
in effect.
Class A Liquidity Provider has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.
Class B Liquidity Provider has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.
Class C Liquidity Provider has the meaning specified in ss. 1.01 of the
Intercreditor Agreement.
Closings: the closing with respect to the acquisition of the Pass Through Certificates by the Placement
Agent and the closing with respect to the acquisition of Certificates by the Pass Through Trustee.
Code: the Internal Revenue Code of 1986, as amended from time to time,
or any similar legislation of the United States enacted to supersede, amend, or
supplement such Code (and any reference to a provision of the Code shall refer
to any successor provision(s), however designated).
Collateral Account: the deposit account established and maintained pursuant to ss. 2.13 of the Indenture.
Collateral Account Control Agreement: the Collateral Account Control Agreement dated as of September 30,
1997 among SSB, the Indenture Trustee, and the Owner Trustee.
Commitment: the amount of the Owner Participant's participation in the Purchase Price required to be
made available or paid as provided in ss. 3.02 of the Participation Agreement.
Corporate Trust Administration: the Corporate Trust Administration
office of the Owner Trustee located at 225 Asylum Street (Goodwin Square),
Hartford, CT 06103, Attention: Corporation Trust Administration, or such other
office at which the Owner Trustee's corporate trust business shall be
administered which the Owner Trustee shall have specified by notice in writing
to the Lessee, the Owner Participant and the Indenture Trustee.
Corporate Trust Department: the Corporate Trust Department office of
the Indenture Trustee located at 26 South Charles Street, Baltimore, MD 21201,
Attention: Corporate Trust Department, or such other office at which the
Indenture Trustee's corporate trust business shall be administered which the
Indenture Trustee shall have specified by notice in writing to the Lessee, the
Owner Participant and the Owner Trustee.
CRAF Program has the meaning specified in ss. 13(d) of the Lease.
Cut-Off Date: June 30, 1998.
DOT: the U.S. Department of Transportation or any successor thereto.
Debt Portion: the amount specified as such on Schedule III to the Participation Agreement.
Debt Rate. the weighted average (based on Outstanding principal amount) rate of interest on the
Certificates issued pursuant to the Indenture.
Default: (a) any event or condition which, with the lapse of time or the giving of notice, or both,
would constitute an Event of Default or (b) an Event of Default.
Default Payment Date: defined in ss. 15(a)(3) of the Lease.
Deficiency Agreement. The Deficiency Agreement, dated as of the Delivery Date, among SDIQ, the Owner
Participant, and the Owner Trustee, pertaining to the Aircraft.
Delivery Date: the date on which the Aircraft is delivered and sold by the Seller to the Lessor and
leased by the Lessor to the Lessee under the Lease, which date shall also be the date of the initial Lease
Supplement.
Delivery Notice: notice of the Aircraft's Delivery Date, given by the
Lessee as provided in ss. 3.01 of the Participation Agreement and including any
notice with respect to a postponed Delivery Date given by the Lessee pursuant to
ss. 3.05(c) of the Participation Agreement.
Downgrade Drawing has the meaning specified in ss. 1.01 of the
Intercreditor Agreement.
EBO: the early buy-out purchase option specified in ss. 16(a)(i) of the Lease.
EBO Date has the meaning set forth in ss. 16(a) of the Lease.
EBO Price has the meaning set forth in ss. 16(a) of the Lease.
Eligible Deposit Account: either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution with corporate trust powers organized
under the laws of the United States or any state thereof, or the District of
Columbia, and whose deposits are insured by the Federal Deposit Insurance
Corporation, provided that such institution also has a combined capital and
surplus of at least $100,000,000 and a rating of A or better from the Thomson
Bank Watch.
Eligible Institution: a depository institution organized under the laws
of the United States or any one of the states thereof, or the District of
Columbia, or any domestic branch of a foreign bank, which in any such case at
all times (a) has either (x) a long-term unsecured debt rating of at least Aa2
by Moody's or (y) a short-term certificate of deposit rating of P-1 by Moody's,
(b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y)
a short-term certificate of deposit rating of A-1+ by S&P, and (c) is a member
of the Federal Deposit Insurance Corporation.
Engine: each of the two General Electric CF34-3-B1 engines listed by
its manufacturer's serial number in the Lease Supplement and leased pursuant to
the Lease, whether or not from time to time installed on the Airframe or
installed on any other airframe or on any other aircraft, and any Replacement
Engine which may from time to time be substituted for an Engine pursuant to the
Lease, together with all Parts related thereto. Except as otherwise provided, at
such time as a Replacement Engine shall be so substituted and the Engine for
which the substitution is made shall be released from the Lien of the Indenture,
such replaced Engine shall cease to be an "Engine" under the Lease. The term
"Engines" means, as of any date of determination, both Engines then leased to
the Lessee pursuant to the Lease.
Engine Manufacturer: General Electric Company, a New York corporation.
Engine Manufacturer's Consent: The General Electric Company Engine Consent and Agreement with respect to
the Engine Warranty Assignment, dated as of the Delivery Date, executed by the Engine Manufacturer.
Engine Warranty Assignment: The Warranty Assignment (Atlantic Coast
Airlines Trust No. __) dated as of the Delivery Date between the Lessor and the
Lessee with respect to the Engine warranties under the GTA in substantially the
form of Exhibit F to the Participation Agreement, as such form may be amended on
or prior to the Delivery Date; provided that no such amendment shall materially
adversely affect the interests of the Holders of the Certificates.
ERISA: the Employee Retirement Income Security Act of 1974, as amended.
Estimated Expense Amount has the meaning specified in ss. 10.01(a) of
the Participation Agreement.
Event of Default: each of the events specified in ss. 14 of the Lease.
Event of Loss: any of the following events with respect to the
Aircraft, the Airframe or any Engine: (i) theft or disappearance for a period in
excess of 90 consecutive days; (ii) destruction, damage beyond economic repair
or rendition of such property permanently unfit for normal use for any reason
whatsoever; (iii) any event which results in an insurance settlement with
respect to such property on the basis of an actual, constructive or compromised
total loss; (iv) condemnation, confiscation or seizure of, or requisition of
title to or use of such property by any foreign government or any agency or
instrumentality thereof, for a period in excess of 180 consecutive days (or 30
consecutive days for the appropriation of title, or, in any of the cases in this
clause (iv), such shorter period ending on the expiration of the Term); (v)
condemnation, confiscation or seizure of, or requisition of title to or use of
such property by the Government for a period extending beyond the term of the
Lease (as the same may be extended pursuant to the terms thereof), provided that
no Event of Loss shall be deemed to have occurred, and the term of the Lease
shall be extended automatically for a period of six months in the event that the
Aircraft is requisitioned by the Government pursuant to an activation under the
CRAF Program; and (vi) as a result of any law, rule, regulation, order or other
action by the Aeronautics Authority or other governmental body having
jurisdiction, the use of the Aircraft or Airframe in the normal course of air
transportation of passengers shall have been prohibited by virtue of a condition
affecting all Canadair Regional Jet Series 200ER aircraft equipped with engines
of the same make and model as the Engines for a period of 180 consecutive days
(or beyond the end of the Term), unless the Lessee, prior to the expiration of
such 180-day period, shall be diligently carrying forward all necessary and
desirable steps to permit normal use of the Aircraft and shall within 12 months
have conformed at least one Canadair Regional Jet Series 200ER aircraft (but not
necessarily the Aircraft) to the requirements of any such law, rule, regulation,
order or action, and shall be diligently pursuing conformance of the Aircraft in
a non-discriminatory manner. The date of such Event of Loss shall be (aa) the
91st day following loss of such property or its use due to theft or
disappearance (or the end of the Term if earlier); (bb) the date of any
destruction, damage beyond economic repair or rendition of such property
permanently unfit for normal use; (cc) the date of any insurance settlement on
the basis of an actual, constructive or compromised total loss; (dd) the 181st
day following condemnation, confiscation, seizure or requisition of title to or
use of such property by a foreign government referred to in clause (iv) above
(or the 31st day in the case of appropriation of title, or the end of the Term
if earlier than such 181st or 31st day); (ee) the last day of the Term (as
automatically extended by six months in the case of an activation under the CRAF
Program) in the case of requisition of title to or use of such property by the
Government; and (ff) the last day of the applicable period referred to in clause
(vi) above (or if earlier, the end of the Term without the Lessee's having
conformed at least one Canadair Regional Jet Series 200ER aircraft to the
applicable requirements). An Event of Loss with respect to the Aircraft shall be
deemed to have occurred if any Event of Loss occurs with respect to the
Airframe.
Excepted Payments: collectively, (i) indemnity, expense, reimbursement
or other payments paid or payable by the Lessee in respect of the Owner
Participant, the Owner Trustee in its individual capacity or any of their
respective successors, permitted assigns, directors, officers, employees,
servants and agents or Affiliates, pursuant to the Participation Agreement or
any other Operative Agreement or any indemnity hereafter granted to the Owner
Participant or the Owner Trustee in its individual capacity pursuant to the
Lease or the Participation Agreement, (ii) proceeds of public liability
insurance (or government indemnities in lieu thereof) in respect of the Aircraft
payable as a result of insurance claims paid for the benefit of, or losses
suffered by, the Owner Trustee or the Indenture Trustee in their respective
individual capacities or by the Owner Participant, or their respective
successors, permitted assigns or Affiliates, (iii) proceeds of insurance
maintained with respect to the Aircraft by the Owner Participant (whether
directly or through the Owner Trustee) or any Affiliate thereof maintained in
accordance with ss. 12(e) of the Lease but not required under ss. 12 of the
Lease, (iv) all right, title and interest of the Owner Participant or the Owner
Trustee in, to and under the Tax Indemnity Agreement, including payments of
Supplemental Rent by the Lessee in respect of any amounts payable under the Tax
Indemnity Agreement, (v) any purchase price paid or payable to the Owner
Participant for its interest in the Trust Estate pursuant to ss. 7.03(d) of the
Participation Agreement, (vi) any Transaction Costs paid or payable by the
Lessee to the Owner Trustee (to the extent for its sole benefit) or the Owner
Participant pursuant to the Lease or the Participation Agreement, (vii) payments
under the RVG and/or the Deficiency Agreement, (viii) any payments in respect of
interest to the extent attributable to payments referred to in clauses (i)
through (vi) above, (ix) any amount payable under the ACA Guaranty in respect of
the foregoing, (x) any right to demand, collect or otherwise receive and enforce
the payment of any amount described in clauses (i) through (v) and (vii) above,
and (xi) 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 specified in clauses (i) through (x) above.
Expenses has the meaning specified in ss. 9.01(a) of the Participation
Agreement.
Expiration Date: _____________, 201__.
FAA: see "Federal Aviation Administration".
FAA Bill of Sale: the bill of sale for the Airframe on AC Form 8050-2,
or such other form as may be approved by the Aeronautics Authority, executed by
the Seller in favor of the Owner Trustee and dated the Delivery Date.
Fair Market Rental: the amount obtainable 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, in accordance
with a net lease on terms and conditions (except as to the amount of Basic Rent)
as provided in the Lease. Such amount shall be determined assuming that the
Aircraft is in the condition required by the Lease, excluding Airworthiness
Directives that would not be required to be made until after the applicable
renewal period begins (except that a determination of Fair Market Rental
pursuant to ss. 15(a)(3) of the Lease shall be based on the actual condition of
such property), and assuming that all Removable Improvements have been removed.
If the Lessor and the Lessee do not agree upon Fair Market Rental, it shall be
determined in accordance with the Appraisal Procedure.
Fair Market Value: the amount obtainable 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. Such amount shall be determined
assuming that the Aircraft is in the condition required by the Lease, excluding
Airworthiness Directives that would not be required to be made until after the
valuation date (except that a determination of Fair Market Value pursuant to ss.
15(a)(3) of the Lease shall be based on the actual condition of such property),
and assuming that all Removable Improvements have been removed. If the Lessor
and the Lessee do not agree upon Fair Market Value, it shall be determined in
accordance with the Appraisal Procedure.
Federal Aviation Administration: the United States Federal Aviation Administration and any successor
agency or agencies thereto.
Final Drawing has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.
FNBM: The First National Bank of Maryland, a national banking association.
Government: the United States of America or an agency or instrumentality thereof the obligations of
which bear the full faith and credit of the United States of America.
GTA: the General Terms Agreement dated as of October, 1996 between the
Engine Manufacturer and the Lessee with respect to certain support services for
the Engines, as originally executed or as modified, amended or supplemented in
accordance with the terms thereof, but only insofar as the General Terms
Agreement related to the Engines, to the extent assigned to the Owner Trustee
pursuant as the Engine Warranty Assignment.
Holder or Holder of a Certificate: as of any particular time, the
Person in whose name a Certificate shall be registered (but not including the
holder of any Pass Through Certificate).
Improvement has the meaning set forth in ss. 9(e) of the Lease.
incorporated in: incorporated or installed in, attached to, or otherwise made a part of.
Indemnitee: each of SSB, in its individual capacity and as Owner
Trustee and Lessor, the Subordination Agent, in its individual capacity and in
its capacity as Subordination Agent, each Liquidity Provider, the Owner
Participant, the Indenture Trustee, in its individual capacity and as trustee,
any Owner Participant Guarantor, and any successor (including any trustee which
may succeed to the Lessor's interest under the Lease) and Affiliate, and, in
each case, any assign, officer, director, employee, agent and servant of any of
the foregoing, the Lessor's Estate, and the Trust Indenture Estate. Neither the
Pass Through Trustee nor any holder of a Pass Through Certificate shall be
deemed to be an Indemnitee.
Indenture: the Trust Indenture and Security Agreement (Atlantic Coast Airlines Trust No. ______), dated
as of September 26, 1997, between the Lessor and the Indenture Trustee, as supplemented by the Indenture
Supplement.
Indenture Default: (a) any event or condition which, with the lapse of time or the giving of notice, or
both, would constitute an Indenture Event of Default, or (b) any Indenture Event of Default.
Indenture Documents has the meaning specified in the Granting Clause of
the Indenture.
Indenture Event of Default: each of the events specified in ss. 7.01 of the Indenture.
Indenture Supplement: Indenture Supplement No. 1 (Atlantic Coast Airlines Trust No. ____), to be dated
the Delivery Date, substantially in the form of Exhibit A to the Indenture.
Indenture Trustee: The First National Bank of Maryland, a national banking association, not in its
individual capacity but solely as trustee under the Indenture.
Indenture Trustee's Liens: any Lien against, on or with respect to the
Aircraft, any Engine, the Lessor's Estate or the Trust Indenture Estate or any
part thereof resulting from (i) claims against the Indenture Trustee not related
to the administration of the Trust Indenture Estate or any transactions pursuant
to the Indenture or any document included in the Trust Indenture Estate, (ii)
any act or omission of the Indenture Trustee which is not related to the
transactions contemplated by the Operative Agreements or is in violation of any
of the terms of the Operative Agreements, or (iii) Taxes imposed against the
Indenture Trustee in its individual capacity in respect of which the Lessee has
not indemnified (and is not obligated to indemnify) the Indenture Trustee in
such capacity.
Independent Investment Banker: an independent investment banking
institution of national standing appointed by the Lessee that is independent in
fact, does not have any direct financial interests, or any material indirect
financial interest, in the Lessee or any Affiliate of the Lessee, and is not
connected with the Lessee or any Affiliate of the Lessee, as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; provided, that if the Indenture Trustee shall not have
received written notice of such an appointment at least 10 days prior to the
Prepayment Date, "Independent Investment Banker" shall mean such an institution
appointed by the Indenture Trustee.
Initial Owner Participant: Atlantic Coast Airlines, a California corporation.
Initial Reoptimization Date: has the meaning specified in ss. 2.03(b) of the Participation Agreement.
Intercreditor Agreement: the Intercreditor Agreement dated as of September 25, 1997, among the Pass
Through Trustees, the Class A Liquidity Provider, the Class B Liquidity Provider, the Class C Liquidity Provider
and the Subordination Agent.
Interest Drawing has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.
Invoice: the invoice for the Aircraft given by the Seller to the Lessor.
Item or Item of Equipment: the Airframe or an Engine.
JAA: the Joint Aviation Authority (or any successor thereto) of the European Union.
Lease: the Lease Agreement (Atlantic Coast Airlines Trust No. ____)
dated as of the Delivery Date, entered into by the Lessor and the Lessee
concurrently with the execution and delivery of the Indenture Supplement, in
substantially the form of Exhibit B to the Participation Agreement, as such form
may be amended on or prior to the Delivery Date as provided in the Participation
Agreement, including, without limitation, supplementation by one or more Lease
Supplements entered into pursuant to the applicable provisions of the Lease.
Lease Supplement:. Lease Supplement No. 1 (Atlantic Coast Airlines Trust No. ____), to be dated the
Delivery Date, substantially in the form of Exhibit A to the Lease.
Lease Term: the period commencing on the Delivery Date and ending at the end of the Basic Term.
Lessee: Atlantic Coast Airlines, a California corporation.
Lessee Documents has the meaning set forth in ss. 6.01(b) of the
Participation Agreement.
Lessor: State Street Bank and Trust Company, a Massachusetts trust company, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement.
Lessor's Cost: has the meaning set forth in Exhibit B of the Lease.
Lessor's Estate: all estate, right, title and interest of the Owner
Trustee in and to the Collateral Account, the Liquid Collateral, the Aircraft,
the Lease, any Lease Supplement, the FAA Bill of Sale, the Warranty Bill of
Sale, the Purchase Agreement, the Purchase Agreement Assignment, the PAA
Consent, any warranty with respect to the Airframe and the Engines, all amounts
of Basic Rent and Supplemental Rent, including without limitation, insurance
proceeds (other than insurance proceeds payable to or for the benefit of the
Owner Trustee in its individual capacity or the Owner Participant) and
requisition, indemnity or other payments of any kind for or with respect to the
Aircraft (except amounts owing to the Owner Participant, to the Indenture
Trustee, to the Owner Trustee in its individual capacity, or to any of their
respective directors, officers, employees and agents pursuant to Articles 8 and
9 of the Participation Agreement), and all other property of the Owner Trustee
purportedly subjected to the Lien of the Indenture by the Granting Clause
thereof; provided that in no event shall "Lessor's Estate" include any Excepted
Payment.
Lessor's Liens: Liens against, on or with respect to the Aircraft, any
Engine, the Lessor's Estate or the Trust Indenture Estate or any part thereof,
title thereto or any interest therein arising as a result of (i) claims against
the Lessor, in its individual capacity or as Owner Trustee, or the Owner
Participant or any Affiliate of such Owner Participant, in each case not related
to the Operative Agreements or the transactions contemplated thereby, (ii) acts
or omissions of the Lessor in its individual capacity or as Owner Trustee, or of
the Owner Participant or any Affiliate of such Owner Participant not
contemplated or permitted under the terms of the Operative Agreements, (iii)
Taxes or Expenses imposed against the Lessor, in its individual capacity or as
Owner Trustee, Owner Participant or any Affiliate of such Owner Participant,
Lessor's Estate or the trust created by the Trust Agreement which are not
required to be indemnified against by the Lessee pursuant to the Participation
Agreement by reason of ss. 8.01(b) or 9.01(b) thereof and which are not required
to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement,
or (iv) claims against the Lessor, in its individual capacity or as Owner
Trustee, or the Owner Participant arising from the transfer by the Lessor or the
Owner Participant of its interests in the Aircraft or any Engine other than a
transfer of the Aircraft pursuant to ss. 3(g), 3(i), 11, 13(a), 15, or 16 of the
Lease and other than a transfer pursuant to the exercise of the remedies set
forth in ss. 15 of the Lease.
Letter of Credit: the Letter of Credit issued by CrestarBank in favor of the Indenture Trustee as
security for the obligations of the Lessee pursuant to the first sentence of Section 7.02(b) of the Participation
Agreement.
Lien: any mortgage, pledge, lien, charge, encumbrance, lease, security
interest (including any conditional sale agreement, equipment trust agreement,
or other title retention agreement), statutory right in rem, claim, or other
similar interest of any nature whatsoever.
Liquid Collateral: all amounts and securities deposited from time to
time in the Collateral Account and all the products, investments, earnings and
proceeds of the foregoing, including, but not limited to, all proceeds of the
investment or conversion thereof, voluntary or involuntary, into cash, Specified
Investments or other property, all rights to payment of any and every kind, and
other forms of obligations, and instruments and other property which at any time
constitute all or part or are included in the proceeds of any of the foregoing.
Liquidity Facility has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.
Liquidity Provider has the meaning specified in ss. 1.01 of the
Intercreditor Agreement.
Losses has the meaning specified in ss. 17.02(a) of the Participation
Agreement.
Loss Payment Date has the meaning specified in ss. 11(a)(2) of the
Lease.
Majority in Interest of Certificate Holders: as of a particular date of
determination, the Holders of more than 50% of the aggregate unpaid principal
amount of all Certificates outstanding as of such date (excluding for purposes
of this definition any Certificates held by (i) the Owner Trustee or the Owner
Participant or any interests of the Owner Participant unless all Certificates
then outstanding are held by the Owner Participant, (ii) the Lessee, or (iii)
any Affiliate of any thereof).
Make-Whole Premium: an amount determined as of the third Business Day
before the applicable Prepayment Date (or date of purchase, as the case may be)
which an Independent Investment Banker determines to be equal to the excess, if
any, of (i) the present value of the remaining scheduled payments of such
principal amount or portion thereof and interest thereon to the Maturity of such
Certificate computed by discounting such payments on a semi-annual basis on each
Payment Date (assuming a 360-day year consisting of twelve 30-day months) at a
discount rate equal to the Treasury Yield, all as determined by the Independent
Investment Banker over (ii) the outstanding principal amount of such Certificate
plus accrued interest.
Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement.
Mandatory Economic Terms. The terms set forth on Schedule IV to the Participation Agreement.
Manuals and Technical Records has the meaning set forth in ss. 9(b) of
the Lease.
Manufacturer: Bombardier Inc., a Canadian corporation.
Materially Adverse Tax Event: any event (other than excessive foreign
usage of the Aircraft) that makes it more likely than not that the Lessee will
be required to indemnify any Indemnitee for Taxes under any of the Operative
Agreements or the Owner Participant under the Tax Indemnity Agreement, or both,
provided that (i) the estimated aggregate of such indemnity payments (computed
as a hypothetical adjustment of Basic Rent or, if applicable, Renewal Rent and
disregarding any indemnity payments waived by such Indemnitee) over the
then-remaining Term is equal to at least 5% of Basic Rent (and, if applicable,
Renewal Rent) payable over the remaining Term, and (ii) future payments of the
Taxes giving rise to the indemnity or indemnities will not be required if the
Lessee purchases the Aircraft.
Maturity: with respect to any Certificate, the date on which the final principal amount of such
Certificate is scheduled to be due and payable.
Minimum Maintenance Standards has the meaning specified in ss. 9(b) of
the Lease.
Moody's: Moody's Investors Service, Inc.
Net Present Value of Rents: the net present cost to the Lessee, as of
the Delivery Date, of all Basic Rent payments through the EBO Date, plus the EBO
Price, discounted at the Debt Rate compounded semi-annually.
Non-U.S. Person: any Person other than a U.S. Person.
Obsolete Parts: Parts which the Lessee in good faith determines to be
obsolete or no longer suitable or appropriate for use on the Airframe or any
Engine and which the Lessee is authorized to remove from the Aircraft, and not
replace, pursuant to the last sentence of ss. 9(d) of the Lease.
Offering Memo: the Lessee's September 19, 1997 Offering Memorandum concerning the Pass-Through
Certificates.
Officer's Certificate: when delivered pursuant to the Indenture, a certificate signed by a Responsible
Officer of the Lessee or the Owner Trustee, as the case may be, and delivered to the Indenture Trustee. Each such
certificate shall include the statements provided for in ss. 15.07 of the Indenture.
Old Lease: the ________, 1997 Aircraft Interim Lease Agreement, between the Seller and the Lessee,
concerning the Aircraft.
Old Lease Termination: the Lease Termination Agreement, dated the date of the Lease Supplement, between
the Seller and the Lessee, pertaining to the Old Lease.
Operative Agreements: the Participation Agreement, the Trust Agreement,
the FAA Bill of Sale, the Warranty Bill of Sale, the ACA Guaranty, the Purchase
Agreement, the Purchase Agreement Assignment, the PAA Consent, the Engine
Warranty Assignment, the Lease (including the Lease Supplement), the Owner
Participant Guaranty, if any, the Certificates outstanding at the time of
reference, the Indenture (including the Indenture Supplement), the Tax Indemnity
Agreement, each Liquidity Facility, the Intercreditor Agreement, the Deficiency
Agreement, the RVG, the Collateral Account Control Agreement, and any Assignment
and Assumption Agreement.
Opinion of Counsel: when delivered pursuant to the Indenture, a written
opinion of legal counsel, who in the case of counsel (a) for the Lessee may be
(i) the general counsel of the Lessee, (ii) Troutman Sanders LLP or a successor
firm, or (iii) other outside counsel designated by the Lessee and reasonably
satisfactory to the Indenture Trustee, and (b) for the Owner Trustee or the
Indenture Trustee, an attorney selected by such Person and reasonably
satisfactory to the Lessee and, in the case of the Owner Trustee, reasonably
satisfactory to the Indenture Trustee.
Outstanding: when used with respect to Certificates, as of the date of determination and subject to the
provisions of ss. 10.04 of the Indenture, all Certificates theretofore executed and delivered under the Indenture,
with the exception of the following:
(i) Certificates theretofore canceled by the Indenture Trustee
or delivered to the Indenture Trustee for cancellation
pursuant to ss. 2.08 of the Indenture or otherwise;
(ii) Certificates for which prepayment money in the necessary
amount has been theretofore deposited with the Indenture
Trustee in trust for the Holders of such Certificates pursuant
to ss. 14.01 of the Indenture; provided, that if such
Certificates are to be prepaid, notice of such prepayment has
been duly given pursuant to the Indenture or provision
therefor satisfactory to the Indenture Trustee has been made;
and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to
Article II of the Indenture.
Owner Participant: the Person to whom on the Delivery Date (or, if
earlier, the Transfer Date) the Initial Owner Participant shall transfer its
Beneficial Interest pursuant to Section 3.02 of the Participation Agreement and
any successors thereto, and any Person to which the Owner Participant transfers,
in accordance with the Trust Agreement and the Participation Agreement, its
right, title and interest in and to the Operative Agreements and the Lessor's
Estate.
Owner Participant Guarantor: the provider of an Owner Participant Guaranty.
Owner Participant Guaranty: any guaranty delivered in compliance with ss.__(d) of the Participation
Agreement.
Owner Trustee: State Street Bank and Trust Company of Connecticut,
National Association, not in its individual capacity except as otherwise
expressly stated, but solely as trustee under the Trust Agreement.
Owner Trustee Guarantor: the provider of an Owner Trustee Guaranty.
Owner Trustee Guaranty: any guaranty delivered in compliance with ss. 11.01(b)(ii) of the Participation
Agreement.
Owner's Economic Return: the Owner Participant's anticipated net
after-tax yield and aggregate after-tax cash flow during the Basic Term, using
the multiple investment sinking fund method of analysis, computed on the basis
of the same methodology and assumptions, including tax assumptions, as were
utilized by the initial Owner Participant in determining the Basic Rent, EBO
Price, EBO Date, Stipulated Loss Values and Termination Values, as the case may
be, as in effect on the date of execution of the Participation Agreement by the
Owner Participant as such assumptions may be adjusted for events which have been
the basis of adjustments to Rent pursuant to ss. 3(d) of the Lease.
PAA Consent: the PAA Consent, dated as of the Delivery Date, executed by the Manufacturer and pertaining
to the Aircraft.
Participation Agreement: the Participation Agreement (Atlantic Coast
Airlines Trust No. ____), dated as of September 30, 1997, among the Lessee, the
Owner Trustee not in its individual capacity except as otherwise expressly
provided therein, but solely as owner trustee, the Initial Owner Participant,
the Indenture Trustee not in its individual capacity except as otherwise
expressly provided therein, but solely as indenture trustee, the Pass-Through
Trustee not in its individual capacity except as otherwise expressly provided
therein, but solely as Pass-Through trustee and the Subordination Agent not in
its individual capacity except as otherwise expressly provided therein, but
solely as subordination agent.
Parts: all appliances, parts, components, instruments, appurtenances,
accessories, furnishings and other equipment of whatever nature (other than
complete Engines or engines) which may from time to time be incorporated in the
Airframe or any Engine or title to which remains vested in the Lessor pursuant
to ss. 9(d) of the Lease.
Pass-Through Agreement: each of the four Pass-Through Trust Agreements dated as of September 25, 1997
among the Lessee, ACA Inc. and the Pass-Through Trustee.
Pass-Through Certificates: any of the Pass-Through Certificates,
1997-1-A, the Pass-Through Certificates, 1997-1-B, the Pass-Through
Certificates, 1997-1-C, or the Pass-Through Certificates, 1997-1-D, in each case
as issued by the related Pass-Through Trust; and "Pass-Through Certificates"
means all of the Pass-Through Certificates issued by each of the Pass-Through
Trusts.
Pass-Through Closing Date: the Business Day on which the sale of the Pass-Through Certificates to the
Placement Agent pursuant to the Placement Agreement takes place.
Pass-Through Trust:. the Atlantic Coast Airlines 1997-1 Pass-Through
Trust Class A, Atlantic Coast Airlines 1997-1 Pass-Through Trust Class B,
Atlantic Coast Airlines 1997-1 Pass-Through Trust Class C, and Atlantic Coast
Airlines 1997-1 Pass-Through Trust Class D, in each case formed pursuant to the
Pass-Through Agreement; and "Pass-Through Trusts" means all of such Pass-Through
Trusts.
Pass-Through Trustee: The First National Bank of Maryland, a national
banking association, in its capacity as Pass-Through Trustee under each
Pass-Through Agreement and each Pass-Through Trust.
Past Due Rate: in respect of (a) any amount payable to the Owner
Participant or the Owner Trustee a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid in
full equal to 2% plus the Debt Rate, and (b) any principal of or interest on any
Certificate or any other amount payable under the Indenture, any Certificate or
any other Operative Agreement that is not paid when due (whether at Maturity, by
acceleration, by optional or mandatory prepayment or otherwise) to any Holder,
the Indenture Trustee or the Pass-Through Trustee, a rate per annum during the
period from and including the due date to but excluding the date on which such
amount is paid in full equal to (i) in the case of any such amount payable to
the Holder of any Certificate, 2% plus the interest rate applicable to such
Certificate, and (ii) in the case of any other such amount, 2% plus the Debt
Rate (but, in each case, in no event greater than the maximum interest rate
permitted by applicable law).
Payment Date: each January 1 and July 1, commencing on January 1, 1998.
Permitted Air Carrier: (1) any Section 1110 Person that is not subject
to bankruptcy or similar proceedings when the sublease begins, (2) after the end
of the Recovery Period (or before that date, if the Lessee prepays in a lump sum
any indemnity required under the Tax Indemnity Agreement as a result of a
sublease to such foreign air carrier), any foreign air carrier that is not
subject to bankruptcy or similar proceedings when the sublease term begins and
that is principally based in and a domiciliary of any foreign country listed on
Exhibit E-2 to the Lease, except those that do not maintain normal diplomatic
relations with the United States or with which it would constitute a breach of
applicable laws for the Lessor, the Indenture Trustee, or the Owner Participant
to engage directly or indirectly in business, or (3) after the end of the
Recovery Period (or before that date, if the Lessee prepays in a lump sum any
indemnity required under the Tax Indemnity Agreement as a result of a sublease
to such foreign carrier), with the Owner Participant's prior written consent,
any foreign air carrier that is not principally based in and a domiciliary of a
country listed on Exhibit E-2 to the Lease, if at the time of such sublease the
Owner Participant receives an opinion satisfactory to the Owner Participant from
counsel satisfactory to the Owner Participant to the effect that there exists no
possessory rights in favor of such sublessee under the laws of such sublessee's
country which would, upon the bankruptcy of or other default by the Lessee (and
assuming that at such time the sublessee is not insolvent or bankrupt) prevent
the return of the Aircraft or part thereof to the Lessor in accordance with and
when permitted by the terms of the Lease upon the exercise by the Lessor of its
remedies thereunder, provided that at the time of the sublease the United States
maintains diplomatic relations with the country in which such foreign air
carrier is based.
Permitted Investments: (a) direct obligations of the United States of
America or any agency or instrumentality thereof, (b) obligations fully
guaranteed by the United States of America or any agency or instrumentality
thereof, (c) certificates of deposit issued by, or bankers' acceptances of, or
time deposits or a deposit account with, any bank, trust company, or national
banking association incorporated or doing business under the laws of the United
States of America or one of the states thereof, having a combined capital and
surplus of at least $100,000,000 and having a rating of "A" or better from the
Keefe Bank Watch Service, (d) commercial paper issued by companies in the United
States which directly issue their own commercial paper and which are doing
business under the laws of the United States of America or one of the states
thereof and in each case having a rating assigned to such commercial paper by a
nationally recognized rating organization in the United States of America equal
to the highest rating assigned by such organization, or (e) obligations of the
type described in clauses (a) through (d) above, purchased from any bank, trust
company, or banking association referred to in clause (c) above pursuant to
repurchase agreements obligating such bank, trust company, or banking
association to repurchase any such obligation not later than 30 days after the
purchase of any such obligation. Unless otherwise specified in writing by the
Owner Trustee, all such Permitted Investments shall mature not later than 30
days from the date of purchase.
Permitted Lien: a Lien permitted under ss. 8 of the Lease.
Permitted Sublessee: any Permitted Air Carrier; or any airframe or
engine manufacturer, or Affiliate of such a manufacturer, which is domiciled in
the United States of America or, after the end of the Recovery Period (or before
that date, if the Lessee prepays in a lump sum any indemnity required under the
Tax Indemnity Agreement as a result of a sublease to such foreign manufacturer)
domiciled in a country listed on Exhibit E-2 to the Lease, or in any other
country to which the Owner Participant gives its prior written consent (which
shall not be unreasonably withheld or delayed).
Person: any individual, sole proprietorship, partnership, joint
venture, joint stock company, trust, unincorporated organization, association,
corporation, institution, entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof).
Placement Agent: Morgan Stanley & Co. Incorporated.
Placement Agreement: the Placement Agreement dated September 19, 1997 among the Lessee and the Placement
--------------------
Agent.
Prepayment Date has the meaning specified in ss. 6.02(b) of the
Indenture.
Prepayment Price has the meaning specified in ss. 6.02(b) of the
Indenture.
Principal Amount: with respect to a Certificate means the stated original principal amount of such
Certificate and, with respect to all Certificates, means the aggregate stated original principal amounts of all
Certificates.
Property: any right or interest in or to property of any kind whatsoever, whether real, personal or
mixed and whether tangible or intangible.
Purchase Agreement: the Purchase Agreement (No. RJ 350), dated as of January 8, 1997, between the
Manufacturer and the Lessee, including all exhibits, appendices and letter agreements, but only to the extent
that the foregoing relate to the Aircraft and to the extent assigned pursuant to the Purchase Agreement
Assignment.
Purchase Agreement Assignment: the Purchase Agreement Assignment (Atlantic Coast Airlines Trust No.
__________), dated as of the Delivery Date between the Lessor and the Lessee in substantially the form of Exhibit
E of the Participation Agreement, as such form may be amended on or prior to the Delivery Date; provided that no
such amendment shall materially adversely affect the interests of the Holders of the Certificates.
Purchase Price: the Lessor's Cost as set forth on Exhibit B to the Lease.
Rating Agencies: collectively, at any time, each nationally recognized
rating agency which shall have been requested to rate the Pass-Through
Certificates and which shall then be rating the Pass-Through Certificates. The
initial Rating Agencies will be Moody's and S&P.
Rating Agency Confirmation: with respect to any Operative Agreement
that is to be modified in any material respect on the Delivery Date or the
Transfer Date, if applicable, a written confirmation from each of the Rating
Agencies that the use of such Operative Agreement with such modifications would
not result in (i) a reduction of the rating for any Class of Pass Through
Certificates below the then current rating for such Class of Pass Through
Certificates or (ii) a withdrawal or suspension of the rating of any Class of
Pass Through Certificates.
Record Date: with respect to Payment Dates under the Indenture (except
a date for payment of defaulted interest), December 15 for January 1 Payment
Dates and June 15 for July 1 Payment Dates, whether or not such date is a
Business Day.
Recourse Amount has the meaning specified in ss. 17.10 of the
Participation Agreement.
Recovery Period: the period prior to the end of the Owner Participant's taxable year which includes the
seventh anniversary of the Delivery Date.
Refinancing: a non-recourse loan to the Lessor arranged pursuant to ss. 15.01 of the Participation
Agreement.
Register has the meaning set forth in ss. 3.02 of the Indenture.
Registrar has the meaning set forth in ss. 3.02 of the Indenture.
Regulation D: Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as the same may be modified and supplemented
and in effect from time to time.
Related Indentures: collectively, (i) the Trust Indenture and Security
Agreement for each of Atlantic Coast Airlines Trust Nos. _______, _________,
________, _________, and ________, each dated as of September 26, 1997, between
the Owner Trustee and the Indenture Trustee, (ii) the Trust Indenture and
Security Agreement for each of Atlantic Coast Airlines Trust Nos. N306UE,
N310UE, N311UE, and N314UE, each dated as of September 26, 1997, between the
Owner Trustee and the Indenture Trustee, each with respect to a Jetstream J-41
aircraft, and (iii) the Trust Indenture and Security Agreement dated as of
September 26, 1997 between Atlantic Coast Airlines and the Indenture Trustee.
Related Leases: the other lease agreements between the Lessor (acting as Owner Trustee for the benefit
of the Owner Participant) and the Lessee, each with respect to a Canadair Regional Jet Series 200ER aircraft.
Remaining Weighted Average Life: on a given date with respect to any
Certificate the number of days equal to the quotient obtained by dividing (i)
the sum of each of the products obtained by multiplying (a) the amount of each
then remaining scheduled payment of principal of such Certificate by (b) the
number of days from and including such prepayment date to but excluding the
dates on which each such payment of principal is scheduled to be made; by (ii)
the then outstanding principal amount of such Certificate.
Removable Improvements has the meaning set forth in ss. 9(e) of the
Lease.
Renewal Rent: the amount payable by the Lessee as rent in accordance with ss. 3(h) of the Lease during any
Renewal Term.
Renewal Term: one or more terms with respect to which the Lessee has exercised its option to renew the
Lease pursuant to ss. 3(h) thereof.
Rent: all payments due from the Lessee under the Lease as Basic Rent, Renewal Rent, and Supplemental
Rent, collectively.
Rent Payment Date: each Payment Date during the Term.
Reoptimization Date has the meaning specified in ss. 15.02(a) of the
Participation Agreement.
Replacement Aircraft: any aircraft substituted for the Aircraft pursuant to ss. 11(a)(1) of the Lease.
Replacement Airframe: has the meaning set forth in ss. 11(a)(1) of the Lease.
Replacement Engine: a General Electric CF34-3B1 engine (or an engine of
the same or another manufacturer) of equal or greater value, airworthiness,
remaining useful life and utility as the Engine being replaced (determined
without regard to hours or cycles remaining until the next scheduled overhaul,
but assuming that the Engine replaced was in the condition required by the
Lease), together with all Parts relating to such engine, which is substituted
for an Engine pursuant to the terms of the Lease; provided, however, that if
such replacement engine is not a General Electric CF34-3B1 engine, such
replacement engine must then be commonly used in the commercial aviation
industry on Canadair Regional Jet Series 200ER airframes; and provided further,
that the Engines subject to the Lease at any given time shall be of the same
make and model.
Replacement Parts has the meaning set forth in ss. 9(d) of the Lease.
Responsible Officer: with respect to the Owner Trustee (except for
purposes of the Trust Agreement in which case the definition of Responsible
Officer set forth in ss. 3.10 of the Trust Agreement is applicable) or the
Indenture Trustee, any officer in its Corporate Trust Administration, as the
case may be, designated by such Person to perform obligations under the
Operative Agreements, and with respect to any other party, any corporate officer
of a party who, in the normal performance of his or her operational
responsibilities, with respect to the subject matter of any covenant, agreement
or obligation of such party pursuant to any Operative Agreement, would have
responsibility for and knowledge of such matter and the requirements of any
Operative Agreement with respect thereto.
RVG: the Residual Agreement, dated as of the Delivery Date, between the Manufacturer and the Lessor,
pertaining to the Aircraft.
S&P: Standard & Poor's Ratings Group.
Scheduled Delivery Date: the Delivery Date specified in the Delivery Notice pursuant to ss. 3.01 of the
Participation Agreement.
SDIQ: Societe de Developpment Industriel du Quebec, a Quebec corporation.
SEC: the Securities and Exchange Commission of the United States and any successor agencies or
authorities.
Section 1110 Person: a Citizen of the United States who is an air carrier holding a valid air carrier
operating certificate issued pursuant to 49 U.S.C. ch. 447 for aircraft capable of carrying 10 or more
individuals.
Secured Obligations has the meaning specified in the Granting Clause of
the Indenture.
Securities Act: the Securities Act of 1933, as amended.
Seller: [Bombardier Capital Inc./First Security Bank, National Association] [the Manufacturer].
Series "A" or "Series A Certificates": Certificates issued and
designated as "Series A" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series A".
Series "B" or "Series B Certificates": Certificates issued and
designated as "Series B" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series B".
Series "C" or "Series C Certificates": Certificates issued and
designated as "Series C" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series C".
Series "D" or "Series D Certificates": Certificates issued and
designated as "Series D" under the Indenture, in the Principal Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series D".
Sinking Fund Redemption Date has the meaning specified in ss. 6.06 of
the Indenture.
Sinking Fund Redemption Price has the meaning specified in ss. 6.06 of
the Indenture.
SLV Determination Date has the meaning set forth in ss. 11(a)(2) of the
Lease.
Special Aviation Counsel: Daugherty, Fowler & Peregrin.
Specified Default: (a) an event or condition described in ss. 14(a), (b), (h), or (i) of the Lease that,
after the giving of notice or lapse of time, or both, would mature into an Event of Default, or (b) an Event of
Default.
Specified Investments: (a) direct obligations of the United States of
America or obligations fully guaranteed by the United States of America; (b)
commercial paper rated A-1/P-1 by S&P and Moody's, respectively or, if such
ratings are unavailable, rated by any nationally recognized rating organization
in the United States equal to the highest rating assigned by such rating
organization; (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; (d)
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers; or (e) overnight repurchase agreements with
respect to the securities described in clause (a) above entered into with an
office of a bank or trust company which is located in the United States of
America or any bank or trust company which is organized under the laws of the
United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $500 million.
SSB: State Street Bank and Trust Company of Connecticut, National Association, a national banking
association.
Stipulated Loss Value: (1) as of any Stipulated Loss Value Date during
the Basic Term, the amount determined as set forth in Exhibit C to the Lease for
that Payment Date, and (2) during any Renewal Term, the amount for the date
involved, determined in accordance with ss. 3(h) of the Lease.
Stipulated Loss Value Date: for any month, the day in such month specified in Exhibit C to the Lease or,
if such day is not a Business Day, the immediately succeeding Business Day.
Sublease: any sublease agreement covering any Item(s) between the Lessee and a Permitted Sublessee.
Sublessee: a Permitted Sublessee under a Sublease in effect at the time in question.
Subordination Agent: The First National Bank of Maryland, a national banking association, not in its
individual capacity but solely as Subordination Agent.
Supplemental Rent: (a) all amounts, liabilities, indemnities and
obligations (other than Basic Rent or Renewal Rent) which the Lessee assumes or
agrees to pay under the Lease or under the Participation Agreement or Tax
Indemnity Agreement or any other Operative Agreement to the Lessor, the Owner
Participant, the Indenture Trustee, the Subordination Agent, any Liquidity
Provider or others, including, without limitation, payments of Stipulated Loss
Value, EBO Price, and amounts calculated by reference to Termination Value, any
amounts of Make-Whole Premium payable under the Indenture (other than any
Make-Whole Premium payable as a result of an Indenture Event of Default that is
not a Lessee Event of Default, and all amounts required to be paid by Lessee
under the agreements, covenants, and indemnities contained in the Lease or in
the Participation Agreement or the Tax Indemnity Agreement or any other
Operative Agreement, but excluding Basic Rent and Renewal Rent, and (b) all
amounts that the Owner Trustee is obligated to pay in accordance with clause (b)
of the last paragraph of ss. 2.04 of the Indenture.
Tax or Taxes has the meaning set forth in ss. 8.01(a) of the
Participation Agreement.
Tax Indemnity Agreement: the Tax Indemnity Agreement (Atlantic Coast Airlines Trust No. ______), dated
as of the Delivery Date or the Transfer Date, between the Lessee and the Owner Participant.
Term: the Basic Term of the lease for the Aircraft under the Lease and, if renewed pursuant to ss. 3(h) of
the Lease, each Renewal Term for the Aircraft for which the Lease is renewed.
Termination Date: the date of termination of the Lease as specified by the Lessee in its notice given
pursuant to ss. 3(g) thereof.
Termination Value: as of any Payment Date, the amount determined as set
forth in Exhibit D to the Lease for that Payment Date, adjusted as required by
ss. 3(d) of the Lease. Notwithstanding any other provisions of the Lease or the
Participation Agreement or the Indenture, each Termination Value for the
Aircraft shall be, under any circumstances and in any event, an amount, together
with Basic Rent due and owing through the date of payment of Termination Value,
at least sufficient to pay in full as of such date of payment the aggregate
unpaid principal amount of and accrued interest on the Certificates outstanding
on such date of payment (assuming that principal and interest payments with
respect to the Certificates have been paid when due).
Termination Value Date: for any month, the day in such month specified in Exhibit D to the Lease or, if
such day is not a Business Day, the immediately succeeding Business Day.
Transaction Costs: those costs and expenses set forth in ss. 10.01(a) of the Participation Agreement to be
borne by the Owner Participant.
Transfer Date: has the meaning set forth in Section 2.02(b) of the Participation Agreement.
Transportation Code: Title 49 of the United States Code, subtitle VII,
as amended and in effect on the date of the Lease or as subsequently amended, or
any successor or substituted legislation at the time in effect and applicable,
and the regulations promulgated pursuant thereto.
Treasury Yield: at the time of determination with respect to any
Certificate, the interest rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of United States Treasury bills, converted to a bond
equivalent yield) determined to be the per annum rate equal to the semi-annual
yield to maturity for United States Treasury securities maturing on the Average
Life Date of such Certificate and trading in the public securities markets
either as determined by interpolation between the most recent weekly average
yield to maturity for two series of United States Treasury securities, trading
in public securities markets, (i) one maturing as close as possible to, but
earlier than, the Average Life Date of such Certificate and (ii) the other
maturing as close as possible to, but later than, the Average Life Date of such
Certificate, 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 Certificate is reported on the most recent H.15
(519), such weekly average yield to maturity as published in such H.15(919).
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. The date of determination of a Make-Whole Premium will be the
third Business Day prior to the applicable prepayment date and the "most recent
H.15(519)" means the H.15(519) published prior to the close of business on the
third Business Day prior to the applicable prepayment date.
Trust Agreement: the Trust Agreement (Atlantic Coast Airlines Trust No. __________), dated as of
September 1, 1997, between the Initial Owner Participant and the Owner Trustee in its individual capacity.
Trust Estate: the Lessor's Estate.
Trust Indenture Act: the Trust Indenture Act of 1939, as amended.
Trust Indenture Estate: all estate, right, title and interest of the
Indenture Trustee in and to any of the property, rights, interests and
privileges granted to the Indenture Trustee pursuant to the Granting Clause of
the Indenture, other than Excepted Payments and any and all other rights of the
Owner Trustee or the Owner Participant expressly reserved to the Owner Trustee
or the Owner Participant pursuant to the Indenture.
United States, U.S., or US: the United States of America.
U.S. Person: a Person described in ss. 7701(a)(30) of the Code.
Warranty Bill of Sale: the full warranty bill of sale covering the
Aircraft (and specifically referring to each Engine) executed by the Seller as
owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery
Date.
<PAGE>
iv
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TRUST INDENTURE AND SECURITY AGREEMENT
(Atlantic Coast Airlines Trust No. ____)
dated as of September 26, 1997
between
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, but solely as trustee,
Owner Trustee
and
THE FIRST NATIONAL BANK OF MARYLAND,
not in its individual capacity, but solely as trustee,
Indenture Trustee
COVERING ONE CANADAIR REGIONAL JET, SERIES 200ER AIRCRAFT
SERIAL NO. _____, REGISTRATION NO. __________
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
iv
TABLE OF CONTENTS
Page
Initial Recitals
Granting Clause
HABENDUM CLAUSE...................................................................................................5
ARTICLE I - DEFINITIONS...........................................................................................7
Section 1.01. Definitions.........................................................................................7
ARTICLE II - ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT..........................7
Section 2.01. Authentication and Delivery of Certificates.........................................................7
Section 2.02. Execution of Certificates...........................................................................7
Section 2.03. Certificate of Authentication.......................................................................7
Section 2.04. Form and Terms of Certificates; Payments on Certificates............................................8
Section 2.05. Payments from Trust Indenture Estate Only..........................................................10
Section 2.06. Registration. Transfer and Exchange................................................................10
Section 2.07. Mutilated. Defaced, Destroyed, Lost and Stolen Certificates........................................11
Section 2.08. Cancellation of Certificates: Destruction Thereof..................................................12
Section 2.09. Temporary Certificates.............................................................................12
Section 2.10. Termination of Interest in Trust Indenture Estate..................................................13
Section 2.11. Certificates in Respect of Replacement Aircraft....................................................13
Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements........................13
Section 2.13. Establishment of Collateral Account................................................................13
Section 2.14. Investment of Funds on Deposit in the Collateral Account...........................................14
Section 2.15. Release of Collateral Account on Delivery Date or Assumption of Certificates.......................14
Section 2.16. Cut-Off Date.......................................................................................15
Section 2.17. Subordination......................................................................................15
Section 2.18. Reoptimization.....................................................................................16
ARTICLE III - COVENANTS..........................................................................................16
Section 3.01. Payment of Principal. Make-Whole Premium and Interest..............................................16
Section 3.02. Offices for Payments, etc..........................................................................16
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.......................................16
Section 3.04. Paying Agents......................................................................................16
Section 3.05. Covenants of SSB and the Owner Trustee.............................................................17
Section 3.06. [Reserved].........................................................................................17
Section 3.07. Disposal of Trust Indenture Estate.................................................................18
Section 3.08. No Representations or Warranties as to Aircraft or Documents.......................................18
Section 3.09. Further Assurances: Financing Statements...........................................................18
ARTICLE IV - HOLDER LISTS........................................................................................18
Section 4.01. Holder Lists: Ownership of Certificates............................................................18
ARTICLE V - RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE......................19
Section 5.01. Basic Rent Distribution............................................................................19
Section 5.02. Event of Loss and Replacement; Prepayment..........................................................20
Section 5.03. Payment After Indenture Event of Default. etc......................................................21
Section 5.04. Certain Payments...................................................................................23
Section 5.05. Other Payments.....................................................................................23
Section 5.06. Payments to Owner Trustee..........................................................................23
Section 5.07. Application of Payments............................................................................23
Section 5.08. Investment of Amounts Held by Indenture Trustee....................................................24
Section 5.09. Withholding Taxes..................................................................................25
Section 5.10. Letter of Credit...................................................................................25
ARTICLE VI - PREPAYMENT OF CERTIFICATES..........................................................................25
Section 6.01. No Prepayment Except as Specified..................................................................25
Section 6.02. Prepayment of Certificates.........................................................................25
Section 6.03. Notice of Prepayment to Holders....................................................................27
Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price......................................27
Section 6.05. Certificates Payable on Prepayment Date............................................................28
Section 6.06. Mandatory Sinking Fund Redemption..................................................................28
ARTICLE VI - INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS..............................28
Section 7.01. Indenture Event of Default.........................................................................28
Section 7.02. Remedies...........................................................................................30
Section 7.03. Return of Aircraft. etc............................................................................32
Section 7.04. Indenture Trustee May Prove Debt...................................................................34
Section 7.05. Remedies Cumulative................................................................................35
Section 7.06. Suits for Enforcement..............................................................................35
Section 7.07 Discontinuance of Proceedings.......................................................................36
Section 7.08. Limitations on Suits by Holders....................................................................36
Section 7.09. Unconditional Right of Holders to Payments on Certificates.........................................36
Section 7.10. Control by Holders.................................................................................36
Section 7.11. Waiver of Past Indenture Default...................................................................37
Section 7.12. Notice of Indenture Default........................................................................37
ARTICLE VIII - RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT............................................38
Section 8.01. Certain Rights of Owner Trustee and Owner Participant..............................................38
Section 8.02. Owner Participant's Right to Prepay or Purchase the Certificates...................................40
Section 8.03. Certain Rights of Owner Participant................................................................41
ARTICLE IX - CONCERNING THE INDENTURE TRUSTEE....................................................................43
Section 9.01. Acceptance of Trusts...............................................................................43
Section 9.02 Duties Before; and During, Existence of Indenture Event of Default.................................43
Section 9.03. Certain Rights of the Indenture Trustee............................................................44
Section 9.04. Indenture Trustee Not Responsible for Recitals, Certificates or Proceeds...........................45
Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc...............................46
Section 9.06. Moneys Held by Indenture Trustee...................................................................46
Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc...................................46
Section 9.08. Replacement Airframes and Replacement Engines......................................................46
Section 9.09 Indenture Supplement for Replacements...............................................................49
Section 9.10. Effect of Replacement..............................................................................49
Section 9.11. Compensation.......................................................................................49
ARTICLE X - CONCERNING THE HOLDERS...............................................................................49
Section 10.01. Evidence of Action Taken by Holders...............................................................49
Section 10.02. Proof of Execution of Instruments and of Holding of Certificates..................................50
Section 10.03. Holders to Be Treated as Owners...................................................................50
Section 10.04. Certificates Owned by Owner Trustee or Lessee Deemed Not Outstanding..............................50
Section 10.05. Right of Revocation of Action Taken...............................................................51
Section 10.06. ERISA.............................................................................................51
ARTICLE XI - INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE...............................................51
ARTICLE XII - SUCCESSOR TRUSTEES.................................................................................52
Section 12.01. Notice of Successor Owner Trustee.................................................................52
Section 12.02. Resignation and Removal of Indenture Trustee: Appointment of Successor............................52
Section 12.03. Persons Eligible for Appointment as Indenture Trustee.............................................53
Section 12.04. Acceptance of Appointment by Successor Trustee....................................................54
Section 12.05. Merger, Consolidation or Succession to Business of Indenture Trustee..............................54
Section 12.06. Appointment of Separate Trustees..................................................................55
ARTICLE XIII - SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS...........................56
Section 13.01. Supplemental Indentures Without Consent of Holders................................................56
Section 13.02. Supplemental Indentures With Consent of Holders...................................................58
Section 13.03. Effect of Supplemental Indenture..................................................................59
Section 13.04. Documents to Be Given to Indenture Trustee........................................................59
Section 13.05. Notation on Certificates in Respect of Supplemental Indentures....................................59
Section 13.06. No Request Necessary for Lease Supplement or Indenture Supplement.................................59
Section 13.07. Notices to Liquidity Providers....................................................................59
ARTICLE XIV - SATISFACTION AND DISCHARGE OF INDENTURE;UNCLAIMED MONEYS...........................................60
Section 14.01. Satisfaction and Discharge of Indenture: Termination of Indenture.................................60
Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates...................61
Section 14.03. Repayment of Moneys Held by Paying Agent..........................................................61
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee and Paying Agent............................61
ARTICLE XV - MISCELLANEOUS.......................................................................................61
Section 15.01. Capacity in Which Acting..........................................................................61
Section 15.02. No Legal Title to Trust Indenture Estate in Holders...............................................61
Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding....................................62
Section 15.04. Indenture Benefits Trustees, Participants, Lessee, and Liquidity Providers Only...................62
Section 15.05. No Action Contrary to Lessee's Rights Under the Lease.............................................62
Section 15.06. Notices...........................................................................................62
Section 15.07. Officer's Certificates and Opinions of Counsel....................................................62
Section 15.08. Severability......................................................................................63
Section 15.09. No Oral Modifications or Continuing Waivers.......................................................63
Section 15.10. Successors and Assigns............................................................................63
Section 15.11. Headings..........................................................................................63
Section 15.12. Normal Commercial Relations.......................................................................63
Section 15.13. Governing Law; Counterparts.......................................................................64
Exhibit A -- Form of Indenture and Security Agreement Supplement
Exhibit B -- Form of Certificate
Schedule I -- Definitions
Schedule II -- Amortization Schedule
<PAGE>
66
TRUST INDENTURE AND SECURITY AGREEMENT
(ATLANTIC COAST AIRLINES TRUST NO. )
TRUST INDENTURE AND SECURITY AGREEMENT (ATLANTIC COAST AIRLINES
TRUST NO. _________) dated as of September 26, 1997 (the "Indenture"), between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a
national banking association, not in its individual capacity, except as
otherwise specifically set forth herein (when acting in such individual
capacity, "SSB"), but solely as owner trustee (the "Owner Trustee") under the
Trust Agreement, as defined herein, and THE FIRST NATIONAL BANK OF MARYLAND, a
national banking association (when acting in its individual capacity, "FNBM"),
as Indenture Trustee hereunder (the "Indenture Trustee").
W I T N E S S E T H:
WHEREAS, capitalized terms used herein shall have the respective
meanings set forth or referred to in Article I hereof;
WHEREAS, the Initial Owner Participant and SSB have, prior to the
execution and delivery of this Indenture, entered into a Trust Agreement
(Atlantic Coast Airlines Trust No. ___________) dated as of September 26, 1997,
(as amended or otherwise modified from time to time in accordance with the
provisions thereof and of the Participation Agreement, the "Trust Agreement"),
whereby, among other things, SSB has declared a certain trust for the use and
benefit of the Initial Owner Participant, subject, however, to the Lien of this
Indenture for the use and benefit of, and with the priority of payment to, the
holders of the Certificates issued hereunder, and the Owner Trustee is
authorized and directed to execute and deliver this Indenture;
WHEREAS, the Owner Trustee desires by this Indenture, among other
things (i) to provide for the issuance by the Owner Trustee of Certificates as
provided in the Participation Agreement, and (ii) to provide for the assignment,
mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of
the Trust Indenture Estate hereunder of the Owner Trustee's right, title and
interest in the Liquid Collateral and after the Delivery Date for the
assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee,
as part of the Trust Indenture Estate hereunder, of among other things, certain
of the Owner Trustee's estate, right, title and interest in and to the Aircraft
and the Indenture Documents and certain payments and other amounts (other than
Excepted Payments) received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's obligations to
the Certificate Holders and for the benefit and security of such Holders;
WHEREAS, all things have been done to make the Certificates, when
executed by the Owner Trustee, and authenticated, issued and delivered
hereunder, the valid obligations of the Owner Trustee; and
WHEREAS, all things necessary to make this Indenture the valid, binding
and legal obligation of the Owner Trustee, enforceable in accordance with its
terms, have been done and performed and have happened.
NOW, THEREFORE, the parties agree as follows:
GRANTING CLAUSE
NOW, THEREFORE, in consideration of the mutual promises contained
herein and to secure (i) the prompt payment of the principal of and Make-Whole
Premium, if any, and interest on, and all other amounts due with respect to, all
the Certificates from time to time outstanding under this Indenture and all
other amounts due hereunder and (ii) the performance and observance by the Owner
Trustee of all the agreements, covenants and provisions in this Indenture, in
the Certificates, in the Participation Agreement and in the Lease contained for
the benefit of the Holders of the Certificates, and the prompt payment of any
and all amounts from time to time owing under the Participation Agreement by the
Owner Trustee, any Owner Participant or the Lessee to the Holders (collectively
the "Secured Obligations") and for the uses and purposes and subject to the
terms and provisions of this Indenture, and in consideration of the premises and
of the covenants in this Indenture and in the Certificates and of the purchase
of the Certificates by their Holders, and of the sum of $1 paid to the Owner
Trustee by the Indenture Trustee at or before the delivery of this Indenture,
the receipt and sufficiency of which are hereby acknowledged, the Owner Trustee
has granted, bargained, sold, assigned, transferred, conveyed, mortgaged,
pledged, granted a first priority security interest in and confirmed, and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
grant a first priority security interest in and confirm to the Indenture
Trustee, its successors and assigns, in trust for the equal and ratable security
and benefit of the Holders from time to time of the Certificates, a first
priority security interest in and first mortgage Lien on all estate, right,
title and interest of the Owner Trustee in, to and under the following described
property, rights and privileges other than Excepted Payments, which
collectively, excluding Excepted Payments but including all property
specifically subjected to the Lien of this Indenture by the terms hereof, by any
supplement to this Indenture (including the Indenture Supplement) or any
mortgage supplemental to this Indenture, are included within the Trust Indenture
Estate, subject always to the rights granted to the Owner Trustee or any Owner
Participant hereunder and to the other terms and conditions of this Indenture:
(1) The Airframe, as described in the Indenture Supplement, and any
airframe substituted in replacement thereof pursuant to the provisions of this
Indenture; the Engines, as the same are more particularly described in the
Indenture Supplement, whether or not such Engines shall be installed in or
attached to the Airframe or any other airframe, and any Replacement Engine
therefor; and all Parts in respect of the Airframe and the Engines and all
records, logs and other documents at any time maintained with respect to the
foregoing property;
(2) The Lease and all Rent thereunder, including, without limitation,
all amounts of Basic Rent and Supplemental Rent, and payments of any kind
thereunder and including all rights of the Owner Trustee to execute any election
or option or to give or receive any notice, consent, waiver or approval under or
in respect of the Lease or to accept any surrender of the Aircraft or any part
thereof as well as any rights, powers or remedies on the part of the Owner
Trustee, whether arising under the Lease or by statute or at law or in equity or
otherwise arising out of any Event of Default;
(3) The Purchase Agreement (to the extent assigned by the Purchase
Agreement Assignment), the Purchase Agreement Assignment, the PAA Consent, the
Engine Manufacturer's Consent, the FAA Bill of Sale, the Warranty Bill of Sale,
and the Participation Agreement (to the extent of amounts payable to the Owner
Trustee thereunder) (collectively, and together with the Lease, the Trust
Agreement, and the Certificates, the "Indenture Documents"), including all
rights of the Owner Trustee to execute any election or option or to give or
receive any notice, consent, waiver or approval under or in respect of any of
the foregoing documents and instruments;
(4) All the tolls, rents, issues, profits, products, revenues and other
income (including sales proceeds) of the property subjected or required to be
subjected to the Lien of this Indenture, and all of the estate, right, title and
interest of the Owner Trustee in and to the same and every part of said
property;
(5) The Collateral Account, the Liquid Collateral and all other moneys
and securities (including Permitted Investments) now or hereafter paid or
deposited or required to be paid or deposited to or with the Indenture Trustee
by or for the account of the Owner Trustee pursuant to any term of any Operative
Agreement, except the Tax Indemnity Agreement, and held or required to be held
by the Indenture Trustee hereunder;
(6) All requisition proceeds with respect to the Aircraft or any part
thereof (to the extent of the Owner Trustee's interest therein pursuant to the
terms of the Lease) and all insurance proceeds with respect to the Aircraft or
any part thereof from insurance required to be maintained by the Lessee under
Section 12 of the Lease, but excluding any insurance maintained by the Lessee
and not required under Section 12 of the Lease; and
(7) All proceeds of the foregoing.
EXCLUDING, HOWEVER, from the foregoing grant of the Lien and security
interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted
Payments, including without limitation all right, title and interest of any
Owner Participant in, to and under the Tax Indemnity Agreement and any moneys
due or to become due under the Tax Indemnity Agreement and all rights to collect
and enforce Excepted Payments and (ii) rights granted to or retained by the
Owner Trustee or any Owner Participant hereunder and SUBJECT TO the following
provisions:
(a) (i) whether or not an Indenture Event of Default shall occur and be
continuing, the Owner Trustee and any Owner Participant shall at all times
retain the right, to the exclusion of the Indenture Trustee: (A) to Excepted
Payments and to commence an action at law to obtain or otherwise demand, sue for
or receive and enforce the payment of such Excepted Payments, (B) to exercise
any election or option or make any decision or determination or to give or
receive any notice (including notice of Default), consent, waiver or approval in
respect of any such Excepted Payment, (C) to adjust (and make any decision or
determination or give any notice or consent with respect to) Basic Rent and the
percentages relating to Stipulated Loss Value and Termination Value and the EBO
Price, and the EBO Date, as provided in Section 3(d) of the Lease and Section
15.01 of the Participation Agreement, (D) to exercise any election or option to
make any decision or determination, or to give or receive any notice, consent,
waiver or approval, or to take any other action in respect of, but in each case
only to the extent relating to, Excepted Payments (except for, in respect of any
portion of Basic Rent constituting an Excepted Payment, any action changing the
manner by which such Basic Rent is to be paid), (E) to retain the rights of the
"Lessor" with respect to solicitations of bids, and the election to retain the
Aircraft pursuant to Section 3(g) of the Lease, (F) to retain the right of
"Lessor" to determine the Fair Market Rental or Fair Market Value pursuant to
the respective definitions thereof, (G) to exercise all other rights of the
Lessor under Sections 3(h) and 16 of the Lease with respect to the retention or
purchase by the Lessee or the Lessor of the Aircraft or the exercise by the
Lessee of the Lessee's renewal or purchase options, (H) to retain all rights
with respect to insurance maintained for its own account which Section 12(e) of
the Lease specifically confers on the "Owner Participant", (I) to approve
appraisers, lawyers and other professionals and receive notices, certificates,
reports, filings, opinions and other documents, in each case with respect to
matters relating to the Owner Participant's tax position, (J) to approve any
accountants to be used in the verification of any Rent adjustment, (K) to
exercise, to the extent necessary to enable it to exercise its rights under
Section 8.03 hereof, the rights of the "Lessor" under Section 19 of the Lease,
and (L) to consent to changes to the list of countries on Exhibit E of the
Lease, and to Permitted Air Carriers and Permitted Sublessees;
(ii) whether or not an Indenture Event of Default shall occur and be
continuing, the Owner Trustee and the Indenture Trustee shall each have the
rights separately but not to the exclusion of the other: (A) to receive from the
Lessee all notices, certificates, reports, filings, opinions of counsel, copies
of all documents and all information which the Lessee is permitted or required
to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee
pursuant to any other Operative Agreement, (B) to exercise inspection rights
pursuant to Section 10 of the Lease (provided that if an Indenture Event of
Default shall be continuing, no inspection right of the Owner Trustee shall
interfere with the efforts of the Indenture Trustee to exercise remedies under
the Lease or this Indenture), (C) to maintain separate insurance pursuant to
Section 12(e) of the Lease and to retain all rights with respect to such
insurance maintained for its own account, and (D) to give any notice of default
under Section 14 of the Lease;
(iii) subject to the last sentence of this clause (a), (A) so long as
no Indenture Event of Default not constituting an Event of Default shall have
occurred and be continuing (but subject to the provisions of Section 8.01
hereof), the Owner Trustee shall retain the right, to the exclusion of the
Indenture Trustee (or, if an Indenture Event of Default that is also an Event of
Default shall have occurred and be continuing, acting jointly with and not to
the exclusion of the Indenture Trustee), to exercise all rights, elections and
options of the Lessor in connection with the return of the Aircraft under
Section 5 of the Lease (but not Section 15 thereof, it being understood that the
Indenture Trustee shall have the exclusive right to exercise remedies pursuant
to such Section 15, including in respect of any related return of the Aircraft
pursuant to Section 5 of the Lease), including the right to approve as
satisfactory any accountants, engineers, appraisers or counsel to render
services for or issue appraisals, reports, certificates or opinions to the Owner
Trustee and to exercise all rights, elections and options of the Lessor in
connection with the return of the Aircraft pursuant to the express provisions of
the Operative Agreements, and (B) so long as no Indenture Event of Default not
constituting an Event of Default shall have occurred and be continuing (but
subject to the provisions of Section 8.01 hereof), the Owner Trustee shall
retain the right, jointly with the Indenture Trustee (agreement of both not
being required), to further assurances and financial information from the Lessee
pursuant to Section 20 of the Lease (other than the right to receive any funds
to be delivered to the "Lessor" under the Lease (except funds delivered with
respect to Excepted Payments);
(iv) subject to the last sentence of this clause (a), at all times the
Owner Trustee shall have the right as Lessor, but not to the exclusion of the
Indenture Trustee, to seek specific performance of the covenants of the Lessee
under the Lease relating to the protection, insurance, maintenance, possession
and use of the Aircraft; and
(v) at all times the Owner Trustee and any Owner Participant shall have
the rights granted to them under Articles VI, VIII and X and Section 7.02
hereof.
Notwithstanding the foregoing, but subject always to the provisions of
Section 15.05 hereof, the Indenture Trustee shall at all times have the right,
to the exclusion of the Owner Trustee and any Owner Participant, to (A) (other
than with respect to Excepted Payments) declare the Lease to be in default under
Section 15 thereof or any statute (including, without limitation, Article 2A of
the Uniform Commercial Code) and (B) subject only to the provisions of this
Indenture (other than in connection with Excepted Payments), exercise the
remedies set forth in such Section 15 of the Lease, in any statute (including
without limitation Article 2A of the Uniform Commercial Code), at law and in
Article 7 hereof.
(b) The leasehold interest granted to the Lessee by the Lease shall not
be subject to the security interest granted by this Indenture, and nothing in
this Indenture shall affect the rights of the Lessee under the Lease so long as
no Event of Default has occurred and is continuing.
HABENDUM CLAUSE
TO HAVE AND TO HOLD the aforesaid property unto the Indenture Trustee,
its successors and assigns, in trust for the equal and ratable benefit and
security of the Holders from time to time of the Certificates, without any
priority of any one Certificate over any other and for the uses and purposes and
subject to the terms and conditions set forth in this Indenture and the rights
of the Owner Trustee and the Owner Participant under this Indenture.
It is expressly agreed that anything contained in this Indenture to the
contrary notwithstanding, the Owner Trustee shall remain liable under the
Indenture Documents to perform all of the obligations assumed by it under any of
those documents, all in accordance with and pursuant to the terms and provisions
of those documents, and the Indenture Trustee and the Holders of the
Certificates shall have no obligation or liability under the Indenture Documents
by reason of or arising out of the assignment under this Indenture, nor shall
the Indenture Trustee or the Holders of the Certificates be required or
obligated in any manner to perform or fulfill any obligations of the Owner
Trustee under or pursuant to the Indenture Documents or, except as expressly
provided in this Indenture, to make any payment, or to make any inquiry as to
the nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
Effective upon the occurrence and continuance of an Indenture Event of
Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and
lawful attorney of the Owner Trustee, irrevocably, with full power (in the name
of the Owner Trustee or otherwise), subject to the terms and conditions of this
Indenture, to ask, require, demand, receive, compound and give acquittance for
any and all Basic Rent, Supplemental Rent payable to the Owner Trustee,
Stipulated Loss Value and Termination Value payments, insurance proceeds and any
and all moneys and claims for moneys due and to become due under or arising out
of the Lease (subject to Section 8.01 hereof) or the other Indenture Documents
(other than Excepted Payments), to endorse any checks or other instruments or
orders in connection with the same and to file any claims, take any action or
institute any proceeding which the Indenture Trustee may deem to be necessary or
advisable in the premises.
Under the Lease the Lessee is directed to make all payments of Rent
(other than Excepted Payments not constituting Basic Rent) payable to the Owner
Trustee and all other amounts (other than Excepted Payments not constituting
Basic Rent) which are required to be paid to or deposited with the Owner Trustee
pursuant to the Lease directly to the Indenture Trustee at such address in the
United States of America as the Indenture Trustee shall specify for application
as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding
such provision, it shall have received any such amounts, promptly on receipt of
any such payment, it will transfer to the Indenture Trustee any and all moneys
from time to time received by the Owner Trustee constituting part of the Trust
Indenture Estate for distribution by the Indenture Trustee pursuant to this
Indenture, except that the Owner Trustee shall accept for distribution pursuant
to the Trust Agreement (i) any amounts distributed to it by the Indenture
Trustee under this Indenture, and (ii) any Excepted Payments not constituting
Basic Rent.
The Owner Trustee agrees that at any time and from time to time, upon
the written request of the Indenture Trustee, the Owner Trustee will, at the
expense of the Lessee, promptly and duly execute and deliver or cause to be duly
executed and delivered any and all such further instruments and documents as the
Indenture Trustee may reasonably deem desirable in obtaining the full benefits
of the assignment hereunder and of the rights and powers herein granted;
provided, however, that the Owner Trustee shall have no obligation to execute
and deliver or cause to be executed or delivered to the Indenture Trustee any
such instrument or document if such execution and delivery would result in the
imposition of additional liabilities on the Owner Trustee or any Owner
Participant or would result in a burden on such Owner Participant's business
activities, unless the Owner Trustee or such Owner Participant, as the case may
be, is indemnified to its reasonable satisfaction against any losses,
liabilities and expenses incurred in connection with such execution and
delivery.
The Owner Trustee does hereby warrant and represent that it has not
assigned, pledged or otherwise disposed of, and hereby covenants that it will
not assign or pledge or otherwise dispose of, so long as the assignment
hereunder shall remain in effect and shall not have been terminated pursuant to
Section 14.01 hereof, any of its right, title or interest hereby assigned, to
anyone other than the Indenture Trustee, and that it will not, except in respect
of Excepted Payments or otherwise as provided in or permitted by this Indenture,
enter into an agreement amending or supplementing any of the Indenture
Documents, settle or compromise any claim (other than claims in respect of
Excepted Payments) against the Lessee arising under any of the Indenture
Documents, or submit or consent to the submission of any dispute, difference or
other matter arising under or in respect of any of the Indenture Documents, to
arbitration thereunder.
Concurrently with the delivery of this Indenture, the Owner Trustee has
delivered to the Indenture Trustee executed counterparts of the Trust Agreement.
It is hereby further covenanted and agreed by and between the parties
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless the context otherwise requires,
capitalized terms utilized herein shall have the meanings set forth in Schedule
I hereto for all purposes of this Indenture and shall be equally applicable to
both the singular and plural forms of the terms defined.
ARTICLE II
ISSUE, EXECUTION, FORM AND
REGISTRATION OF CERTIFICATES;
COLLATERAL ACCOUNT
Section 2.01. Authentication and Delivery of Certificates. Forthwith
upon the execution and delivery of this Indenture, and from time to time
thereafter, Certificates in an aggregate principal amount not in excess of the
amount specified in Section 2.04 hereof (except as otherwise provided in
Sections 2.06 and 2.07 hereof) shall be executed by the Owner Trustee and
delivered to the Indenture Trustee for authentication, and the Indenture Trustee
shall thereupon authenticate and deliver said Certificates to or upon the oral
or written order of the Owner Trustee, signed, if written, by an authorized
officer of the Owner Trustee, without any further action by the Owner Trustee.
Section 2.02. Execution of Certificates. The Certificates shall be
signed on behalf of the Owner Trustee by an authorized officer of SSB. Such
signatures may be the manual or facsimile signatures of such officer and minor
errors or defects in any reproduction of any such signature shall not affect the
validity or enforceability of any Certificate which has been duly authenticated
and delivered by the Indenture Trustee.
In case any officer of SSB who shall have signed any of the
Certificates shall cease to be such officer before the Certificate so signed
shall be authenticated and delivered by the Indenture Trustee or disposed of by
SSB, such Certificate nevertheless may be authenticated and delivered or
disposed of as though the person who signed such Certificate had not ceased to
be such officer of SSB; and any Certificate may be signed on behalf of the Owner
Trustee by such person or persons as, at the actual date of the execution of
such Certificate, shall be the proper officers of SSB, although at the date of
the execution and delivery of this Indenture any such person was not such an
officer. Certificates bearing the facsimile signatures of individuals who were
authorized officers of SSB at the time such Certificates were issued shall bind
the Owner Trustee, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the authentication and delivery of such
Certificates or did not hold such offices at the respective dates of such
Certificates.
Section 2.03. Certificate of Authentication. Only such Certificates as
shall bear thereon a certificate of authentication substantially in the form set
forth in Exhibit B, executed by the Indenture Trustee by manual signature of one
of its authorized officers, shall be entitled to the security and benefits of
this Indenture or be valid or obligatory for any purpose. Such certificate by
the Indenture Trustee upon any Certificate executed by the Owner Trustee shall
be conclusive evidence that the Certificate so authenticated has been duly
authenticated and delivered hereunder and that the Holder, as evidenced on the
Register, is entitled to the security and benefits of this Indenture.
Section 2.04. Form and Terms of Certificates; Payments on Certificates.
The Certificates and the Indenture Trustee's certificate of authentication shall
be substantially in the form set forth in Exhibit B hereto. Certificates may
differ with respect to Maturity (subject to Section 15.01(d) of the
Participation Agreement) and as to other terms. The Certificates shall be
issuable as registered securities without coupons and shall be numbered,
lettered, or otherwise distinguished in such manner or in accordance with such
plans as the Owner Trustee executing the same may determine with the approval of
the Indenture Trustee.
The aggregate principal amount of Certificates that may be
authenticated and delivered under this Indenture is limited as provided in the
form of Certificate attached as Exhibit B hereto. The Certificates shall be
issued in registered form only and in denominations of $1,000 and any integral
multiple thereof, shall be dated the Certificate Closing Date, shall be issued
in four separate series consisting of Series A, Series B, Series C, and Series D
and shall be issued in the Maturities and principal amounts, and shall bear
interest at the rates per annum, specified in the form of Certificate set forth
in Exhibit B.
Any of the Certificates may be issued with appropriate insertions,
omissions, substitutions and variations, and may have imprinted or otherwise
reproduced thereon such legend or legends, not inconsistent with the provisions
of this Indenture, as may be required to comply with any law or with any rules
or regulations pursuant thereto, or with the rules of any securities market in
which the Certificates are admitted to trading, or to conform to general usage.
Each Certificate shall bear interest from the date of original issuance
thereof or from the most recent date to which interest has been paid and duly
provided for, as the case may be, which shall be payable on the dates specified
on the face of the form of Certificate set forth in Exhibit B hereto until the
principal thereof is paid. Interest shall be calculated on the basis of a
360-day year of twelve 30-day months.
Notwithstanding the preceding paragraph, each Certificate shall bear
interest at the Past Due Rate on any principal, interest and any other amount
payable hereunder or under such Certificate, which shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full, payable from time to time on demand
of the Indenture Trustee.
The principal of, and Make-Whole Premium, if any, and interest on, the
Certificates shall be payable at the Corporate Trust Department of the Indenture
Trustee or at any office or agency maintained for such purpose pursuant to
Section 3.02 hereof in immediately available funds prior to 10:30 A.M. (New York
time) on the due date thereof and the Indenture Trustee shall remit all such
amounts received by it to the Holders at such account or accounts at such
financial institution or institutions as the Holders shall have designated to
the Indenture Trustee in writing, in immediately available funds, such payment
to be made if the payment was received prior to 10:30 A.M. New York time by the
Indenture Trustee on any Business Day, by 12:00 noon New York time on such
Business Day; otherwise, the Indenture Trustee shall make payment promptly, but
not later than 11:00 A.M. New York time on the next succeeding Business Day;
provided, however, that interest may be payable at the option of the Indenture
Trustee or its Paying Agent, as defined in Section 3.04, by mailing checks for
such interest payable to or upon the written order of the Holders entitled
thereto as they shall appear on the Register. If any amount payable under the
Certificates, or under this Indenture, falls due on a day that is not a Business
Day, then such sum shall be payable on the next succeeding Business Day, without
(provided that payment is made on such next succeeding Business Day) additional
interest thereon for the period of such extension.
The Holder at the close of business on any Record Date with respect to
any Payment Date shall be entitled to receive the interest if any payable on
such Payment Date notwithstanding any transfer or exchange of such Certificate
subsequent to the Record Date and prior to such Payment Date, except if and to
the extent the Owner Trustee shall default in the payment of the interest due on
such Payment Date, in which case such defaulted interest shall be paid to the
Holder at the close of business on a subsequent Record Date (which shall be not
less than five or more than 15 Business Days prior to the date of payment of
such defaulted interest) established by notice given by mail by or on behalf of
the Owner Trustee to the Holders not less than 15 days preceding such subsequent
Record Date.
The Owner Trustee agrees to pay to the Indenture Trustee for
distribution in accordance with Section 5.04 hereof (a) any and all indemnity
amounts received by the Owner Trustee which are payable by the Lessee to (i) the
Indenture Trustee in its individual capacity, (ii) the Subordination Agent or
(iii) each Liquidity Provider, in each case pursuant to Article 8 or 9 of the
Participation Agreement (it being acknowledged that the Lessee has been
instructed to pay such amounts to the Person or Persons entitled thereto) and
(b) the Owner Trustee's pro rata share of all amounts owed to each Liquidity
Provider by the Subordination Agent under each Liquidity Facility other than
amounts due as (i) repayments of the principal of advances thereunder, and (ii)
interest on Interest Drawings and Final Drawings except to the extent included
in Net Interest and Related Charges. As used in this Section, the Owner
Trustee's pro rata share means as of any time:
(A) with respect to all amounts other than Net Interest and
Related Charges, a fraction the numerator of which is the aggregate
principal balance then outstanding of the Certificates issued under
this Indenture other than the Series D Certificates and the denominator
of which is the aggregate principal balance of all Certificates issued
under this Indenture and the Related Indentures other than the Series D
Certificates, plus
(B) with respect to all Net Interest and Related Charges (x)
if there exists a Payment Default under any Certificate issued under
this Indenture a fraction, the numerator of which is the aggregate
principal balance then outstanding of Certificates issued under this
Indenture other than the Series D Certificates and the denominator of
which is the aggregate principal balance then outstanding of all
Certificates issued under this Indenture and the Related Indentures
other than the Series D Certificates under which there exists a Payment
Default or (y) at all other times, zero.
As used in this Section, "Net Interest and Related Charges" means the sum of (i)
the amount, if any, by which interest payable to each Liquidity Provider on any
Interest Drawing and Final Drawing exceeds the amount which would be payable if
such drawings bore interest at the weighted average Past Due Rate applicable to
amounts in default on all Certificates plus (ii) any amounts payable under
Section 3.1, Section 3.2, Section 3.3, Section 3.9 or Section 7.7 of each
Liquidity Facility (or similar provisions of any replacement Liquidity Facility)
which result from any Interest Drawing or Final Drawing. As used in this
Section, a "Payment Default" when used in connection with a Certificate issued
hereunder or a Certificate issued under any Related Indenture means a default in
the payment of principal thereof or interest thereon (which default has not been
cured), other than solely because of acceleration.
Section 2.05. Payments from Trust Indenture Estate Only. All payments
to be made by the Owner Trustee under this Indenture shall be made only from the
income and the proceeds from the Lessor's Estate to the extent included in the
Trust Indenture Estate and from any other amounts of the type described in
Section 5.01 hereof (but only to the extent actually received by the Indenture
Trustee) and only to the extent that the Owner Trustee shall have sufficient
income or proceeds from the Lessor's Estate to the extent included in the Trust
Indenture Estate (and such other amounts) to enable the Indenture Trustee to
make distributions of the amounts due in respect of the Certificates in
accordance with the terms hereof and thereof. Each Holder by its acceptance of a
Certificate agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate (and such other amounts of the type described in Section
5.01 hereof but only to the extent actually received by the Indenture Trustee)
to the extent available for distribution to it as provided herein and that
neither the Owner Participant, nor the Owner Trustee, nor SSB, nor the Indenture
Trustee is personally liable to such Holder for any amounts payable under this
Indenture or such Certificate or for any amounts payable or liability under any
Certificate or this Indenture, except as expressly provided herein in the case
of SSB, the Owner Trustee or the Indenture Trustee.
SSB is not personally liable to any Holder, the Lessee, the Owner
Participant or the Indenture Trustee for any amounts payable under this
Indenture or for any liability under this Indenture or the Certificates, except
as a result of SSB's gross negligence or willful misconduct, or as otherwise
expressly provided herein or in the Participation Agreement.
If (1) all or any part of the Lessor's Estate becomes the property of a
debtor subject to the reorganization provisions of the Bankruptcy Code, (2)
pursuant to such reorganization provisions any Owner Participant is required, by
reason of such Owner Participant being held to have recourse liability to the
debtor or the trustee of the debtor directly or indirectly, to make payment on
account of any amount payable as principal of or interest, Make-Whole Premium or
other amounts payable on the Certificates, and (3) the Indenture Trustee
actually receives any Recourse Amount which reflects any payment by an Owner
Participant on account of (2) above, then the Indenture Trustee shall promptly
refund to such Owner Participant such Recourse Amount. Nothing contained in this
paragraph shall prevent the Indenture Trustee from enforcing any personal
recourse obligation (and retaining the proceeds thereof) of any Owner
Participant under the Participation Agreement, or from retaining any amount paid
by any Owner Participant under Sections 5.01, 8.02 and 8.03 hereof.
Section 2.06. Registration. Transfer and Exchange. The Indenture
Trustee will keep, on behalf of the Owner Trustee, at each office or agency to
be maintained for the purpose as provided in Section 3.02 hereof a Register or
Registers on which, subject to such reasonable regulations as it may prescribe,
it will register, and will register the transfer of, Certificates as provided in
this Article. Such Register shall be in written form in the English language or
in any other form capable of being converted into such form within a reasonable
period of time.
Upon due presentation for registration of transfer of any Certificate
at any such office or agency, the Owner Trustee shall execute and the Indenture
Trustee shall authenticate and deliver in the name of the transferee or
transferees a new Certificate or Certificates of the same Series and Maturity,
principal amount and interest rate and in authorized denominations for an equal
aggregate principal amount; provided, that such Certificate being transferred
shall be canceled in accordance with Section 2.08 hereof simultaneously with the
issuance of the new Certificate.
Any Certificate or Certificates may be exchanged for a Certificate or
Certificates of the same Series and Maturity and interest rate but in other
authorized denominations, in an equal aggregate principal amount. Certificates
to be exchanged shall be surrendered at any office or agency to be maintained by
the Indenture Trustee for the purpose as provided in Section 3.02 hereof, and
the Owner Trustee shall execute and the Indenture Trustee shall authenticate and
deliver in exchange therefor the Certificate or Certificates which the Holder
making the exchange shall be entitled to receive, bearing numbers not
contemporaneously or previously outstanding.
All Certificates presented for registration of transfer, exchange,
prepayment or payment shall (if so required by the Owner Trustee or the
Indenture Trustee) be duly endorsed by, or be accompanied by a written
instrument or instruments of transfer in form satisfactory to the Owner Trustee
and the Indenture Trustee duly executed by the Holder or its attorney duly
authorized in writing and (except in the case of transfers pursuant to Article
15 of the Participation Agreement) the Indenture Trustee may require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act.
The Indenture Trustee may require payment from the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any exchange or registration of transfer of Certificates. No
service charge shall be levied for any such transaction.
The Indenture Trustee shall not be required to exchange or register a
transfer of any Certificates (a) for a period of 15 days immediately preceding
the first mailing of notice of prepayment of such Certificates or (b) with
respect to which notice of prepayment has been given pursuant to Section 6.03
hereof and such notice has not been revoked.
All Certificates issued upon any transfer or exchange of Certificates
shall be valid obligations of the Owner Trustee, evidencing the same debt, and
entitled to the same security and benefits under this Indenture, as the
Certificates surrendered upon such transfer or exchange.
Section 2.07. Mutilated. Defaced, Destroyed, Lost and Stolen
Certificates. In case any temporary or definitive Certificate shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee
in its discretion may execute, and upon the oral or written request of any
officer of SSB, principal amount and interest rate as the Certificate being
replaced, bearing a number not contemporaneously or previously outstanding, in
exchange and substitution for the mutilated or defaced Certificate, or in lieu
of and substitution for the Certificate so apparently destroyed, lost or stolen.
In the case of any Certificate so apparently destroyed, lost or stolen, the
applicant for a substitute Certificate shall furnish to the Owner Trustee and to
the Indenture Trustee such security or indemnity as may be required by them to
indemnify and defend and to hold each of them harmless and evidence to their
satisfaction of the apparent destruction, loss or theft of such Certificate and
of the ownership thereof.
Upon the issuance of any substitute Certificate, the Owner Trustee or
the Indenture Trustee may require payment from the Holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses incurred in connection therewith. In
case any Certificate which has matured or is about to mature, or has been called
for prepayment in full, shall become mutilated or defaced or be apparently
destroyed, lost or stolen, the Owner Trustee may, instead of issuing a
substitute Certificate, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated or defaced Certificate), if
the applicant of any Certificate so apparently destroyed, lost or stolen, for
such payment shall furnish to the Owner Trustee and to the Indenture Trustee
such security or indemnity as any of them may require to hold each of them
harmless and the applicant shall also furnish to the Owner Trustee and the
Indenture Trustee evidence to their satisfaction of the apparent destruction,
loss or theft of such Certificate and of the ownership thereof.
Every substitute Certificate issued pursuant to the provisions of this
Section by virtue of the fact that any Certificate is apparently destroyed, lost
or stolen shall constitute an original additional contractual obligation of the
Owner Trustee, whether or not the apparently destroyed, lost or stolen
Certificate shall be enforceable at any time by anyone and shall be entitled to
all the security and benefits of (but shall be subject to all the limitations of
rights set forth in) this Indenture equally and proportionately with any and all
other Certificates duly authenticated and delivered hereunder. All Certificates
shall be held and owned upon the express condition that, to the extent permitted
by law, the foregoing provisions are exclusive with respect to the replacement
or payment of mutilated, defaced, or apparently destroyed, lost or stolen
Certificates and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
Section 2.08. Cancellation of Certificates: Destruction Thereof. All
Certificates surrendered for payment, prepayment, registration of transfer or
exchange, if surrendered to the Owner Trustee or any agent of the Owner Trustee
or the Indenture Trustee, shall be delivered to the Indenture Trustee for
cancellation or, if surrendered to the Indenture Trustee, shall be canceled by
it; and no Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Indenture. The Indenture Trustee
shall destroy cancelled Certificates held by it and deliver a certificate of
destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the
Certificates, such acquisition shall not operate as a prepayment or satisfaction
of the indebtedness represented by such Certificates unless and until the same
are delivered to the Indenture Trustee for cancellation.
Section 2.09. Temporary Certificates. Pending the preparation of
definitive Certificates, the Owner Trustee may execute and, upon the oral or
written request of an officer of SSB, the Indenture Trustee shall authenticate
and deliver temporary Certificates (printed, lithographed, typewritten or
otherwise reproduced, in each case in form satisfactory to the Indenture
Trustee). Temporary Certificates shall be issuable as registered Certificates
without coupons, of any authorized denomination, and substantially in the form
of the definitive Certificates but with such omissions, insertions and
variations as may be appropriate for temporary Certificates, all as may be
determined by the Owner Trustee with the concurrence of the Indenture Trustee.
Temporary Certificates may contain such reference to any provisions of this
Indenture as may be appropriate. Every temporary Certificate shall be executed
by the Owner Trustee and, upon the oral or written request of an authorized
officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Certificates. Without unreasonable delay the Owner Trustee shall
execute and shall furnish definitive Certificates and thereupon temporary
Certificates shall be surrendered in exchange therefor without charge at any
office or agency to be maintained by the Indenture Trustee for the purpose
pursuant to Section 3.02 hereof, and, upon the oral or written request of an
authorized officer of the Owner Trustee, the Indenture Trustee shall
authenticate and deliver in exchange for such temporary Certificates an equal
aggregate principal amount of definitive Certificates of the same Series and
Maturities and interest rates and in authorized denominations. Until so
exchanged, temporary Certificates shall be entitled to the same security and
benefits under this Indenture as definitive Certificates.
Section 2.10. Termination of Interest in Trust Indenture Estate. A
Holder shall not, as such, have any further interest in, or other right with
respect to, the Trust Indenture Estate when and if the principal amount of and
Make-Whole Premium, if any, and interest on and other amounts due under all
Certificates held by such Holder and all other sums payable to such Holder
hereunder and under the other Operative Agreements shall have been paid in full.
Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the
execution and delivery of a supplement to this Indenture covering a Replacement
Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each
Certificate shall be deemed to have been issued in connection with such
Replacement Airframe and/or Replacement Engine and (in the case of a Replacement
Airframe) each Certificate issued thereafter upon a transfer or exchange of, or
as a replacement for, a Certificate, shall be designated as having been issued
in connection with such Replacement Airframe, but without any other change
therein except as provided for in this Article II.
Section 2.12. Assumption of Obligations Under Certificates and Other
Operative Agreements. If, in accordance with and subject to the satisfaction of
the conditions set forth in Section 7.11 of the Participation Agreement, the
Lessee shall assume all of the obligations of the Owner Trustee hereunder, under
the Certificates, and under all other Operative Agreements, the Owner
Participant and the Owner Trustee shall be released and discharged from any
further obligations hereunder and under the Certificates and all other Operative
Agreements (except for any recourse obligations of the Owner Participant or the
Owner Trustee in its individual capacity with respect to matters arising out of
events occurring prior to such assumption).
Section 2.13. Establishment of Collateral Account. (a) The Indenture
Trustee shall, pursuant to the Collateral Account Control Agreement, establish,
or cause to be established, with State Street Bank and Trust Company of
Connecticut, National Association, who shall represent and warrant that it is a
financial intermediary (as defined in Section 8-313(4) of the Connecticut
Uniform Commercial Code), in its name as secured party hereunder an Eligible
Deposit Account entitled "The First National Bank of Maryland, as secured party
under the Trust Indenture and Security Agreement (Atlantic Coast Airlines Trust
No. __________) dated as of September 26, 1997, with the Owner Trustee referred
to therein".
(b) If at any time the Collateral Account ceases to be an Eligible
Deposit Account, the Indenture Trustee shall within two Business Days, establish
a new Collateral Account meeting the conditions specified in the definition of
Eligible Deposit Account, and shall transfer any cash or any investments in the
Collateral Account to such new Collateral Account.
(c) The Indenture Trustee shall have exclusive dominion and control of
the Collateral Account and all funds therein, and shall make withdrawals from
the Collateral Account only in accordance with this Indenture.
(d) The Collateral Account Control Agreement shall require FNBM to send
confirmation to the Indenture Trustee and the Lessee that it has credited the
Specified Investments to the Collateral Account and to make appropriate entries
on its books identifying the Specified Investments as pledged to the Indenture
Trustee.
Section 2.14. Investment of Funds on Deposit in the Collateral Account.
(a) Funds deposited in the Collateral Account shall be invested and reinvested
by the Indenture Trustee, subject to Section 17.02 of the Participation
Agreement, at the risk of the Owner Trustee, in Specified Investments selected
by the Lessee and approved by the Indenture Trustee for the account of the Owner
Trustee in accordance with Section 2.14(b) below; provided, however, that if
Specified Investments meeting the requirements of Section 2.14(b) are not
available on any day on which funds are to be invested as contemplated by the
preceding provisions of this Section 2.14(a), the Indenture Trustee may leave
such funds in the Collateral Account uninvested until the earliest of (i) the
date on which an appropriate Specified Investment becomes available, (ii) the
Delivery Date and (iii) the Cut-Off Date. The Indenture Trustee shall maintain
possession of the negotiable instruments or securities, if any, evidencing such
Specified Investments and, in the case of any Specified Investments in
book-entry form, such Specified Investments shall be credited to an account of
the Indenture Trustee or a financial intermediary with the applicable Federal
Reserve Bank; provided, however, if the Specified Investments are credited to an
account of the financial intermediary, the financial intermediary shall make
written confirmation thereof to the Indenture Trustee and make an appropriate
entry on its books identifying the Specified Investments as pledged to the
Indenture Trustee. All proceeds of and any income, interest and other payments
and distributions on or with respect to any Specified Investments shall be
deposited in or credited to the Collateral Account and thereafter shall be held,
invested and applied by the Indenture Trustee in accordance with this Indenture.
The Indenture Trustee shall promptly notify the Owner Trustee and the Lessee of
any Losses.
(b) On the Certificate Closing Date, the Indenture Trustee shall invest
the amount deposited in the Collateral Account pursuant to Section 2.01(c) of
the Participation Agreement in Specified Investments selected by the Lessee and
approved by the Indenture Trustee for the account of the Owner Trustee which
mature on or prior to ___________, 199_. If the Delivery Date is postponed
pursuant to Section 3.02(c) or Section 3.05 of the Participation Agreement, the
proceeds of the Specified Investments referred to in the preceding sentence may
be invested in Specified Investments which mature within 14 days after the
rescheduled Delivery Date. If no Delivery Date occurs, then any Specified
Investment shall mature no later than the 15th day after the Cut-Off Date.
(c) If for any reason the Indenture Trustee shall be required to make
any distributions of the Liquid Collateral prior to the maturity date of any
Specified Investment, the Indenture Trustee shall cause the same to be sold in
accordance with standard commercial practices, and the Lessee, for the account
of the Owner Trustee, shall forthwith compensate the Indenture Trustee for any
Losses as provided in Section 17.02(a) of the Participation Agreement.
(d) Pursuant to Section 17.02(b) of the Participation Agreement,
interest payable on the Certificates during the period in which funds are on
deposit in the Collateral Account shall, to the extent investment earnings in
the Collateral Account are insufficient to fund such interest, be paid by the
Lessee.
Section 2.15. Release of Collateral Account on Delivery Date or
Assumption of Certificates. (a) Subject to the satisfaction or waiver of the
conditions precedent to the Indenture Trustee's obligations set forth in Section
4.02 of the Participation Agreement, on the Delivery Date or, if applicable, the
date the Lessee assumes the obligations of the Owner Trustee under the
Certificates pursuant to Section 3.05(a) of the Participation Agreement, the
Indenture Trustee shall release from the Collateral Account an amount of Liquid
Collateral, equal to the lesser of (A) the Debt Portion and (B) the amount
actually in the Collateral Account on the Delivery Date. Such amount so
released, together with the amount of any Losses received from the Lessee
pursuant to Section 17.02(a) of the Participation Agreement, shall be used to
finance a portion of the Purchase Price as contemplated by Section 3.02(a) or
Section 3.05(a), as the case may be, of the Participation Agreement. Any amount
remaining in the Collateral Account after such release (net of any uncompensated
Losses) shall be remitted by the Indenture Trustee on behalf of the Owner
Trustee to the Lessee pursuant to Section 3.02(a)(C) of the Participation
Agreement.
(b) The Lien of this Indenture on the Collateral Account and the Liquid
Collateral shall terminate on (i) the Delivery Date following the transfer of
amounts described in Section 3.02(a) or Section 3.05(a), as the case may be, of
the Participation Agreement, (ii) the assumption by the Lessee of the
obligations of the Owner Trustee under the Certificates pursuant to Section
3.05(a) of the Participation Agreement or (iii) the prepayment of the
Certificates pursuant to Section 3.05(b) of the Participation Agreement.
Section 2.16. Cut-Off Date. In the case of a prepayment under Section
6.02(a)(vi) hereof, the Indenture Trustee shall release from the Collateral
Account all amounts held in the Collateral Account on such date. Such amount so
released, together with the amount of any Losses received from the Lessee
pursuant to Sections 17.02(a) and 17.02(c) of the Participation Agreement not
then deposited in the Collateral Account, shall be applied to pay amounts due
under Section 6.02(b)(1) hereof on the 15th day following the Cut-Off Date, and
any amount (net of any uncompensated Losses) remaining after such release and
application shall be remitted by the Indenture Trustee, on behalf of the Owner
Trustee, to the Lessee.
Section 2.17. Subordination. (a) The Owner Trustee and, by acceptance
of its Certificates of any Series, each Holder of such Series, hereby agree that
no payment or distribution shall be made on or in respect of the Secured
Obligations owed to such Certificate Holder of such Series, including any
payment or distribution of cash, property or securities after the commencement
of a proceeding of the type referred to in clause (v), (vi) or (vii) of Section
7.01 hereof, except as expressly provided in Article V hereof.
(b) By the acceptance of its Certificates of any Series (other than
Series A), each Holder of such Series agrees that in the event that such Holder,
in its capacity as a Holder, shall receive any payment or distribution on any
Secured Obligations in respect of such Series which it is not entitled to
receive under this Section 2.17 or Article V hereof, it will hold any amount so
received in trust for the Senior Holder (as defined in Section 2.17(c) hereof)
and will forthwith turn over such payment to the Indenture Trustee in the form
received to be applied as provided in Article V hereof.
(c) As used in this Section 2.17, the term "Senior Holder" shall mean,
(i) the Holders of Series A Certificates until the Secured Obligations in
respect of Series A Certificates have been paid in full, (ii) after the Secured
Obligations in respect of Series A Certificates have been paid in full, the
Holders of Series B Certificates until the Secured Obligations in respect of
Series B Certificates have been paid in full, (iii) after the Secured
Obligations in respect of Series B Certificates have been paid in full, the
Holders of Series C Certificates until the Secured Obligations in respect of
Series C Certificates have been paid in full, and (iv) after the Secured
Obligations in respect of Series C Certificates have been paid in full, the
Holders of Series D Certificates until the Secured Obligations in respect of
Series D Certificates have been paid in full.
Section 2.18. Reoptimization. The Owner Trustee shall have the right,
on the Initial Reoptimization Date and the Reoptimization Date, to modify the
schedule of principal payments of the Certificates subject to the terms and
conditions set forth in Section 2.03(b) or Section 15.02, as applicable, of the
Participation Agreement. To give effect to the foregoing the Indenture Trustee
shall execute an amendment to this Indenture which shall amend Section 6.06 and
Schedule II hereof to set forth the new schedule of principal payments and
Schedule I to each Certificate shall be amended accordingly. The Indenture
Trustee shall deliver such amendments to the Subordination Agent on behalf of
the Pass Through Trustee for each of the Pass Through Trusts. To the extent that
such amendment of this Indenture occurs later than the Delivery Date, this
Indenture, as amended, shall, if required, be duly filed for recordation with
the Aeronautics Authority.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal. Make-Whole Premium and Interest.
The Owner Trustee covenants and agrees that it will, subject to Section 2.05
hereof, duly and punctually pay or cause to be paid the principal of, and
interest and Make-Whole Premium, if any, and all other amounts due on, each of
the Certificates and under this Indenture at the place or places, at the
respective times and in the manner provided in this Indenture and in the
Certificates.
Principal and interest and other amounts due hereunder or under the
Certificates shall be payable in dollars on the due date thereof, to the
Indenture Trustee at the Corporate Trust Department (or such other account at
such other financial institution as the Indenture Trustee may designate for the
purpose). If any amount payable under the Certificates or under this Indenture
falls due on a day which is not a Business Day, then such sum shall be payable
on the next succeeding Business Day, without (provided that payment is made on
such next succeeding Business Day) additional interest thereon for the period of
such extension.
Section 3.02. Offices for Payments, etc. So long as any of the
Certificates remain outstanding, the Indenture Trustee will maintain the
following: (a) an office or agency where the Certificates may be presented for
payment and (b) a facility or agency where the Certificates may be presented for
registration of transfer and for exchange and for prepayment as provided in this
Indenture (the "Registrar"). The Registrar shall keep a register (the
"Register") with respect to the Certificates and their transfer and exchange.
The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars")
for the Certificates and may terminate any such appointment at any time upon
written notice. The term "Registrar" includes any Co-Registrar.
The Indenture Trustee shall initially act as Registrar.
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture
Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the
office of Indenture Trustee, will, with the consent of the Lessee, appoint, in
the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there
shall at all times be an Indenture Trustee hereunder.
Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole
discretion shall appoint a paying agent (the "Paying Agent"), it will cause the
Paying Agent to execute and deliver an instrument in which the Paying Agent
shall agree with the Indenture Trustee, subject to the provisions of this
Section:
(a) that it will hold all sums received by it as such agent
for the payment of the principal of, and interest and Make-Whole
Premium, if any, on the Certificates (whether such sums have been paid
to it by the Indenture Trustee or the Owner Trustee) in trust for the
benefit of the Holders or of the Indenture Trustee, and
(b) that it will give the Indenture Trustee notice of any
failure by the Owner Trustee to make any payment of the principal of or
interest or Make-Whole Premium, if any, on the Certificates when the
same shall be due and payable.
Anything in this Section to the contrary notwithstanding, the
agreements to hold sums in trust as provided in this Section are subject to the
provisions of Sections 14.03 and 14.04 hereof.
Section 3.05. Covenants of SSB and the Owner Trustee.
(a) SSB hereby covenants and agrees to perform its covenants set forth in Sections 7.04(b) and
7.04(c) of the Participation Agreement.
(b) The Owner Trustee hereby covenants and agrees as follows:
(i) in the event a Responsible Officer of the Owner Trustee
shall have actual knowledge of an Indenture Event of Default, an
Indenture Default or an Event of Loss, the Owner Trustee will give
prompt written notice of such Indenture Event of Default, Indenture
Default or Event of Loss to the Indenture Trustee, the Lessee and the
Owner Participant;
(ii) the Owner Trustee will furnish to the Indenture Trustee,
promptly upon receipt thereof, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and
other instruments furnished to the Owner Trustee under the Lease,
including, without limitation, a copy of each report or notice from an
insurer or an insurance broker received pursuant to Section 12 of the
Lease, to the extent that the same shall not have been furnished to the
Indenture Trustee;
(iii) the Owner Trustee will not enter into any business or
other activity other than the business of owning the Aircraft, the
leasing thereof to the Lessee and the carrying out of the transactions
contemplated hereby and by the Lease, the Participation Agreement, the
Trust Agreement and the other Indenture Documents; and
(iv) except as contemplated by the Operative Agreements, the
Owner Trustee will not contract for, create, incur or assume any debt,
and will not guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment or performance on any
obligation or capability of so doing, or otherwise), endorse or
otherwise take action to become contingently liable, directly or
indirectly, in connection with the debt of any other Person.
Section 3.06. [Reserved]
Section 3.07. Disposal of Trust Indenture Estate. At any time and from
time to time any part of the Trust Indenture Estate may be sold or disposed of
in accordance with the provisions of this Indenture and the Lease. The Indenture
Trustee shall, from time to time, release any part of the Trust Indenture Estate
so sold or disposed of or as to which an Event of Loss has occurred or as to
which the Lease has been terminated from the Lien of this Indenture. In
addition, to the extent that such property constitutes an Airframe or Engine,
the further requirements of Section 9.08 hereof shall be complied with.
Section 3.08. No Representations or Warranties as to Aircraft or
Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE
OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, WORKMANSHIP,
VALUE, CONDITION, DESIGN, COMPLIANCE WITH SPECIFICATIONS, MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, AS TO
THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER
REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE
WHATSOEVER, except that SSB warrants that on the Delivery Date (a) the Owner
Trustee shall have received whatever title was conveyed to it by the Seller, and
(b) the Aircraft shall be free and clear of Lessor's Liens attributable to SSB.
Neither SSB nor the Indenture Trustee makes or shall be deemed to have made any
representation or warranty as to the validity, legality or enforceability of
this Indenture, the Trust Agreement, the Certificates or any Indenture Document
or as to the correctness of any statement contained in any thereof, except for
the representations and warranties of SSB and the Indenture Trustee made under
this Indenture or in the Participation Agreement or of the Owner Participant
made under the Participation Agreement.
Section 3.09. Further Assurances: Financing Statements. At any time and from time to time, upon the
request of the Indenture Trustee or the Lessee, at the expense of the Lessee, the Owner Trustee shall promptly
and duly execute and deliver any and all such further instruments and documents as may be specified in such
request and as are necessary or advisable to perfect, preserve or protect the Liens and assignments created or
intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and
powers granted herein, including, without limitation, the execution and delivery of Uniform Commercial Code
financing statements and continuation statements with respect thereto, or similar instruments relating to the
perfection of the Liens or assignments created or intended to be created hereby.
ARTICLE IV
HOLDER LISTS
Section 4.01. Holder Lists: Ownership of Certificates. (a) The
Indenture Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Indenture Trustee is not the Registrar, the Registrar shall
furnish to the Indenture Trustee semi-annually not more than ten days after each
Record Date, as of such Record Date, or at such other times as the Indenture
Trustee may request in writing, a list, in such form and as of such date as the
Indenture Trustee may reasonably require, containing all the information in the
possession or control of the Registrar as to the names and addresses of the
Holders and the amounts and Maturities of the Certificates held by such Holders.
(b) Ownership of the Certificates shall be proved by the Register kept by the Registrar.
ARTICLE V
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE TRUST INDENTURE ESTATE
Section 5.01. Basic Rent Distribution. Except as otherwise provided in
Section 5.03 hereof, each installment of Basic Rent, any payment of interest on
overdue installments of Basic Rent, any payment received by the Indenture
Trustee pursuant to Section 8.03(a) hereof and any payment received by the
Indenture Trustee pursuant to Section 17.02(b) (including any amount received by
the Indenture Trustee pursuant to a draw on the Letter of Credit pursuant to
such Section 17.02(b) and Section 5.10 hereof) or 17.02(c) of the Participation
Agreement shall be distributed by the Indenture Trustee no later than the time
herein provided in the following order of priority:
first, (i) so much of such installment or payment as shall be required to pay
in full the aggregate amount of the payment or payments of Principal
Amount and interest and other amounts (as well as any interest on any
overdue Principal Amount and, to the extent permitted by applicable
law, on any overdue interest and any other overdue amounts) then due
under all Series A Certificates shall be distributed to the Holders of
Series A Certificates 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 Certificate bears to the aggregate amount of the
payments then due under all Series A Certificates;
(ii) after giving effect to paragraph (i) above, so much of
such installment or payment as shall be required to pay in full the
aggregate amount of the payment or payments of Principal Amount and
interest and other amounts (as well as any interest on any overdue
Principal Amount and, to the extent permitted by applicable law, on any
overdue interest and any other overdue amounts) then due under all
Series B Certificates shall be distributed to the Holders of Series B
Certificates 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 Certificate bears to the aggregate amount of the payments
then due under all Series B Certificates;
(iii) after giving effect to paragraph (ii) above, so much of
such installment or payment as shall be required to pay in full the
aggregate amount of the payment or payments of Principal Amount and
interest and other amounts (as well as any interest on any overdue
Principal Amount and, to the extent permitted by applicable law, on any
overdue interest and any other overdue amounts) then due under all
Series C Certificates shall be distributed to the Holders of Series C
Certificates 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 Certificate bears to the aggregate amount of the payments
then due under all Series C Certificates; and
(iv) after giving effect to paragraph (iii) above, so much of
such installment or payment as shall be required to pay in full the
aggregate amount of the payment or payments of Principal Amount and
interest and other amounts (as well as any interest on any overdue
Principal Amount and, to the extent permitted by applicable law, on any
overdue interest and any other overdue amounts) then due under all
Series D Certificates shall be distributed to the Holders of Series D
Certificates ratably, without priority of one over the other, in the
proportion that the amount of such payment or payments then due under
each Series D Certificate bears to the aggregate amount of the payments
then due under all Series D Certificates; and
second, the balance if any of such installment or payment remaining thereafter
shall be distributed to the Owner Trustee, or as the Owner Trustee may
request, for distribution pursuant to the Trust Agreement.
Section 5.02. Event of Loss and Replacement; Prepayment. (a) Except as
otherwise provided in Section 5.03 hereof, any payment received by the Indenture
Trustee as the result of an Event of Loss with respect to the Aircraft
(including pursuant to Section 11(a)(2) of the Lease, but, in the case of such
Section 11(a)(2), subject to the time limits specified therein) or as the result
of, or in connection with any event under the Lease giving rise to, a prepayment
pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture
Trustee in the following order of priority:
first, to reimburse the Indenture Trustee for any costs or expenses reasonably incurred in connection
with such prepayment,
second, (i) to pay the amounts specified in paragraph (i) of clause "second" of Section 5.03 hereof then
due and payable in respect of the Series A Certificates;
(ii) after giving effect to paragraph (i) above, to pay the
amounts specified in paragraph (ii) of clause "second" of Section 5.03
hereof then due and payable in respect of the Series B Certificates;
(iii) after giving effect to paragraph (ii) above, to pay the
amounts specified in paragraph (iii) of clause "second" of Section 5.03
hereof then due and payable in respect of the Series C Certificates;
and
(iv) after giving effect to paragraph (iii) above, to pay the
amounts specified in paragraph (iv) of clause "second" of Section 5.03
hereof then due and payable in respect of the Series D Certificates;
provided, that payments pursuant to this clause "second" shall be made without the payment of Make-Whole
Premium; and
third, as provided in clause "third" of Section 5.03 hereof;
provided that if a Replacement Airframe shall be substituted for an Airframe
subject to an Event of Loss as provided in Section 11(a)(1) of the Lease and
Section 9.08 hereof, any proceeds which result from such Event of Loss and are
paid to the Indenture Trustee shall be held by the Indenture Trustee as part of
the Trust Indenture Estate and, unless otherwise applied pursuant to Section
5.01 or 5.03 hereof, such proceeds shall be released to the Lessee upon the
release of such damaged Airframe and the replacement thereof as herein provided.
(b) Any amounts received directly or indirectly from any governmental
authority, insurer or other party pursuant to any provision of Section 11 or 12
of the Lease as the result of loss or damage not constituting an Event of Loss
with respect to the Aircraft, or as a result of such loss or damage constituting
an Event of Loss if and to the extent that such amounts would at the time be
required to be paid to the Lessee pursuant to Section 11 or 12 but for the fact
that a Specified Default exists shall be held by the Indenture Trustee as
security for the obligations of the Lessee under the Lease and the Participation
Agreement and shall be invested in accordance with the terms of Section 5.08
hereof and at such time as the conditions for payment to the Lessee specified in
Section 11 or 12, as the case may be, shall be fulfilled and no Specified
Default exists, such amount, and the proceeds of any investment thereof, shall,
to the extent not theretofore applied, be paid to the Lessee to the extent
provided in the Lease.
Section 5.03. Payment After Indenture Event of Default. etc. Except as
otherwise provided in Sections 5.02(b), 5.04(b), 5.04(c) and 5.05 hereof, all
payments (other than Excepted Payments) received and all amounts held or
realized by the Indenture Trustee after an Indenture Event of Default shall have
occurred and so long as such an Indenture Event of Default shall be continuing,
and after the Certificates shall have become due and payable as provided in
Section 7.02(b) or (c) hereof, shall be promptly distributed by the Indenture
Trustee in the following order of priority:
first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for
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any tax, expense, charge or other loss (including, without limitation, all amounts to be
expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and
profits of, the property included in the Trust Indenture Estate pursuant to Section 7.03(b)
hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including,
without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and
expenses, court costs, and any other expenditures incurred or expenditures or advances made by
the Indenture Trustee or the Holders in the protection, exercise or enforcement of any right,
power or remedy or any damages sustained by the Indenture Trustee or the Holders, liquidated or
otherwise, upon such Indenture Event of Default) shall be applied by the Indenture Trustee as
between itself and the Holders in reimbursement of such expenses;
second, (i) so much of such payments or amounts remaining as shall be required to pay in full the
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aggregate unpaid Principal Amount of all Series A Certificates, and the accrued but unpaid
interest and other amounts due thereon and all other Secured Obligations (other than Make-Whole
Premium) in respect of the Series A Certificates to the date of distribution, shall be
distributed to the Holders of Series A Certificates, and in case the aggregate amount so to be
distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority
of one over the other, in the proportion that the aggregate unpaid Principal Amount of all
Series A Certificates held by each Holder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder (other than Make-Whole Premium) to the date of
distribution, bears to the aggregate unpaid Principal Amount of all Series A Certificates held
by all such Holders plus the accrued but unpaid interest and other amounts due thereon (other
than Make-Whole Premium) to the date of distribution;
(ii) after giving effect to paragraph (i) above, so much of
such payments or amounts remaining as shall be required to pay
in full the aggregate unpaid Principal Amount of all Series B
Certificates, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other
than Make-Whole Premium) in respect of the Series B
Certificates to the date of distribution, shall be distributed
to the Holders of Series B Certificates, and in case the
aggregate amount so to be distributed shall be insufficient to
pay in full as aforesaid, then ratably, without priority of
one over the other, in the proportion that the aggregate
unpaid Principal Amount of all Series B Certificates held by
each Holder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder (other than Make-Whole
Premium) to the date of distribution, bears to the aggregate
unpaid Principal Amount of all Series B Certificates held by
all such Holders plus the accrued but unpaid interest and
other amounts due thereon (other than Make-Whole Premium) to
the date of distribution;
(iii) after giving effect to paragraph (ii) above, so much of
such payments or amounts remaining as shall be required to pay
in full the aggregate unpaid Principal Amount of all Series C
Certificates, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other
than Make-Whole Premium) in respect of the Series C
Certificates to the date of distribution, shall be distributed
to the Holders of Series C Certificates, and in case the
aggregate amount so to be distributed shall be insufficient to
pay in full as aforesaid, then ratably, without priority of
one over the other, in the proportion that the aggregate
unpaid Principal Amount of all Series C Certificates held by
each Holder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder (other than Make-Whole
Premium) to the date of distribution, bears to the aggregate
unpaid Principal Amount of all Series C Certificates held by
all such Holders plus the accrued but unpaid interest and
other amounts due thereon (other than Make-Whole Premium) to
the date of distribution; and
(iv) after giving effect to paragraph (iii) above, so much of
such payments or amounts remaining as shall be required to pay
in full the aggregate unpaid Principal Amount of all Series D
Certificates, and the accrued but unpaid interest and other
amounts due thereon and all other Secured Obligations (other
than Make-Whole Premium) in respect of the Series D
Certificates to the date of distribution, shall be distributed
to the Holders of Series D Certificates, and in case the
aggregate amount so to be distributed shall be insufficient to
pay in full as aforesaid, then ratably, without priority of
one over the other, in the proportion that the aggregate
unpaid Principal Amount of all Series D Certificates held by
each Holder plus the accrued but unpaid interest and other
amounts due hereunder or thereunder (other than Make-Whole
Premium) to the date of distribution, bears to the aggregate
unpaid Principal Amount of all Series D Certificates held by
all such Holders plus the accrued but unpaid interest and
other amounts due thereon (other than Make-Whole Premium) to
the date of distribution;
(it being understood that amounts payable under this clause
"second" shall not in any event include Make-Whole Premium);
and
third, the balance, if any of such payments or amounts remaining
thereafter shall be distributed to the Owner Trustee for
distribution pursuant to the Trust Agreement.
Section 5.04. Certain Payments. (a) Except as otherwise provided in this Indenture, any payments
received by the Indenture Trustee which are to be held or applied according to any provision in any other
Indenture Document shall be held or applied thereunder in accordance therewith.
(b) The Indenture Trustee will distribute, promptly upon receipt, any
indemnity or other payment received by it from the Owner Trustee or the Lessee
in respect of (i) the Indenture Trustee in its individual capacity, (ii) the
Subordination Agent, (iii) each Liquidity Provider, and (iv) the Pass-Through
Trustee, in each case whether pursuant to Article 8 or 9 of the Participation
Agreement or as Supplemental Rent, directly to the Person (which may include the
Indenture Trustee) entitled thereto. Any payment received by the Indenture
Trustee under clause (b) of the last paragraph of Section 2.04 shall be
distributed to the Subordination Agent to be distributed in accordance with the
terms of the Intercreditor Agreement.
(c) Notwithstanding anything to the contrary contained herein, any sums
received by the Indenture Trustee which constitute Excepted Payments shall be
distributed promptly upon receipt by the Indenture Trustee directly to the
Person or Persons entitled thereto.
Section 5.05. Other Payments. Any payments received by the Indenture
Trustee for which no provision as to the application thereof is made elsewhere
in this Indenture or in any other Indenture Document shall be distributed by the
Indenture Trustee (a) to the extent received or realized at any time prior to
the payment in full of all obligations to the Holders, in the order of priority
specified in Section 5.01 hereof, and (b) to the extent received or realized at
any time after payment in full of all obligations to the Holders, in the
following order of priority:
first, in the manner provided in clause "first" of Section 5.03 hereof, and
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second, in the manner provided in clause "third" of Section 5.03 hereof.
Section 5.06. Payments to Owner Trustee. Any amounts distributed
hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the
Owner Trustee by wire transfer of immediately available funds of the type
received by the Indenture Trustee at such office and to such account or accounts
of such entity or entities as shall be designated by notice from the Owner
Trustee to the Indenture Trustee from time to time. The Owner Trustee hereby
notifies the Indenture Trustee that unless and until the Indenture Trustee
receives notice to the contrary from the Owner Trustee, all amounts to be
distributed to the Owner Trustee hereunder for distribution in accordance with
the Trust Agreement shall be distributed by wire transfer of immediately
available funds of the type received by the Indenture Trustee to such account of
the Owner Participant as may be specified pursuant to Section 2.06 of the Trust
Agreement.
Section 5.07. Application of Payments. Each payment of principal of and interest or other amounts
due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on
such Certificate due and payable
to the date of such payment, as provided in such Certificate,
as well as any interest on overdue principal and Make-Whole
Premium, if any, and, to the extent permitted by law, interest
and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such
Certificate) due hereunder
to the Holder of such Certificate or under such Certificate, third, to the payment of the principal of such
Certificate if then due hereunder or under such
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Certificate and fourth, the balance, if any remaining thereafter, to the payment of the principal of such
Certificate remaining unpaid (applied to the installments of principal amount in the inverse order of their
normal maturity) (provided that such Certificate shall not be subject to prepayment without the
consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof);
provided that, solely for the purpose of determining whether an Indenture Event of Default
shall have occurred and be continuing, each such payment shall be deemed applied in the
following order of priority: first, in the manner provided in clause "first" above, second, in
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the manner provided in clause "third" above, third, in the manner provided in clause "second"
----- ------
above and fourth, in the manner provided in clause "fourth" above.
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Section 5.08. Investment of Amounts Held by Indenture Trustee. Amounts
held by the Indenture Trustee pursuant to Section 5.02(b) hereof or pursuant to
any provision of any Indenture Document providing for investment by the
Indenture Trustee of sums pursuant to Section 11(e) of the Lease or this Section
5.08 shall be invested by the Indenture Trustee from time to time in securities
selected by (i) so long as no Event of Default shall have occurred and be
continuing, the Lessee (and in the absence of written direction by the Lessee,
the Indenture Trustee shall invest such monies in direct obligations of the
United States of America) or (ii) so long as an Event of Default shall have
occurred and be continuing, the Indenture Trustee and in each case shall be of
the type meeting the criteria for Permitted Investments. Unless otherwise
expressly provided in this Indenture, any income realized as a result of any
such investment, net of the Indenture Trustee's reasonable fees and expenses in
making such investment, shall be held and applied by the Indenture Trustee in
the same manner as the principal amount of such investment is to be applied and
any losses, net of earnings and such reasonable fees and expenses, shall be
charged against the principal amount invested. The Lessee shall be responsible
for and will promptly pay to the Indenture Trustee or the Owner Trustee, as the
case may be, on demand, the amount of any loss realized as the result of any
such investment (together with any fees, commissions and other costs and
expenses, if any, incurred by the Indenture Trustee or the Owner Trustee in
connection with such investment), such amount to be disposed of in accordance
with the terms hereof or the Lease, as the case may be. The Indenture Trustee
shall not be liable for any loss resulting from any investment made by it or any
investment sold by it under this Indenture in accordance with instructions from
the Lessee other than by reason of its willful misconduct or gross negligence,
and any such investment may be sold (without regard to its maturity) by the
Indenture Trustee without instructions whenever the Indenture Trustee reasonably
believes such sale is necessary to make a distribution required by this
Indenture. Notwithstanding the foregoing, amounts paid to the Indenture Trustee
pursuant to the first sentence of Section 17.02(b) of the Participation
Agreement or Section 5.10 hereof shall be held by the Indenture Trustee in a
non-interest bearing account until distributed by the Pass-Through Trustee on
the next succeeding Payment Date.
Unless otherwise confirmed in writing, an account statement delivered
by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall
be deemed written confirmation by the Owner Trustee that the investment
transactions identified therein accurately reflect the investment directions
given to the Indenture Trustee by or on behalf of the Lessee, unless the Lessee
notifies the Indenture Trustee in writing to the contrary within 30 days of the
date of receipt of such statement.
Section 5.09. Withholding Taxes. The Indenture Trustee shall withhold
any Taxes required to be withheld, except to the extent that the Holder has
furnished evidence satisfactory to the Indenture Trustee of any exemption from
withholding claimed by such Holder and under no circumstances shall the failure
of any such Holder to receive any amounts so withheld constitute an Indenture
Event of Default. Notwithstanding any provision to the contrary in Sections 5.01
through 5.05 hereof and subject to Article 8 of the Participation Agreement, if
the Lessee is required to pay any such Tax, or any interest or penalty thereon,
or to indemnify the Owner Participant or the Owner Trustee with respect thereto
pursuant to Section 8.01(c) of the Participation Agreement, the Lessee shall be
entitled to receive any payments otherwise distributable to the Holder of any
Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof
until the amounts the Lessee shall have so paid in respect of any such Tax
[(together with interest thereon at the Debt Rate)] shall have been recovered in
full by the Lessee.
Section 5.10. Letter of Credit. If an amount is due and payable by the
Lessee pursuant to the first sentence of Section 17.02(b) of the Participation
Agreement, the Indenture Trustee shall draw upon the Letter of Credit in an
amount equal to such amount due from the Lessee, and such draw shall satisfy the
obligation of the Lessee under such section with respect to such amount.
ARTICLE VI
PREPAYMENT OF CERTIFICATES
Section 6.01. No Prepayment Except as Specified. Except as provided in Sections 6.02, 6.06 and 8.02
hereof, the Certificates may not be prepaid prior to their respective Maturities.
Section 6.02. Prepayment of Certificates. (a) The Outstanding Certificates shall be prepaid in full
(and not in part):
(i) If an Event of Loss occurs with respect to the Airframe or
with respect to the Airframe and the Engines or engines then installed
on the Airframe (unless pursuant to Section 11(a)(1) of the Lease and
Section 9.08 hereof replacement equipment is substituted therefor).
(ii) If the Lessee, pursuant to Section 16(a) of the Lease,
gives notice of purchase of the Aircraft (and Section 2.12 hereof is
not applicable in connection with such purchase), but subject to
Section 6.02(c) below.
(iii) If the Owner Participant, or the Owner Trustee on behalf
of the Owner Participant, gives notice of prepayment to the Indenture
Trustee pursuant to Section 8.02 hereof (unless such notice is revoked
in accordance with such Section).
(iv) If the Lessee, pursuant to Section 3(g) of the Lease,
gives notice of a voluntary termination for obsolescence or surplus,
but subject to Section 6.02(c) below.
(v) Pursuant to Section 15.01 of the Participation Agreement
in connection with a refinancing of the Certificates, but subject to
Section 6.02(c) below.
(vi) As contemplated by Section 2.16 hereof and Section
3.05(b) of the Participation Agreement if the Delivery Date has not
occurred on or prior to the Cut-Off Date.
(vii) At the option of the Owner Trustee, with the prior
written consent of the Lessee and the Owner Participant, upon not less
than 25 days' prior written notice.
(viii) If a Triggering Event (as defined in the Intercreditor
Agreement) occurs prior to the earliest of (A) the Delivery Date, (B)
the date the obligations of the Owner Trustee under the Certificates
are assumed by the Lessee pursuant to Section 3.05(a) of the
Participation Agreement and (iii) the Cut-Off Date.
(b) In the event of a prepayment of the Certificates pursuant to
Sections 6.02(a)(ii), (iv) and (v) above, the Owner Trustee, having received
notice from the Lessee in accordance with and subject to the terms of Section
16(a) or 3(g) of the Lease or Article 15 of the Participation Agreement, as the
case may be, shall give irrevocable (subject to Section 6.02(c) hereof) written
notice to the Indenture Trustee and to the Holders of all of the Certificates
specifying the Business Day on which the Certificates shall be prepaid. In the
case of a prepayment of the Certificates pursuant to Section 6.02(a)(i) above,
the Certificates shall be prepaid in full on the Loss Payment Date as defined in
Section 11(a)(2) of the Lease. In the case of a prepayment of the Certificates
pursuant to Section 6.02(a)(iii) above, the Certificates shall be prepaid in
full on the date so designated in the notice referred to in Section 8.02 hereof.
In the case of a prepayment of the Certificates pursuant to Section 6.02(a)(ii)
or (iv) above, the Certificates shall be prepaid in full on the Termination
Date. In the case of a prepayment of the Certificates pursuant to Section
6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the
Refinancing. In the case of a prepayment of the Certificates pursuant to Section
6.02(a)(vi) above, the Certificates shall be prepaid on the 15th day following
the Cut-Off Date. In the case of a prepayment of the Certificates pursuant to
Section 6.02(a)(vii) above, the Certificates shall be prepaid on the date
designated in the notice referred to therein. In the case of a prepayment of the
Certificates pursuant to Section 6.02(a) (viii) above, the Certificates shall be
prepaid on the Special Distribution Date (as defined in the Intercreditor
Agreement) as provided in Section 2.4(b)(ii) of the Intercreditor Agreement. The
day on which the Certificates are to be prepaid pursuant to this Section 6.01(b)
is herein referred to as the "Prepayment Date".
On or prior to the Prepayment Date, immediately available funds shall
be deposited with the Indenture Trustee in an amount in respect of the
Certificates equal to:
(1) if such prepayment is made pursuant to Section 6.02(a)(i),
(iii) (if clause (i), but not clause (ii) or clause (iii) of the first
sentence of Section 8.02(a) of the Indenture is applicable and such
prepayment is made when an Event of Default has occurred and been
continuing for 180 days or more, or if clause (ii) or clause (iii) of
the first sentence of Section 8.02(a) hereof is applicable),
6.02(a)(vi) or 6.02(a)(viii) above, the sum of (A) the aggregate
principal amount of such Certificates then Outstanding, (B) accrued
interest on the Certificates to the Prepayment Date and (C) all other
aggregate sums due the Indenture Trustee hereunder or under the
Participation Agreement or the Lease, but excluding any Make-Whole
Premium or other premium or penalty, or
(2) if such prepayment is made pursuant to Section
6.02(a)(ii), 6.02(a)(iii) (if clause (i), but not clause (ii) or clause
(iii) of the first sentence of Section 8.02(a) of the Indenture is
applicable and such prepayment is made when an Event of Default has
occurred and been continuing for less than 180 days) 6.02(a)(iv),
6.02(a)(v) or 6.02(a)(vii) above, the sum of the amounts specified in
clauses (A), (B) and (C) of the preceding clause (1) plus any
Make-Whole Premium payable in respect of all Certificates
(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").
(c) If, pursuant to the last paragraph of Section 3(g) of the Lease, no
Termination Date shall occur, or if no refinancing shall occur pursuant to
Article 15 of the Participation Agreement, the Lessee shall give notice thereof
to the Indenture Trustee, and the prepayment proposed to be effected in respect
thereof shall not occur.
Section 6.03. Notice of Prepayment to Holders. In order to effect any
prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give
prompt notice by first class mail of prepayment to each Holder of an Outstanding
Certificate. Any notice of prepayment given by the Owner Trustee may be revoked
by the Owner Trustee at any time on or before the Prepayment Date by prompt
notice to the Holders except as otherwise provided in the Lease or the
Participation Agreement.
All notices of prepayment shall state:
(1) the Prepayment Date,
(2) the applicable basis for determining the Prepayment Price,
(3) that on the Prepayment Date, subject to the provisions
hereof, the Prepayment Price will become due and payable, and that
interest on the Certificates shall cease to accrue on and after such
Prepayment Date, and
(4) the place or places where such Certificates are to be
surrendered for payment.
Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption
Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in
Section 6.06 hereof), the Owner Trustee shall, to the extent an amount equal to
the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section
6.06 hereof), as the case may be, shall not then be held in cash or Permitted
Investments (marked-to-market net of all costs and expenses of liquidation
thereof) by the Indenture Trustee in immediately available funds and deposited
for the purpose, pay to the Indenture Trustee an amount equal to the difference
between (a) the amount then so held and (b) the Prepayment Price or the Sinking
Fund Redemption Price, as the case may be. If there shall so be on deposit
and/or deposited the applicable Prepayment Price or Sinking Fund Redemption
Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest
shall cease to accrue in respect of all or, in the case of a mandatory sinking
fund redemption, the relevant portion being prepaid of, the Outstanding
Certificates on and after such Prepayment Date or such Sinking Fund Redemption
Date.
Section 6.05. Certificates Payable on Prepayment Date. On the
Prepayment Date, the Outstanding Certificates shall (except (A) if the Owner
Trustee has requested the Indenture Trustee to revoke such notice of prepayment
in accordance with Section 6.03 hereof or (B) as otherwise provided in the
Lease) become due and payable and from and after such Prepayment Date (unless
there shall be a default in the payment of the Prepayment Price) such
Certificates shall cease to bear interest. Upon surrender by any Holder of its
Certificate for prepayment in accordance with said notice, such Holder shall be
paid the principal amount of its Certificate then outstanding, accrued interest
thereon to the Prepayment Date, all other sums due to such Holder hereunder,
under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is
payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of
such Certificate.
If any Certificate called for prepayment shall not be so paid upon
timely surrender thereof for prepayment, the principal shall, until paid,
continue to bear interest from the Prepayment Date at the interest rate
applicable to such Certificate.
Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall
be subject to partial redemption, at the aggregate principal amount set forth
for the Certificates of the respective Series and Maturity, on a pro rata basis,
on each date specified in this Section (a "Sinking Fund Redemption Date") for
such payment on the Certificates of such Series and Maturity. The Owner Trustee
shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the
Indenture Trustee as provided in Section 6.04 hereof. The Indenture Trustee
shall pay from the amounts so deposited on each applicable Sinking Fund
Redemption Date to the Certificates of each Series in the order of priority set
forth in clause "first" of Section 5.01 and among the Holders of the
Certificates of each Series then Outstanding on a pro rata basis the aggregate
principal amount set forth in Schedule II hereto, together with accrued interest
to such Sinking Fund Redemption Date, but without Make-Whole Premium (the
"Sinking Fund Redemption Price"):
ARTICLE VII
INDENTURE EVENTS OF DEFAULT; REMEDIES
OF INDENTURE TRUSTEE AND HOLDERS
Section 7.01. Indenture Event of Default. "Indenture Event of Default"
means any of the following events (whatever the reason for such Indenture Event
of Default and whether it shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) any Event of Default specified in Section 14 of the Lease
(other than an Event of Default arising solely as the result of the
failure to make an Excepted Payment unless the Owner Participant shall
notify the Indenture Trustee in writing that such failure shall
constitute an Indenture Event of Default); or
(ii) the failure of the Owner Trustee other than by reason of
a Default or an Event of Default (i) to pay principal, interest or
Make-Whole Premium, if any, on any Certificate when due, and such
failure shall have continued unremedied for ten Business Days after the
date when due or (ii) to pay any other amounts hereunder or under the
Certificates when due and such failure shall have continued unremedied
for a period of 30 days after the Owner Trustee and the Owner
Participant shall receive written demand therefor from the Indenture
Trustee or by the Holders of not less than 25% in aggregate principal
amount of Outstanding Certificates; or
(iii) (A) any representation or warranty made by SSB, the
Owner Trustee, the Owner Participant or any Owner Participant Guarantor
or any Owner Trustee Guarantor, in any Operative Agreement or in any
certificate of SSB, the Owner Trustee, the Owner Participant, or any
Owner Participant Guarantor furnished to the Indenture Trustee or any
Holder in connection herewith or therewith or pursuant hereto or
thereto shall prove to have been incorrect when made and was and
remains in any respect material to the Holders and if such
misrepresentation is capable of being corrected as of a subsequent date
and if such correction is being sought diligently, and such
misrepresentation shall not have been corrected within 30 days
following notice thereof identified as a "Notice of Indenture Event of
Default" being given to the Owner Trustee and the Owner Participant by
the Indenture Trustee or by a Majority in Interest of Certificate
Holders; or
(B) any (x) covenant made by the Owner Trustee in the fifth
paragraph following the Habendum Clause hereof or Section 3.05(b)(iii)
hereof or Section 7.02(b) or 7.12 of the Participation Agreement shall
be breached in any respect, (y) covenant made by the Owner Participant
in Section 7.02(c) or Section 7.13 of the Participation Agreement shall
be breached in any respect, or (z) other covenant made by the Owner
Trustee, in its individual capacity or as Owner Trustee, or by any
Owner Trustee Guarantor, or by any Owner Participant or by any Owner
Participant Guarantor in any Operative Agreement shall be breached in
any respect and such breach shall remain unremedied for a period of 30
days after there has been given to the Owner Trustee and any Owner
Participant by the Indenture Trustee or by Holders holding not less
than 25% in aggregate principal amount of Outstanding Certificates a
written notice identified as a "Notice of Indenture Event of Default"
specifying such breach and requiring it to be remedied; or
(iv) the Owner Trustee, the Lessor's Estate, any Owner Trustee
Guarantor, any Owner Participant or any Owner Participant Guarantor
shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future bankruptcy,
insolvency or similar statute, law or regulation;
(v) an order for relief shall be entered in respect of the
Owner Trustee or any Owner Trustee Guarantor or any Owner Participant
or any Owner Participant Guarantor or the Lessor's Estate by a court
having jurisdiction in the premises in an involuntary case under the
federal bankruptcy laws as now or hereafter in effect; or the Owner
Trustee or any Owner Trustee Guarantor or any Owner Participant or any
Owner Participant Guarantor or the Lessor's Estate shall file any
answer admitting or not contesting the material allegations of a
petition filed against the Owner Trustee or any Owner Trustee Guarantor
or any Owner Participant or any Owner Participant Guarantor or the
Lessor's Estate in any proceeding referred to in clause (vi) below or
seek or consent or acquiesce in the appointment of any trustee,
custodian, receiver or liquidator of the Owner Trustee or any Owner
Trustee Guarantor or any Owner Participant or any Owner Participant
Guarantor or the Lessor's Estate, as the case may be, or of all or any
substantial part of its properties; or
(vi) without the consent or acquiescence of the Owner Trustee
or any Owner Trustee Guarantor or any Owner Participant or any Owner
Participant Guarantor or the Lessor's Estate, as the case may be, an
order shall be entered constituting an order for relief or approving a
petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any present or future
bankruptcy, insolvency or similar statute, law or regulation, or if any
such petition shall be filed against the Owner Trustee or any Owner
Trustee Guarantor or any Owner Participant or any Owner Participant
Guarantor or the Lessor's Estate, as the case may be, and such petition
shall not be dismissed within 60 days, or if, without the consent or
acquiescence of the Owner Trustee or any Owner Trustee Guarantor or any
Owner Participant or any Owner Participant Guarantor or the Lessor's
Estate, as the case may be, an order shall be entered appointing a
trustee, custodian, receiver or liquidator of the Owner Trustee or any
Owner Trustee Guarantor or any Owner Participant or any Owner
Participant Guarantor or the Lessor's Estate, as the case may be, or of
all or any substantial part of the properties of the Owner Trustee or
any Owner Trustee Guarantor or any Owner Participant or any Owner
Participant Guarantor or the Lessor's Estate, as the case may be, and
such order shall not be dismissed within 60 days; or
(vii) any Owner Trustee Guaranty or any Owner Participant
Guaranty shall cease to be a valid and enforceable obligation of any
Owner Trustee Guarantor or any Owner Participant Guarantor, as the case
may be, or otherwise shall not be in full force and effect.
Section 7.02. Remedies. (a) If an Indenture Event of Default shall have
occurred and be continuing and so long as the same shall be continuing
unremedied, then and in every such case, the Indenture Trustee may, and when
required by the provisions of Article IX or Section 7.02(c) hereof, shall (i)
exercise any or all of the rights and powers and pursue any and all of the
remedies pursuant to this Article VII, and (ii) in the event such Indenture
Event of Default is an Indenture Event of Default referred to in clause (i) of
Section 7.01 hereof, exercise any and all of the remedies pursuant to Section 15
of the Lease; provided that without the consent of the Owner Trustee and the
Owner Participant such exercise of remedies shall not occur until after the
latest date on which the Owner Trustee may cure the related Event of Default
pursuant to Section 8.03 hereof. The Indenture Trustee may (subject to the
provisions of the next succeeding paragraph) take possession of all or any part
of the properties covered or intended to be covered by the Lien and security
interest created hereby or pursuant hereto and may exclude the Owner
Participant, the Owner Trustee, the Lessee and any transferee of the Lessee
(subject to Section 15.05 hereof), and all Persons claiming under any of them
wholly or partly therefrom. In addition, the Indenture Trustee may (subject to
the provisions of the next succeeding paragraph) exercise any other right or
remedy in lieu of or in addition to the foregoing that may be available to it
under applicable law, or proceed by appropriate court action to enforce the
terms hereof, of the Lease, or both, or to rescind the Lease. Without limiting
any of the foregoing, it is understood and agreed that the Indenture Trustee may
exercise any right of sale of the Aircraft available to it, even though it shall
not have taken possession of the Aircraft and shall not have possession thereof
at the time of such sale.
Notwithstanding the foregoing, it is understood and agreed that if the
Indenture Trustee shall proceed to foreclose the Lien of this Indenture, it
shall substantially simultaneously therewith, to the extent the Indenture
Trustee is then entitled to do so hereunder and under the Lease, and is not then
stayed or otherwise prevented from doing so, proceed (to the extent it has not
already done so) to declare the Lease in default and commence the exercise in
good faith of one or more of the significant remedies under Section 15 of the
Lease (as the Indenture Trustee determines in its sole discretion) for the
purpose of recovering the Aircraft. It is further understood and agreed that if
the Indenture Trustee is unable to exercise one or more remedies under Section
15 of the Lease because of any stay or operation of law or otherwise, the
Indenture Trustee shall not be entitled to foreclose the Lien of this Indenture
(A) until the earlier of (i) 60 days from the date of any such stay or
applicable order under Section 1110 of the Bankruptcy Code plus any extension
consented to by the Indenture Trustee or the Holders of Certificates of such
period as permitted under Section 1110(b) of the Bankruptcy Code and (ii) the
date of actual repossession of the Aircraft by the Indenture Trustee or (B) if
the Lessee has agreed to perform or assume the Lease pursuant to Section 365 or
1110 of the Bankruptcy Code and no Event of Default (other than as specified in
Section 14(f), (g), (h) or (i) of the Lease, or other Event of Default in
respect of which the 30-day period referred to in clause (a)(1)(B)(ii)(l) of
Section 1110 of the Bankruptcy Code shall not yet have expired) shall be
continuing. For the avoidance of doubt, it is expressly understood and agreed
that except as aforesaid the above-described inability of the Indenture Trustee
to exercise any right or remedy under the Lease shall in no event and under no
circumstances prevent the Indenture Trustee from exercising all of its rights,
powers and remedies under this Indenture, including, without limitation, this
Article VII. The Indenture Trustee further agrees that notice of intent to
foreclose shall be given to the Owner Trustee at the earlier of the commencement
of any proceeding or at least 30 days prior to the consummation of foreclosure
of the Lien of this Indenture.
(b) If an Indenture Event of Default under clause (iv), (v) or (vi) of
Section 7.01 hereof shall occur and be continuing, the unpaid principal of all
Outstanding Certificates, together with interest accrued but unpaid thereon and
all other amounts due thereunder, but without Make-Whole Premium, shall
immediately become due and payable, without presentment, demand, protest or
notice, all of which are hereby waived.
(c) If any Indenture Event of Default not described in the preceding
paragraph (b) shall have occurred and be continuing, then and in every such
case, the Indenture Trustee may on its own accord or at the direction of a
Majority in Interest of Certificate Holders, at any time, by written notice to
the Owner Trustee, the Owner Participant and the Lessee, declare the principal
of all the Certificates to be due and payable, whereupon the unpaid principal
amount of all Outstanding Certificates, together with accrued interest thereon
and all other amounts due thereunder, but without Make-Whole Premium, shall
immediately become due and payable without presentment, demand, protest or other
notice, all of which are hereby waived. At any time after such declaration and
prior to the sale or disposition of the Trust Indenture Estate, however, the
Holders of not less than 50% in aggregate principal amount of Outstanding
Certificates, by notice to the Indenture Trustee, the Owner Trustee and the
Lessee, may rescind such declaration, whether made by the Indenture Trustee on
its own accord or as directed, if (x) there has been paid or deposited with the
Indenture Trustee a sum sufficient to pay all overdue installments of interest
on all Certificates (together, to the extent permitted by law, with interest on
such overdue installments of interest), the principal on any Certificates that
would have become due otherwise than by such declaration of acceleration, all
sums paid or advanced by the Indenture Trustee hereunder and the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and counsel, or (y) all Indenture Events of Default (other than the
nonpayment of principal that has become due solely because of such acceleration)
have been either cured or waived as provided in Section 7.11 hereof. No such
rescission shall affect any subsequent default or impair any right consequent
thereon.
(d) Each Holder shall be entitled at any sale to credit against any
purchase price bid at such sale by such Holder all or any part of the unpaid
obligations owing to such Holder secured by the Lien of this Indenture (but only
to the extent that an amount equal to such purchase price would have been paid
to such Holder pursuant to Article V hereof if such purchase price were paid in
cash and the foregoing provisions of this subsection (d) were not given effect).
Section 7.03. Return of Aircraft. etc. (a) Subject to Section 7.02
hereof, if an Indenture Event of Default shall have occurred and be continuing,
at the request of the Indenture Trustee, the Owner Trustee shall promptly
execute and deliver to the Indenture Trustee such documents as the Indenture
Trustee may deem necessary or advisable to enable the Indenture Trustee or an
agent or representative designated by the Indenture Trustee, at such time or
times and place or places as the Indenture Trustee may specify, to obtain
possession of all or any part of the Trust Indenture Estate to which the
Indenture Trustee shall at the time be entitled under this Indenture. Subject to
the foregoing, if the Owner Trustee shall for any reason fail to execute and
deliver such documents after such request by the Indenture Trustee, the
Indenture Trustee may pursue all or part of such Trust Indenture Estate wherever
it may be found and enter any of the premises of the Lessee or the Owner Trustee
wherever such Trust Indenture Estate may be or be supposed to be and search for
such Trust Indenture Estate and take possession of and remove such Trust
Indenture Estate. All expenses of pursuing, searching for and taking such Trust
Indenture Estate shall, until paid, be secured by the Lien of this Indenture.
(b) Upon every such taking of possession, the Indenture Trustee may,
from time to time, at the expense of the Trust Indenture Estate, make all such
expenditures for maintenance, insurance and repairs to and of such Trust
Indenture Estate, as the Indenture Trustee may reasonably deem proper. In each
case subject to Section 7.02 hereof, the Indenture Trustee shall have the right
to maintain, use, operate, store, lease, control or manage the Trust Indenture
Estate and to carry on the business and to exercise all rights and powers of the
Owner Participant and the Owner Trustee relating to the Trust Indenture Estate,
as the Indenture Trustee may reasonably deem best, including the right to enter
into any and all such agreements with respect to the maintenance, insurance,
use, operation, storage, leasing, control, management or disposition of all or
any part of the Trust Indenture Estate as the Indenture Trustee may determine.
Further, the Indenture Trustee shall be entitled to collect and receive directly
all tolls, rents (including Rent), revenues, issues, income, products and
profits of the Trust Indenture Estate other than Excepted Payments, without
prejudice, however, to the right of the Indenture Trustee under any provision of
this Indenture to collect and receive all cash held by, or required to be
deposited with, the Indenture Trustee under this Indenture. Such tolls, rents
(including Rent), revenues, issues, income, products and profits shall be
applied to pay the expenses of the use, operation, storage, leasing, control,
management, or disposition of the Trust Indenture Estate, and of all maintenance
and repairs, and to make all payments which the Indenture Trustee may be
required or may reasonably elect to make for any taxes, assessments, insurance
or other proper charges upon the Trust Indenture Estate (including the
employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Owner Trustee and the Lessee),
and all other payments which the Indenture Trustee may be required or authorized
to make under any provision of this Indenture, as well as just and reasonable
compensation for the services of the Indenture Trustee and of all persons
properly engaged and employed for such purposes by the Indenture Trustee;
provided, that any excess amounts shall be promptly distributed in accordance
with Section 5.03 hereof.
(c) Subject to Section 7.02 hereof, if an Indenture Event of Default
shall have occurred and be continuing and the Indenture Trustee shall be
entitled to exercise remedies hereunder, and subject to Article VIII hereof, the
Indenture Trustee, either with or without taking possession, and either before
or after taking possession, and without instituting any legal proceedings
whatsoever, may sell, assign, transfer and deliver the whole or, from time to
time, to the extent permitted by law, any part of the Trust Indenture Estate, or
any part thereof, or interest therein, at any private sale or public auction to
the highest bidder, with or without demand, advertisement or notice, except that
in respect of any private sale 30 days' prior written notice by registered mail
to the Owner Trustee and any Owner Participant will be provided, for cash or,
with the consent of the Owner Trustee and any Owner Participant, credit or for
other property, for immediate or future delivery, and for such price or prices
and on such terms as the Indenture Trustee in exercising reasonable commercial
discretion may determine; provided, that any such action shall be at the time
lawful and that all mandatory legal requirements shall be complied with. Any
notice required pursuant to the terms hereof in the case of a public sale, shall
state the time and place fixed for such sale. Any such public sale shall be held
at such time or times within ordinary business hours as the Indenture Trustee
shall fix in the notice of such sale. At any such sale, the Trust Indenture
Estate may be sold in one lot as an entirety or in separate lots. The Indenture
Trustee shall not be obligated to make any sale pursuant to such notice. The
Indenture Trustee may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for such sale, and any such sale may be made at any
time or place to which the same may be so adjourned without further notice or
publication. The Indenture Trustee may exercise such right of sale without
possession or production of the Certificates or proof of ownership thereof, and
as representative of the Holders may exercise such right without notice to the
Holders or without including the Holders as parties to any suit or proceedings
relating to the foreclosure of any part of the Trust Indenture Estate. The Owner
Trustee shall execute any and all such bills of sale, assignments and other
documents, and perform and do all other acts and things requested by the
Indenture Trustee in order to permit consummation of any sale of the Trust
Indenture Estate in accordance with this Section 7.03(c) and to effectuate the
transfer or conveyance referred to in the first sentence of this Section
7.03(c). Notwithstanding any other provision of this Indenture, the Indenture
Trustee shall not sell the Trust Indenture Estate or any part thereof unless the
Certificates shall have been accelerated.
(d) To the extent permitted by applicable law, and subject to Section
7.02 hereof, the Indenture Trustee or any Holder may be a purchaser of the Trust
Indenture Estate or any part thereof or any interest therein at any sale
thereof, whether pursuant to foreclosure or power of sale or otherwise. The
Indenture Trustee may apply against the purchase price therefor the amount then
due hereunder or under any of the Certificates secured hereby and any Holder may
apply against the purchase price therefor the amount then due to it hereunder,
under any other Indenture Document or under the Certificates held by such Holder
to the extent of such portion of the purchase price as it would have received
had it been entitled to share any distribution thereof. The Indenture Trustee or
any Holder or nominee thereof shall, upon any such purchase, acquire good title
to the property so purchased, free of the Lien of this Indenture and, to the
extent permitted by applicable law, free of all rights of redemption in the
Owner Trustee or the Owner Participant in respect of the property so purchased.
(e) The Indenture Trustee shall, as a matter of right, be entitled to
the appointment of a receiver (who may be the Indenture Trustee or any successor
or nominee) for all or any part of the Trust Indenture Estate, whether such
receivership be incidental to a proposed sale of the Trust Indenture Estate or
the taking of possession thereof or otherwise, and the Owner Trustee hereby
consents to the appointment of such receiver and will not oppose any such
appointment. Any receiver appointed for all or any part of the Trust Indenture
Estate shall be entitled to exercise all of the rights and powers of the
Indenture Trustee with respect to the Trust Indenture Estate.
Section 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee
shall fail to pay any amount payable hereunder or under the Certificates, the
Indenture Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Owner Trustee and collect in the manner
provided by law out of the property of the Owner Trustee wherever situated, the
moneys adjudged or decreed to be payable; provided, that any sale of any portion
of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.
In case there shall be pending proceedings relative to the Owner
Trustee under the Bankruptcy Code or any other applicable Federal or state
bankruptcy, insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or reorganization, liquidator, sequestrator or similar
official shall have been appointed for or taken possession of the Owner Trustee
or its property, or in case of any other comparable judicial proceedings
relative to the Owner Trustee, or to the creditors or property of the Owner
Trustee, the Indenture Trustee, irrespective of whether the principal of the
Certificates shall then be due and payable as therein or herein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(a) to file and prove a claim or claims for the whole amount
of principal, interest and other amounts owing and unpaid in respect of
the Certificates or hereunder, and to file such other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Holders allowed in any judicial proceedings relative to the Owner
Trustee or to the creditors or property of the Owner Trustee,
(b) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders in any election of a trustee or a standby
trustee in arrangement, reorganization, liquidation or other bankruptcy
or insolvency proceedings or person performing similar functions in
comparable proceedings, and
(c) to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute all
amounts received with respect to the claims of the Holders and of the
Indenture Trustee on their behalf;
and any trustee, receiver, or liquidator, custodian or other similar official is
hereby authorized by each of the Holders to make payments to the Indenture
Trustee, and, in the event that the Indenture Trustee shall consent to the
making of payments directly to the Holders, to pay to the Indenture Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture Trustee
except as a result of negligence or willful misconduct.
Nothing contained herein shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Certificates or the rights of any Holder thereof, or to authorize
the Indenture Trustee to vote in respect of the claim of any Holder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.
All rights of action and rights to assert claims under this Indenture,
or under any of the Certificates, may be enforced by the Indenture Trustee
without the possession of such Certificates. Any trial or other proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders, as provided herein.
In any proceedings brought by the Indenture Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party) the Indenture Trustee shall be
held to represent all the Holders of the Certificates, and it shall not be
necessary to make any Holders parties to such proceedings.
Section 7.05. Remedies Cumulative. Each and every right, power and
remedy given to the Indenture Trustee in this Indenture shall be cumulative and
shall be in addition to every other right, power and remedy specifically given
herein or now or hereafter existing at law, in equity or by statute, and each
and every right, power and remedy whether specifically given herein or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Indenture Trustee or the Holders, and the
exercise or the beginning of the exercise of any power or remedy shall not be
construed to be a waiver of the right to exercise at the same time or later any
other right, power or remedy. No delay or omission by the Indenture Trustee or
of any Holder in the exercise of any right, remedy or power or in the pursuance
of any remedy shall impair any such right, power or remedy or be construed to be
a waiver of any default on the part of the Owner Trustee or the Lessee or to be
an acquiescence in any such default.
Section 7.06. Suits for Enforcement. If an Indenture Event of Default
has occurred, has not been waived and is continuing, the Indenture Trustee may
in its discretion and subject to its rights of appropriate indemnification under
Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its
rights and rights of the Holders by such appropriate judicial proceedings as the
Indenture Trustee shall deem most effectual to protect and enforce any of such
rights, either at law or in equity or in bankruptcy or otherwise, whether for
the specific enforcement of any covenant or agreement contained in this
Indenture or in aid of the exercise of any power granted in this Indenture or to
enforce any other legal or equitable right vested in the Indenture Trustee or
the Holders by this Indenture or by law; provided, that any sale of any portion
of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.
Section 7.07 Discontinuance of Proceedings. In case the Indenture
Trustee or any Holder shall have instituted any proceeding to enforce any right,
power or remedy under this Indenture by foreclosure, entry or otherwise, and
such proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Indenture Trustee or such Holder,
then the Owner Trustee, the Indenture Trustee, any Owner Participant, the
Holders and the Lessee shall, subject to any binding determination in such
proceeding, be restored to their former positions and rights under this
Indenture with respect to the Trust Indenture Estate, and all rights, remedies
and powers of the Indenture Trustee and the Holders shall continue as if no such
proceeding had been instituted.
Section 7.08. Limitations on Suits by Holders. No Holder of any
Certificate shall have any right by virtue or by availing of any provision of
this Indenture to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Indenture, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Holder previously shall
have given to the Indenture Trustee written notice that an Indenture Event of
Default shall then have occurred and be continuing, as hereinbefore provided,
and a Majority in Interest of Certificate Holders shall have made written
request upon the Indenture Trustee to institute such action or proceedings in
its own name as trustee hereunder and shall have offered to the Indenture
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby and the Indenture Trustee for
60 days after its receipt of such notice, request and offer of indemnity shall
have failed to institute any such action or proceedings and no direction
inconsistent with such written request shall have been given to the Indenture
Trustee pursuant to Section 7.10 hereof; it being understood and intended, and
being expressly covenanted by the Holder of each Certificate with every other
Holder of each other Certificate and the Indenture Trustee, that no one or more
Holders shall have any right in any manner whatever to affect, disturb or
prejudice the rights of any other Holder or the Lien of this Indenture or any
part of the Trust Indenture Estate or to obtain or seek to obtain priority over
or preference to any other such Holder or to enforce any right under this
Indenture, except in the manner provided herein and for the equal, ratable and
common benefit of all Holders. For the protection and enforcement of the
provisions of this Section, each and every Holder and the Indenture Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 7.09. Unconditional Right of Holders to Payments on
Certificates. Notwithstanding any other provision in this Indenture and any
provision of any Certificate, the right of any Holder to receive payment of the
principal of and interest and Make-Whole Premium, if any, on such Certificate on
or after the respective due dates and in the manner expressed in such
Certificate, or, subject to Section 7.08 hereof, to institute suit for the
enforcement of any such payment on or after such respective dates as provided
herein, shall not be impaired or affected without the consent of such Holder.
Section 7.10. Control by Holders. The Majority in Interest of
Certificate Holders shall have the right to direct the Indenture Trustee as to
the time, method, and place of conducting any proceeding for any remedy
available to the Indenture Trustee, or exercising any trust or power conferred
on the Indenture Trustee by this Indenture; provided that such direction shall
not be otherwise than in accordance with law and the provisions of this
Indenture and the Indenture Trustee shall have received, to the extent provided
in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification
as it may require against the costs, expenses and liabilities to be incurred by
the Indenture Trustee; and provided further that (subject to the provisions of
Section 9.02 hereof) the Indenture Trustee shall have the right to decline to
follow any such direction if the Indenture Trustee, being advised by counsel,
shall determine that the action or proceeding so directed may not lawfully be
taken or if the Indenture Trustee in good faith by its board of directors, the
executive committee, or a trust committee of directors or Responsible Officers
of the Indenture Trustee shall determine that the action or proceedings so
directed would involve the Indenture Trustee in personal liability or if the
Indenture Trustee in good faith shall so determine that the actions or
forebearances specified in or pursuant to such direction shall be unduly
prejudicial to the interests of Holders not joining in the giving of said
direction, it being understood that (subject to Section 9.02 hereof) the
Indenture Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders.
Nothing in this Indenture shall impair the right of the Indenture
Trustee in its discretion to take any action deemed proper by the Indenture
Trustee and which is not inconsistent with the direction by the Majority in
Interest of Certificate Holders.
Section 7.11. Waiver of Past Indenture Default. Upon written
instructions from the Majority in Interest of Certificate Holders, the Indenture
Trustee shall waive any past Indenture Default and its consequences and upon any
such waiver such Indenture Default shall cease to exist and any Indenture Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
other Indenture Default or impair any right consequent thereon; provided,
however, that in the absence of written instructions from all Holders and each
Liquidity Provider, the Indenture Trustee shall not waive any Indenture Default
(a) in the payment of the principal of or Make-Whole Premium, if any, or
interest on, or other amounts due under, any Certificate then Outstanding, or
(b) in respect of a covenant or provision of this Indenture which, under Article
XIII hereof, cannot be modified or amended without the consent of each Holder.
Section 7.12. Notice of Indenture Default. The Indenture Trustee shall
transmit to the Owner Trustee, the Holders and to any Owner Participant notice
of any Indenture Defaults actually known to a Responsible Officer of the
Indenture Trustee, such notice to be transmitted by mail to the Holders within
90 days, and to the Owner Trustee and any Owner Participant promptly after the
occurrence thereof, unless such Indenture Default shall have been cured before
the giving of such notice; provided that except in the case of a default in the
payment of the principal of or interest on any Certificate, under no
circumstances shall the Indenture Trustee give such notice to the Holders until
the expiration of a period of 60 days from the occurrence of such Indenture
Default; and provided further that, except in the case of default in the payment
of the principal of or interest on or any other amount due under any of the
Certificates, the Indenture Trustee shall be protected in withholding such
notice to the Holders if and so long as the board of directors, the executive
committee, or a trust committee of directors or trustees and/or Responsible
Officers of the Indenture Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders.
ARTICLE VIII
RIGHTS OF THE OWNER TRUSTEE
AND THE OWNER PARTICIPANT
Section 8.01. Certain Rights of Owner Trustee and Owner Participant.
(a) Subject to Section 13.01 hereof and the provisions of paragraph (a)
immediately following the Granting Clause hereof, without the consent of a
Majority in Interest of Certificate Holders, the respective parties to the
Indenture Documents may not modify, amend or supplement any of said agreements,
or give any consent, waiver, authorization or approval thereunder, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions thereof or of modifying in any manner the rights of the
respective parties thereunder; provided, however, that the actions specified in
subsection (b) of this Section 8.01, the actions specified in Section 2.18
hereof, and the amendments contemplated by Section 2.03 of the Participation
Agreement (subject to the limitations set forth therein) may be taken without
the consent of the Indenture Trustee or any Holder.
(b) Subject to the provisions of subsection (c) of this Section 8.01,
the Lessor and the respective parties to the Indenture Documents, at any time
and from time to time, without the consent of the Indenture Trustee or of any
Holder, may:
(1) so long as no Indenture Event of Default shall have
occurred and be continuing, modify, amend or supplement the Lease, or
give any waiver with respect thereto, except that without compliance
with subsection (a) of this Section 8.01 the parties to the Lease shall
not modify, amend or supplement, or give any waiver for the purpose of
adding any provisions to or changing in any manner or eliminating any
of the provisions thereof or of modifying in any manner the rights of
the respective parties thereunder, with respect to the following
provisions of the Lease as in effect on the effective date hereof:
Sections 2, 3(c) (except to the extent such Section relates to amounts
payable (whether directly or pursuant to this Indenture) to Persons
other than Holders, each Liquidity Provider, the Subordination Agent
and the Indenture Trustee in its individual capacity), 3(e), 3(f)
(except insofar as it relates to the address or account information of
the Owner Trustee or the Indenture Trustee) (other than as such
Sections 3(c), 3(e) and 3(f) may be amended pursuant to Section 3(d) of
the Lease as in effect on the effective date hereof), 3(g) (except that
further restrictions may be imposed on the Lessee), 4, 6, 8, 10 (except
in order to increase the Lessee's liabilities or enhance the Lessor's
rights thereunder), 11 (except that additional requirements may be
imposed on the Lessee), 12 (except for Section 12(e) and except that
additional insurance requirements may be imposed on the Lessee), 14
(except to impose additional or more stringent Events of Default), 15
(except to impose additional remedies), 20 (except to impose additional
requirements on the Lessee), 23(f), and 26, and any definition of terms
used in the Lease, to the extent that any modification of such
definition would result in a modification of the Lease not permitted
pursuant to this subsection (b); provided that the parties to the Lease
may take any such action without the consent of the Indenture Trustee
or any Holder to the extent such action relates to the payment of
amounts constituting, or the Owner Trustee's, the Owner Participant's
or the Lessee's rights or obligations with respect to, Excepted
Payments (other than the place, time and manner of payment of any
portion of Basic Rent constituting an Excepted Payment);
(2) modify, amend or supplement the Trust Agreement and any
other Indenture Document (other than the Lease and the Participation
Agreement), or give any consent, waiver, authorization or approval with
respect thereto, in each case only to the extent any such action shall
not materially adversely impact the interests of the Holders;
(3) modify, amend or supplement the Participation Agreement,
or give any consent, waiver, authorization or approval with respect
thereto, except that without compliance with subsection (a) of this
Section 8.01 the parties to the Participation Agreement shall not
modify, amend or supplement, or give any consent, waiver, authorization
or approval for the purpose of adding provisions to or changing in any
manner or eliminating any of the provisions thereof or of modifying in
any manner the rights of the respective parties thereunder, with
respect to the following provisions of the Participation Agreement as
in effect on the effective date hereof: Article 6 and Section 10.01(b)
(insofar as such Article 6 and Section 10.01(b) relate to the Indenture
Trustee, the Pass-Through Trustee and the Holders), Article 7 and
Sections 3.05, 15.01, 17.02 and 17.10 and Articles 8 and 9 (insofar as
such Articles relate to the Indenture Trustee; it being understood that
only the Indenture Trustee's consent in respect thereof need be
obtained) and any definition of terms used in the Participation
Agreement, to the extent that any modification of such definition would
result in a modification of the Participation Agreement not permitted
pursuant to this subsection (b); and
(4) modify, amend or supplement any of said agreements in
order to cure any ambiguity, to correct or supplement any provisions
thereof which may be defective or inconsistent with any other provision
thereof or of any provision of this Indenture, or to make any other
provision with respect to matters or questions arising thereunder or
under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided the making of any such other
provision shall not adversely affect the interests of the Holders.
(c) No modification, amendment, supplement, consent, waiver,
authorization or approval with respect to the Lease or the Participation
Agreement, whether effected pursuant to subsection (a) or pursuant to subsection
(b) of this Section 8.01 and anything in such subsections or elsewhere in this
Indenture to the contrary notwithstanding, shall, without the consent of the
Holder of each Outstanding Certificate affected thereby, and each Liquidity
Provider,
(1) modify, amend or supplement the Lease in such a way as to
extend the time of payment of Basic Rent or Stipulated Loss Value or
Supplemental Rent payable to the Holders or any Liquidity Provider or
any other amounts payable for the account of the Holders or any
Liquidity Provider (subject in any event to Section 3(e) of the Lease)
upon the occurrence of an Event of Loss or Termination Value and any
other amounts payable for the account of the Holders (subject in any
event to Section 3(e) of the Lease) upon termination of the Lease with
respect to the Aircraft payable under, or as provided in, the Lease as
in effect on the effective date hereof, or reduce the amount of any
installment of Basic Rent or Supplemental Rent so that the same is less
than the payment of principal of, and interest on the Certificates and
Make-Whole Premium, if any, and amounts due to each Liquidity Provider,
as the case may be, to be made from such installment of Basic Rent or
Supplemental Rent, or reduce the aggregate amount of Stipulated Loss
Value, or any other amounts payable under, or as provided in, the Lease
as in effect on the date of the Indenture Supplement upon the
occurrence of an Event of Loss so that the same is less than the
accrued interest on and the principal as of the Loss Payment Date, of
the Certificates at the time Outstanding or reduce the amount of
Termination Value and any other amounts payable under, or as provided
in, the Lease as in effect on the date of the Indenture Supplement upon
termination of the Lease with respect to the Aircraft so that the same
is less than the accrued interest on and principal as of the Lease
Termination Date and Make-Whole Premium, if any, of Certificates at the
time Outstanding, or
(2) modify, amend or supplement the Lease in such a way as to,
or consent to any assignment of the Lease or give any consent, waiver,
authorization or approval which would, release the Lessee from its
absolute and unconditional obligations in respect of payment of Basic
Rent or Supplemental Rent, or Stipulated Loss Value and any other
amounts payable for the account of the Holders (subject in any event to
Section 3(e) of the Lease) upon the occurrence of an Event of Loss, or
Termination Value and any other amounts payable for the account of the
Holders (subject in any event to Section 3(e) of the Lease) with
respect to the Aircraft, payable under, or as provided in, the Lease as
in effect on the date of the Indenture Supplement, except for any such
assignment pursuant to Section 2.12 hereof, and except as provided in
the Lease as in effect on the date of the Indenture Supplement.
(d) At all times so long as this Indenture is in effect, the consent of
the Owner Trustee (at the direction of the Owner Participant) shall be required
in order (i) to amend, modify or supplement the Lease or any other Operative
Document to which the Owner Trustee is a party or to waive compliance by the
Lessee with any of its obligations thereunder and (ii) to grant any consent
requested under the Lease.
Notwithstanding the foregoing, but subject always to the provision of Section
15.05 hereof, the Indenture Trustee shall at all times have the right, to the
exclusion of the Owner Trustee and the Owner Participant, to (A) declare the
Lease to be in default under Section 15 (other than with respect to Excepted
Payments) thereof and (B) subject only to the provisions of this Indenture,
exercise the remedies set forth in Section 15 of the Lease (other than in
connection with Excepted Payments) and in Article 7 hereof.
Nothing in this Indenture shall be deemed to prohibit the Owner
Participant or the Owner Trustee from making demand on the Lessee for, or from
commencing an action at law to obtain the payment of, or from receiving payment
of, any Excepted Payment; provided, however, that if the Owner Trustee is
proceeding under the Lease, the Owner Trustee shall proceed pursuant to Section
15(a)(5), and only Section 15(a)(5), of the Lease.
Section 8.02. Owner Participant's Right to Prepay or Purchase the
Certificates. (a) If (i) an Event of Default shall have occurred and be
continuing or (ii) the Indenture Trustee shall have taken action, or notified
the Owner Participant that it intends to take action, to foreclose the Lien of
this Indenture or otherwise commence the exercise of any significant remedy
under Section 7.02 of this Indenture or Section 15 of the Lease, or (iii) the
Certificates shall have become due and payable pursuant to Section 7.02(b) or
(c) hereof, the Owner Participant (or the Owner Trustee on behalf of the Owner
Participant) may, but shall be under no obligation to do either of the
following:
(1) direct the Owner Trustee to cause the prepayment of all, but not
less than all, of the Certificates then Outstanding by notifying the Indenture
Trustee of such election, which notice in order to be effective shall state that
it is irrevocable (except as provided below) and shall designate a Prepayment
Date which shall be a Business Day which shall be not less than 15 days after
the date of such notice on which the Owner Trustee shall, in the manner provided
for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph
"first" under Section 5.03 and the aggregate Prepayment Price (determined in
accordance with Section 6.02(b) hereof) of all such Certificates with the
Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee
is made, the Certificates shall cease to accrue interest from and after the
Prepayment Date, and after distribution of such payment to the Holders, the
Indenture Trustee shall release the Trust Indenture Estate from the Lien of this
Indenture; or
(2) purchase all, but not less than all, of the Outstanding
Certificates by notifying the Indenture Trustee of such election, which notice
in order to be effective shall state that it is irrevocable (except as provided
below) and shall designate a date which shall be a Business Day which shall be
not less than 15 days after the date of such notice on which the Owner Trustee
shall pay to the Indenture Trustee an amount equal to the aggregate unpaid
principal amount of all Outstanding Certificates, together with accrued interest
on such amount to the date of purchase, plus all other sums due any Holder or
the Indenture Trustee hereunder or under the Participation Agreement or the
Lease, but without any Make-Whole Premium (provided that the Make-Whole Premium
shall be included if the purchase is made pursuant to clause (a)(i) above (but
not pursuant to clause (a)(ii) or (a)(iii) above) when the Event of Default
shall have occurred and been continuing for less than 180 days). Upon receipt by
the Indenture Trustee of such amount, each Holder will be deemed, whether or not
Certificates shall have been delivered to the Indenture Trustee on such date, to
have thereupon sold, assigned, transferred and conveyed (and shall promptly take
such actions as the Owner Participant shall reasonably request to evidence such
sale, assignment, transfer and conveyance) to the Owner Participant (without
recourse or warranty of any kind except for its own acts), all of the right,
title and interest of such Holder in and to the Trust Indenture Estate and this
Indenture and all Certificates held by such Holder and the former Holders shall
not be entitled to receive any interest on the principal amount of such
Certificates after the purchase date, and the Owner Participant shall be deemed
to have assumed (and shall promptly take such actions as any Holder shall
reasonably request to evidence such assumption) all of such Holder's obligations
under the Participation Agreement and this Indenture arising subsequent to such
sale. If the Owner Trustee shall so request, such Holder will comply with all
the provisions of Section 2.06 of this Indenture to enable new Certificates to
be issued to the Owner Participant in such authorized denominations as the Owner
Participant shall request. All charges and expenses required pursuant to Section
2.06 hereof in connection with the issuance of any such new Certificates shall
be borne by the Owner Participant.
(b) From and after the deposit by the Owner Trustee of the applicable
Prepayment Price or purchase price with the Indenture Trustee pursuant to
Section 8.02(a) hereof, the Owner Trustee shall be entitled to exercise all
remedies of the Indenture Trustee under Article VII hereof as well as of the
Lessor under the Lease.
(c) Any election to prepay or purchase the Certificates under this
Section 8.02 shall be irrevocable, provided that if on the specified date for
prepayment or purchase, the Event of Default giving rise to such election shall
no longer be continuing under the Lease such election shall be deemed to be
automatically withdrawn.
Section 8.03. Certain Rights of Owner Participant. (a) If (A) there
shall occur an Event of Default under the Lease as a result of the Lessee's
failure to make any payment of an installment of Basic Rent, and (B) the Owner
Trustee shall have paid or caused to be paid on or prior to the date which is 15
Business Days after the Owner Participant's receipt of written notice of such
Event of Default all principal and interest on the Certificates then due (as
well as any interest on overdue principal and (to the extent permitted by
applicable law) interest), but not including any principal or interest becoming
due on account of such Event of Default, then the failure of the Lessee to make
the payment of such installment of Basic Rent or of interest on account of such
installment's being overdue shall not constitute or result in an Indenture Event
of Default under this Indenture and any declaration based solely on the same
shall be deemed to be automatically rescinded. Nothing contained in the
preceding sentence shall be deemed to entitle the Owner Trustee to exercise any
rights and powers or pursue any remedies pursuant to Article 15 of the Lease or
otherwise except as set forth in this Indenture, and except that the Owner
Trustee or the Owner Participant may attempt to recover any amount paid by it or
them under this Indenture by demanding of the Lessee payment of such amount, or
by commencing an action at law or equity against the Lessee for the payment of
such amount or taking appropriate action in a pending action at law against the
Lessee pursuant to Section 15(a)(5), but only said Section 15(a)(5), of the
Lease. Upon curing any such Event of Default pursuant to this Section 8.03, the
Owner Trustee or the Owner Participant, as the case may be, shall be subrogated
on an unsecured basis to all the rights of the Indenture Trustee under the Lease
in respect of the payment giving rise to such Event of Default, and any right to
any interest in respect of the same, and shall be entitled to any payment of
Basic Rent (or interest thereon) actually made by the Lessee in respect of such
cured payment upon receipt by the Indenture Trustee; provided that no such
amount shall be paid to the Owner Trustee or the Owner Participant until all
amounts then due and payable to each Certificate Holder hereunder and thereunder
shall have been paid in full and no Indenture Event of Default shall have
occurred and be continuing. Notwithstanding anything in this Indenture or the
Lease to the contrary, the Owner Participant and the Owner Trustee collectively,
shall not be entitled to cure more than six Events of Default (no more than
three of which may be consecutive) occasioned by defaults in the payment of
Basic Rent.
(b) If (A) there shall occur an Event of Default under the Lease for
any reason other than the Lessee's failure to make any payment of an installment
of Basic Rent and (B) the Owner Trustee shall have taken or caused to be taken
such action necessary to cure and shall have cured such Event of Default prior
to the date which is 15 Business Days after the Owner Participant's receipt of
the written notice of such Event of Default, then the failure of the Lessee to
perform such covenant, condition or agreement, the observance or performance of
which was accomplished by the Owner Trustee hereunder shall not constitute or
result in an Indenture Event of Default under this Indenture and any declaration
based solely on the same shall be deemed to be automatically rescinded. Nothing
contained in the preceding sentence shall be deemed to entitle the Owner Trustee
or the Owner Participant to exercise any rights and powers or pursue any
remedies pursuant to Section 15 of the Lease or otherwise except as set forth in
this Indenture, and except that the Owner Trustee or the Owner Participant may
attempt to recover any amount paid by it or them in effecting such cure by
demanding of the Lessee payment of such amount, plus any interest due, or by
commencing an action at law or in equity against the Lessee for the payment of
such amount or taking appropriate action in a pending action at law or in equity
against the Lessee pursuant to Section 15(a)(5), but only Section 15(a)(5), of
the Lease. Upon curing any such Event of Default pursuant to this Section
8.03(b), the Owner Trustee or the Owner Participant, as the case may be, shall
be subrogated to all the rights of the Indenture Trustee under the Lease in
respect of the payment, agreement or covenant giving rise to such Event of
Default, and any right to any interest in respect of the same, and shall be
entitled to any payment or other performance upon receipt by the Indenture
Trustee; provided that no such amount shall be paid to the Owner Trustee or the
Owner Participant until all amounts then due and payable to each Certificate
Holder hereunder and thereunder shall have been paid in full and no Indenture
Event of Default shall have occurred and be continuing.
ARTICLE IX
CONCERNING THE INDENTURE TRUSTEE
Section 9.01. Acceptance of Trusts. The Indenture Trustee in its
individual capacity hereby accepts the trusts imposed upon it by this Indenture,
and covenants and agrees to perform the same as expressed herein and agrees to
receive and disburse all moneys constituting part of the Trust Indenture Estate
in accordance with the terms hereof.
Section 9.02 Duties Before, and During, Existence of Indenture Event of
Default. (a) The Indenture Trustee, prior to the occurrence of an Indenture
Event of Default and after the curing or waiving of all Indenture Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. So long as an Indenture
Event of Default has occurred and has not been cured or waived, the Indenture
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs. No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:
(i) prior to the occurrence of an Indenture Event of Default and after
the curing or waiving of all Indenture Events of Default which may have
occurred:
(x) the duties and obligations of the Indenture Trustee shall
be determined solely by the express provisions of this Indenture, and
the Indenture Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read in to
this Indenture against the Indenture Trustee; and
(y) in the absence of bad faith on the part of the Indenture
Trustee, the Indenture Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any statements, certificates or opinions furnished to the
Indenture Trustee and conforming to the requirements of this Indenture;
but in the case of any such statements, certificate or opinions which
by any provision hereof are specifically required to be furnished to
the Indenture Trustee, the Indenture Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer or Responsible Officers of
the Indenture Trustee, unless it shall be proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to any
action taken or not taken by it in good faith in accordance with the direction
of the Holders of not less than a majority in aggregate principal amount of
Outstanding Certificates relating to the time, method and place of conducting
any proceeding for any remedy available to the Indenture Trustee, or exercising
any trust or power conferred upon the Indenture Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if the Indenture Trustee shall have determined
in good faith that the repayment of such funds or adequate indemnity against
such liability is not reasonably assured to it.
The Indenture Trustee agrees that it will execute and the Owner Trustee
agrees that it will, at the expense of the Lessee, file or cause to be filed
such continuation statements with respect to financing statements relating to
the security interest created hereunder in the Trust Indenture Estate as may be
specified from time to time in written instructions of the Holders of not less
than 25% in aggregate principal amount of Certificates (which instructions may,
by their terms, be operative only at a future date and which shall be
accompanied by the execution form of such continuation statement so to be
filed); provided that, notwithstanding the foregoing, the Indenture Trustee may
execute and file or cause to be filed any financing statement which it from time
to time deems appropriate.
(b) If any Event of Default shall have occurred and be continuing and,
after the latest date on which the Owner Trustee may cure such Event of Default
pursuant to Section 8.03 hereof, on request of the Holders of not less than 25%
in aggregate principal amount of outstanding Certificates (unless otherwise
instructed by a greater percentage) and subject to indemnification, to the
extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may
require against the costs, expenses and liabilities to be incurred, the
Indenture Trustee shall exercise such remedies under Section 15 of the Lease as
shall be specified in such request.
(c) The Indenture Trustee agrees that it will, in its individual
capacity and at its own cost and expense (but without any right of indemnity in
respect of any such cost or expense under Article XI hereof or under any other
Operative Agreement) promptly take such action as may be necessary duly to
discharge all Indenture Trustee's Liens on any part of the Trust Indenture
Estate.
(d) The Indenture Trustee will execute and deliver to the Lessee for
filing in accordance with Section 20 of the Lease any properly presented
document, instrument or financing or continuation statement specified in any
opinion delivered pursuant to Section 6.03(e) of the Participation Agreement.
The Indenture Trustee may rely on the act of presentation of any such document,
instrument, financing or continuation statement as evidencing the fact that it
is properly prepared and presented, provided that the Indenture Trustee shall
promptly correct any error in any such document, instrument, financing or
continuation statement of which a Responsible Officer of the Indenture Trustee
has actual knowledge.
(e) The Indenture Trustee will furnish to each Holder promptly upon
receipt thereof, duplicates or copies of all reports, notices, requests,
demands, certificates, financial statements and other instruments furnished to
the Indenture Trustee, to the extent that the same shall not have been otherwise
furnished to such Holder pursuant to this Indenture or to the extent the
Indenture Trustee does not reasonably believe that the same shall have been
furnished by the Lessee directly to such Holder.
Section 9.03. Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof:
(a) the Indenture Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Owner Trustee
mentioned herein shall be sufficiently evidenced by an Officer's Certificate
(unless other evidence in respect thereof be herein specifically prescribed)
upon which the Indenture Trustee may rely to prove or establish a matter set
forth therein;
(c) the Indenture Trustee may consult with counsel and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;
(d) the Indenture Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred therein or thereby;
(e) the Indenture Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture;
(f) prior to the occurrence of an Indenture Event of Default hereunder
and after the curing or waiving of all Indenture Events of Default, the
Indenture Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, appraisal, bond, debenture,
note, coupon, security, or other paper or document unless requested in writing
to do so by the Majority in Interest of Certificate Holders; provided that, if
the payment within a reasonable time to the Indenture Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Indenture Trustee, not reasonably
assured to the Indenture Trustee by the security afforded to it by the terms of
this Indenture, the Indenture Trustee may require reasonable indemnity against
such costs, expenses or liabilities as a condition to proceeding; the reasonable
expenses of every such examination shall be paid by the Owner Trustee or, if
paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the
Owner Trustee upon demand; and
(g) the Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys not regularly in its employ and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of any such
agent or attorney appointed with due care by it hereunder.
Section 9.04. Indenture Trustee Not Responsible for Recitals,
Certificates, or Proceeds.. The Indenture Trustee assumes no responsibility for
the correctness of the recitals contained herein and in the Certificates, except
the Indenture Trustee's certificates of authentication. The Indenture Trustee
makes no representation as to the validity or sufficiency of this Indenture or
of the Certificates. The Indenture Trustee shall not be accountable for the use
or application by the Owner Trustee of any of the Certificates or of the
proceeds thereof.
Section 9.05. Indenture Trustee and Agents May Hold Certificates;
Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not the Indenture
Trustee or such agent and may otherwise deal with the Owner Trustee and receive,
collect, hold and retain collections from the Owner Trustee with the same rights
it would have if it were not the Indenture Trustee or such agent.
Section 9.06. Moneys Held by Indenture Trustee. Subject to Sections
5.08 hereof and 14.04 hereof, all moneys received by the Indenture Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required by mandatory provisions of law. Neither the
Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any
agent thereof shall be under any liability for interest on any moneys received
by it hereunder.
Section 9.07. Right of Indenture Trustee to Rely on Officer's
Certificate, etc. Subject to Sections 9.02 and 9.03 hereof, whenever in the
administration of the trusts of this Indenture the Indenture Trustee shall deem
it necessary or desirable that a matter be proved or established prior to taking
or suffering or omitting any action hereunder, such matter (unless other
evidence in respect thereof be specifically prescribed herein) may, in the
absence of bad faith on the part of the Indenture Trustee, be deemed to be
conclusively proved and established by an Officer's Certificate delivered to the
Indenture Trustee, and such certificate, in the absence of bad faith on the part
of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any
action taken, suffered or omitted by it under the provisions of this Indenture
upon the faith thereof.
Section 9.08. Replacement Airframes and Replacement Engines. At any
time and from time to time any Airframe or Engine may, or is required to, be
replaced under Section 3(i), 11(a), or 11(b) of the Lease by a Replacement
Airframe or Replacement Engine, as the case may be, shall be replaced in
accordance with the provisions of this Section 9.08 and the provisions of such
Sections of the Lease, the Owner Trustee shall, from time to time, direct the
Indenture Trustee to execute and deliver to or as directed in writing by the
Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as
appropriate from the Lien of this Indenture and the Indenture Trustee shall
execute and deliver such instrument as aforesaid without recourse or warranty,
but only upon receipt by or deposit with the Indenture Trustee of the following:
(1) A written request from the Owner Trustee requesting such release
and specifically describing the Airframe and/or Engine(s) to be so released.
(2) A certificate signed by a duly authorized officer of the Lessee
stating the following:
A. With respect to the replacement of any Airframe:
(i) a description of the Airframe subject to the Event of Loss
including the manufacturer, model, FAA registration number (or other
applicable registration information) and manufacturer's serial number;
(ii) a description of the Replacement Airframe, including the
manufacturer, model, FAA registration number (or other applicable
registration information) and manufacturer's serial number;
(iii) that on the date of the supplement to this Indenture
relating to the Replacement Airframe the Owner Trustee will be the
legal owner of and have good title to such Replacement Airframe free
and clear of all Liens except Liens permitted under Section 8 of the
Lease, that such Replacement Airframe will on such date be in at least
as good operating condition and repair as required by the terms of the
Lease, and that such Replacement Airframe has been or, substantially
concurrently with such replacement, will be duly registered in the name
of the Owner Trustee under the Transportation Code or under the law
then applicable to the registration of the Airframe subject to the
Event of Loss and that an airworthiness certificate has been duly
issued under the Aviation Act (or such other applicable law) with
respect to such Replacement Airframe and that such registration and
certificate is, or will be, in full force and effect, and that the
Lessee will have the full right and authority to use such Replacement
Airframe;
(iv) that the insurance required by Section 12 of the Lease is
in full force and effect with respect to such Replacement Airframe;
(v) that the Replacement Airframe is of the same or an
improved make or model as the Airframe requested to be released from
this Indenture;
(vi) that the value of the Replacement Airframe as of the date
of such certificate is not less than the value of the Airframe
requested to be released (assuming such Airframe was in the condition
and repair required to be maintained under the Lease);
(vii) that no Event of Default exists or would result from the
making and granting of the request for release and the addition of a
Replacement Airframe;
(viii) that the release of the Airframe subject to the Event
of Loss will not impair the security of the Indenture in contravention
of any of the provisions of this Indenture;
(ix) that upon such replacement, the Lien of this Indenture
will apply to the Replacement Airframe and such Lien will be a first
priority security interest in favor of the Indenture Trustee; and
(x) that each of the conditions specified in Section 11(a)(1)
of the Lease with respect to such Replacement Airframe has been
satisfied.
B. With respect to the replacement of any Engine:
(i) a description of the Engine subject to the Event of Loss including the manufacturer's
serial number;
(ii) a description of the Replacement Engine including the
manufacturer's name, the engine model and serial number;
(iii) that on the date of the supplement to this Indenture
relating to the Replacement Engine the Owner Trustee will be the legal
owner of such Replacement Engine free and clear of all Liens except
Liens permitted under Section 8 of the Lease, and that such Replacement
Engine will on such date be in at least as good operating condition and
repair as required by the terms of the Lease and will otherwise conform
to the requirements set forth in the definition of "Replacement
Engine";
(iv) that the value of the Replacement Engine as of the date
of such certificate is not less than the value of the Engine to be
released (without regard to the number of hours or cycles remaining
until the next scheduled maintenance visit, and assuming such Engine
was in the condition and repair required to be maintained under the
Lease);
(v) that the release of the Engine subject to the Event of
Loss will not impair the security of the Indenture in contravention of
any of the provisions of this Indenture;
(vi) that upon such replacement, the Lien of this Indenture
will apply to the Replacement Engine and such Lien will be a first
priority security interest in favor of the Indenture Trustee; and
(vii) that each of the conditions specified in Section 11(a) or 11(b) of the Lease with
respect to such Replacement Engine has been satisfied.
(3) The appropriate instruments (i) transferring to the Owner Trustee
title to the Replacement Airframe or Replacement Engine to be received as
consideration for the Airframe or Engine to be released and (ii) assigning to
the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if
any, generally available with respect to such Replacement Airframe or
Replacement Engine, and a supplement to this Indenture subjecting such
Replacement Airframe or Replacement Engine to the Trust Agreement and to the
Lien of this Indenture.
(4) A certificate from a firm of independent aircraft appraisers of
national standing reasonably satisfactory to the Indenture Trustee and the Owner
Trustee confirming the accuracy of the information set forth in clause (2)A(vi)
of this Section 9.08.
(5) The opinions of Troutman Sanders LLP, special counsel to the
Lessee, and of Special Aviation Counsel, or (in either case) other counsel
reasonably satisfactory to the Indenture Trustee, stating that:
(i) the certificates, opinions and other instruments and/or
property which have been or are therewith delivered to and deposited
with the Indenture Trustee conform to the requirements of this
Indenture and the Lease and, upon the basis of such application, the
property so sold or disposed of may be properly released from the Lien
of this Indenture and all conditions precedent herein provided for
relating to such release have been complied with; and
(ii) the Replacement Airframe or Replacement Engine has been
validly subjected to the Lien of this Indenture and covered by the
Lease, the instruments subjecting such Replacement Airframe or
Replacement Engine to the Lease and to the Lien of this Indenture, as
the case may be, have been duly filed for recordation pursuant to the
Transportation Code or any other law then applicable to the
registration of the Aircraft, and no further action, filing or
recording of any document is necessary or advisable in order to
establish and perfect the title of the Owner Trustee to and the Lien of
this Indenture on such Replacement Airframe or Replacement Engine and
the Indenture Trustee would be entitled to the benefits of Section 1110
of the Bankruptcy Code with respect to such Replacement Airframe or
Replacement Engine, provided, that such opinion need not be to the
effect specified in the foregoing clause to the extent that the
benefits of such Section 1110 would not have been, by reason of a
change in law or governmental interpretation thereof after the date
hereof, available to the Indenture Trustee with respect to the Aircraft
immediately prior to such substitution had such Event of Loss not
occurred.
Section 9.09 Indenture Supplement for Replacements. In the event of the
substitution of a Replacement Airframe or a Replacement Engine as contemplated
by Section 11 of the Lease, the Owner Trustee and the Indenture Trustee agree
for the benefit of the Holders and the Lessee, subject to fulfillment of the
conditions precedent and compliance by the Lessee with its obligations set forth
in Section 11 of the Lease, to execute and deliver a supplement to this
Indenture as contemplated by Section 9.08(3) hereof and, provided no Event of
Default shall have occurred and be continuing, execute and deliver to the Lessee
an appropriate instrument releasing the Airframe or Engine being replaced from
the Lien of this Indenture.
Section 9.10. Effect of Replacement. In the event of the substitution
of a Replacement Airframe or a Replacement Engine as contemplated by Section 11
of the Lease and Section 9.08 hereof, all provisions of this Indenture relating
to the Airframe or Engine or Engines being replaced shall be applicable to such
Replacement Airframe or Replacement Engine or Engines with the same force and
effect as if such Replacement Airframe or Replacement Engine or Engines were the
same Airframe or engine or engines, as the case may be, as the Airframe or
Engine or Engines being replaced but for any Event of Loss with respect to the
Airframe or Engine or Engines being replaced.
Section 9.11. Compensation. The Owner Trustee covenants and agrees to
pay, and the Indenture Trustee shall be entitled to receive, reasonable
compensation and payment or reimbursement for its reasonable advances, expenses
and disbursements (including the reasonable compensation and expenses and
disbursements of its counsel, agents and other persons not regularly in its
employ) in connection with its services rendered hereunder or in any way
relating to or arising out of the administration of the Trust Indenture Estate
and shall have a priority claim on the Trust Indenture Estate for the payment of
such compensation, advances, expenses and disbursements to the extent that such
compensation, advances, expenses and disbursements shall not be paid by the
Lessee, and shall have the right to use or apply any moneys held by it hereunder
in the Trust Indenture Estate toward such payments; provided that, so long as
the Lease is in effect, the Indenture Trustee shall not make any claim for
payment under this Section 9.11 against the Owner Trustee without first making
demand on the Lessee for payment of such claim. The Indenture Trustee agrees
that it shall have no right against any Holder, SSB, or the Owner Participant
for any fee as compensation for its services as trustee under this Indenture.
ARTICLE X
CONCERNING THE HOLDERS
Section 10.01. Evidence of Action Taken by Holders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly appointed in writing, and, except
as otherwise expressly provided herein, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee and, if
expressly required herein, to the Owner Trustee. Proof of execution of any
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Sections 9.02 and 9.03 hereof)
conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in
the manner provided in this Article.
(b) For the purpose of determining the Holders entitled to vote or
consent to any direction, waiver or other action of such Holders under Section
7.10 or 7.11 hereof, the Lessee may set a record date for such vote or consent
by specifying such record date in an Officer's Certificate delivered to the
Indenture Trustee. Such record date shall be a date not more than 15 days prior
to the first solicitation of such vote or consent.
Section 10.02. Proof of Execution of Instruments and of Holding of
Certificates. Subject to Sections 9.02 and 9.03 hereof, the execution of any
instrument by a Holder or his agent or proxy may be proved in accordance with
such reasonable rules and regulations as may be prescribed by the Indenture
Trustee. The holding of Certificates shall be proved by the Register or by a
certificate of the Registrar.
Section 10.03. Holders to Be Treated as Owners. Prior to due
presentment for registration of transfer of any Certificate, the Owner Trustee,
the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee,
the Paying Agent, if any, the Registrar and the Lessee shall deem and treat the
Person in whose name such Certificate shall be registered upon the Register as
the absolute owner of such Certificate (whether or not such Certificate shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on such Certificate and
for all other purposes; and neither the Owner Trustee nor the Indenture Trustee
(nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying
Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice
to the contrary. All such payments so made to any such person, or upon his
order, shall be valid, and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for moneys payable upon any such
Certificate.
Section 10.04. Certificates Owned by Owner Trustee or Lessee Deemed Not
Outstanding. In determining whether the Holders of the requisite aggregate
principal amount of Certificates have concurred in any direction, consent or
waiver under this Indenture, Certificates which are owned by the Owner Trustee,
any Owner Participant, SSB, the Lessee or any Affiliate thereof shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination; provided that for the purpose of determining whether the
Indenture Trustee shall be protected in relying on any such direction, consent
or waiver, only if a Responsible Officer of the Indenture Trustee has actual
knowledge that certain Certificates are so owned by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Owner Trustee, such Owner Participant, SSB or the Lessee shall
such Certificates be so disregarded; and provided further that if all
Certificates which would be deemed Outstanding in the absence of the foregoing
provision are owned by the Owner Trustee, SSB or any Owner Participant or by any
Affiliate thereof, then such Certificates shall be deemed Outstanding for the
purpose of any such determination. Certificates so owned which have been pledged
in good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Certificates and that the pledgee is not the Owner Trustee, the Owner
Participant, SSB or the Lessee or any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Owner
Trustee, the Owner Participant, SSB or the Lessee. In case of a dispute as to
such right, the advice of counsel shall be full protection in respect of any
decision made by the Indenture Trustee in accordance with such advice, unless
the Lessee, the Owner Trustee, SSB, or the Owner Participant are actually named
in the Register. Upon request of the Indenture Trustee, the Owner Trustee, the
Owner Participant, SSB and the Lessee shall furnish to the Indenture Trustee
promptly an Officer's Certificate listing and identifying all Certificates, if
any, known by the Owner Trustee, the Owner Participant, SSB or the Lessee to be
owned or held by or for the account of any of the above-described persons; and,
subject to Sections 9.02 and 9.03 hereof, the Indenture Trustee shall be
entitled to accept such Officer's Certificate as conclusive evidence of the
facts set forth therein and of the fact that all Certificates not listed therein
are outstanding for the purpose of any such determination.
Section 10.05. Right of Revocation of Action Taken. At any time prior
to (but not after) the evidencing to the Indenture Trustee, as provided in
Section 10.01, of the taking of any action by the Holders of the percentage in
aggregate principal amount of the Certificates specified in this Indenture in
connection with such action, any Holder of a Certificate, the serial number of
which is shown by the evidence to be included among the serial numbers of the
Certificates the Holders of which have consented to such action, may, by filing
written notice at the Corporate Trust Department and upon proof of holding as
provided in this Article, revoke such action so far as concerns such
Certificate. Except as aforesaid, any such action taken by the Holder shall be
conclusive and binding upon such Holder and upon all future Holders and owners
of such Certificate and of any Certificates issued in exchange or substitution
therefor, irrespective of whether or not any notation in regard thereto is made
upon any such Certificate or otherwise. Any action taken by the Holders of the
percentage in aggregate principal amount of the Certificates specified in this
Indenture in connection with such action shall be conclusively binding upon the
Owner Trustee, the Indenture Trustee and the Holders of all the Certificates.
Section 10.06. ERISA. Any Person, other than the Subordination Agent,
any Pass-Through Trustee, and any pass-through trustee in respect of
pass-through certificates, if any, issued in accordance with Section 15.01 of
the Participation Agreement, who is acquiring the Certificates will be deemed to
represent and warrant that (i) no assets of an employee benefit plan subject to
Title I of ERISA or an individual retirement account or plan subject to Section
4975 of the Code, or any trust established under any such plan or account, have
been used to acquire or hold any of the Certificates, or (ii) that one or more
administrative or statutory exemptions from the prohibited transaction rules
under Section 406 of ERISA and Section 4975 of the Code applies to its purchase
and holding of the Certificates such that its purchase and holding of the
Certificates will not result in a non-exempt prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code.
ARTICLE XI
INDEMNIFICATION OF INDENTURE
TRUSTEE BY OWNER TRUSTEE
The Owner Trustee, not individually but solely in its capacity as Owner
Trustee under the Trust Agreement, hereby agrees, whether or not any of the
transactions contemplated hereby shall be consummated, to assume liability for,
and does hereby indemnify, protect, save and keep harmless the Indenture
Trustee, in its individual capacity, and its successors, assigns, agents and
servants solely from the Lessor's Estate, with respect to the claims of the
Indenture Trustee for payment or reimbursement under Section 9.11 hereof and
from and against any and all liabilities, obligations, losses, damages,
penalties, taxes (excluding any taxes payable by the Indenture Trustee on or
measured by any compensation received by the Indenture Trustee for its services
under this Indenture and any taxes excluded from the Lessee's indemnity
obligation under Section 8.01(b) of the Participation Agreement), 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 Indenture Trustee (whether or not also agreed to be
indemnified against by any other person under any other document) in any way
relating to or arising out of this Indenture, or any other Indenture Documents
or the enforcement of any of the terms of any thereof, or in any way relating to
or arising out of the manufacture, purchase, acceptance, nonacceptance,
rejection, ownership, delivery, lease, possession, use, operation, condition,
sale, return or other disposition of the Aircraft or any Engine (including,
without limitation, latent and other defects, whether or not discoverable, and
any claim for patent, trademark or copyright infringement), or in any way
relating to or arising out of the administration of the Trust Indenture Estate
or the action or inaction of the Indenture Trustee hereunder, except only (a) in
the case of willful misconduct or gross negligence of the Indenture Trustee in
the performance of its duties hereunder, (b) as may result from the inaccuracy
of any representation or warranty of the Indenture Trustee in the Participation
Agreement, (c) as otherwise provided in Section 9.02(c) hereof or (d) as
otherwise excluded by the terms of Article 8 or Article 9 of the Participation
Agreement from the Lessee's general indemnity or general tax indemnity to the
Indenture Trustee under said Article; provided that so long as the Lease is in
effect, the Indenture Trustee shall not make any claim under this Article XI for
any claim or expense indemnified by the Lessee under the Participation Agreement
without first making demand on the Lessee for payment of such claim or expense.
The Indenture Trustee shall be entitled to indemnification, from the Trust
Indenture Estate, for any liability, obligation, loss, damage, penalty, claim,
action, suit, cost, expense or disbursement indemnified against pursuant to this
Article XI to the extent not reimbursed by the Lessee or others, but without
releasing any of them from their respective agreements of reimbursement; and to
secure the same the Indenture Trustee shall have a prior Lien on the Trust
Indenture Estate. The indemnities contained in this Article XI shall survive the
termination of this Indenture and the resignation or removal of the Indenture
Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to
this Article XI, the Owner Trustee shall, so long as no Indenture Event of
Default shall have occurred and be continuing, be subrogated to the rights of
the Indenture Trustee, if any, in respect of the matter as to which the
indemnity was paid.
ARTICLE XII
SUCCESSOR TRUSTEES
Section 12.01. Notice of Successor Owner Trustee. In the case of any
appointment of a successor to the Owner Trustee pursuant to the Trust Agreement
or any merger, conversion, consolidation or sale of substantially all of the
corporate trust business of the Owner Trustee pursuant to the Trust Agreement,
the successor Owner Trustee shall give prompt written notice thereof to the
Indenture Trustee.
Section 12.02. Resignation and Removal of Indenture Trustee:
Appointment of Successor. (a) The Indenture Trustee or any successor thereto may
resign at any time without cause by giving at least 30 days' prior written
notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder,
such resignation to be effective upon the acceptance of the trusteeship by a
successor Indenture Trustee. In addition, the Majority in Interest of the
Certificate Holders or the Owner Trustee, with the consent of the Lessee and the
Majority in Interest of the Certificate Holders may at any time remove the
Indenture Trustee without cause by an instrument in writing delivered to the
Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and
the Indenture Trustee shall promptly notify each Holder thereof of such action
in writing, such removal to be effective upon the acceptance of the trusteeship
by a successor Indenture Trustee. In the case of the resignation or removal of
the Indenture Trustee, the Majority in Interest of the Certificate Holders, or
the Owner Trustee, with the consent of the Lessee and the Majority in Interest
of the Certificate Holders, may appoint a successor Indenture Trustee by an
instrument signed by such Holders. If a successor Indenture Trustee shall not
have been appointed within 30 days after such notice of resignation or removal,
the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or
any Holder may apply to any court of competent jurisdiction to appoint a
successor Indenture Trustee to act until such time, if any, as a successor shall
have been appointed as provided above. The successor Indenture Trustee so
appointed by such court shall immediately and without further act be superseded
by any successor Indenture Trustee appointed as provided above.
(b) In case at any time any of the following shall occur:
(i) the Indenture Trustee shall cease to be eligible in
accordance with the provisions of Section 12.03 hereof and shall fail
to resign after written request therefor by the Owner Trustee or by any
Holder; or
(ii) the Indenture Trustee shall become incapable of acting,
or shall be adjudged a bankrupt or insolvent, or a receiver or
liquidator of the Indenture Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the
Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then the Owner Trustee may remove the Indenture Trustee and, with the consent of
the Lessee, appoint a successor trustee by written instrument, in duplicate,
executed by a Responsible Officer of the Owner Trustee, one copy of which
instrument shall be delivered to the Indenture Trustee so removed and one copy
to the successor trustee, or, subject to the provisions of Section 7.13 hereof,
any Holder who has been a bona fide Holder for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Indenture Trustee and the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Indenture Trustee and
appoint a successor trustee, which removal and appointment shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.04 hereof. The successor Indenture Trustee so appointed by such court
shall immediately and without further act be superseded by any successor
Indenture Trustee appointed as provided above within one year from the date of
appointment by such court.
Section 12.03. Persons Eligible for Appointment as Indenture Trustee.
There shall at all times be an Indenture Trustee hereunder which shall be (i)(x)
a bank or trust company organized and doing business under the laws of the
United States of America or any state or the District of Columbia having a
combined capital and surplus of at least $100,000,000 or (y) a bank or trust
company whose obligations hereunder are fully guaranteed by a direct or indirect
parent thereof having a combined capital and surplus of at least $100,000,000
and (ii) a Citizen of the United States authorized under applicable law to
exercise corporate trust powers and subject to supervision of examination by
Federal, state or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Indenture Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Indenture Trustee shall resign immediately in the manner and with the effect
specified in Section 12.02 hereof.
Section 12.04. Acceptance of Appointment by Successor Trustee. Any
successor trustee appointed as provided in Section 12.02 hereof shall execute
and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an
instrument accepting such appointment hereunder, in form and substance
reasonably satisfactory to the Owner Trustee, and thereupon the resignation or
removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become vested with
all rights, powers, duties and obligations of its predecessor hereunder, with
like effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Owner Trustee or of the successor trustee, upon payment
of its charges then unpaid, the trustee ceasing to act shall, subject to Section
14.04 hereof, pay over to the successor trustee all moneys at the time held by
it hereunder and shall execute and deliver an instrument transferring to such
successor trustee all such rights, powers, duties and obligations. Upon request
of any such successor trustee, the Owner Trustee shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a prior claim upon all property or funds held or
collected by such trustee to secure any amounts then due it pursuant to the
provisions of Article XI hereof.
No successor trustee shall accept appointment as provided in this
Section 12.04 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 12.03 hereof.
Upon acceptance of appointment by a successor trustee as provided in
this Section 12.04, the successor trustee shall mail notice thereof by
first-class mail to the Holders at their last addresses as they shall appear in
the Register, and shall mail a copy of such notice to the Lessee and the Owner
Trustee. If the acceptance of appointment is substantially contemporaneous with
the resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 12.02 hereof.
Section 12.05. Merger, Consolidation or Succession to Business of
Indenture Trustee. Any corporation into which the Indenture Trustee may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Indenture
Trustee shall be a party, or any corporation succeeding to the corporate trust
business of the Indenture Trustee, shall be the successor to the Indenture
Trustee hereunder, provided that, anything herein to the contrary
notwithstanding, such corporation shall be eligible under the provisions of
Section 12.03 hereof, without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
In case at the time such successor to the Indenture Trustee shall
succeed to the trusts created by this Indenture any of the Certificates shall
have been authenticated but not delivered, any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor Indenture
Trustee and deliver such Certificates so authenticated; and, in case at that
time any of the Certificates shall not have been authenticated, any successor to
the Indenture Trustee may authenticate such Certificates either in the name of
any predecessor hereunder or in the name of the successor Indenture Trustee; and
in all such cases such certificate shall have the full force which it is
anywhere in the Certificates or in this Indenture provided that the certificate
of the Indenture Trustee shall have; provided, that the right to adopt the
certificate of authentication of any predecessor Indenture Trustee or to
authenticate Certificates in the name of any predecessor Indenture Trustee shall
apply only to its successor or successors by merger, conversion or
consolidation.
Section 12.06. Appointment of Separate Trustees. (a) At any time or
times, for the purpose of meeting any legal requirements of any jurisdiction in
which any part of the Trust Indenture Estate may at the time be located or in
which any action of the Indenture Trustee may be required to be performed or
taken, the Indenture Trustee, by an instrument in writing signed by it, may
appoint one or more individuals or corporations to act as a separate trustee or
separate trustees or co-trustee, acting jointly with the Indenture Trustee, of
all or any part of the Trust Indenture Estate, to the full extent that local law
makes it necessary for such separate trustee or separate trustees or co-trustee
acting jointly with the Indenture Trustee to act.
(b) The Indenture Trustee and, at the request of the Indenture Trustee,
the Owner Trustee, shall execute, acknowledge and deliver all such instruments
as may be required by the legal requirements of any jurisdiction or by any such
separate trustee or separate trustees or co-trustee for the purpose of more
fully confirming such title, rights or duties to such separate trustee or
separate trustees or co-trustee. Upon the acceptance in writing of such
appointment by any such separate trustee or separate trustees or co-trustee, it,
he or they shall be vested with such title to the Trust Indenture Estate or any
part thereof, and with such rights, powers, duties and obligations, as shall be
specified in the instrument of appointment, and such rights, powers, duties and
obligations shall be conferred or imposed upon and exercised or performed by the
Indenture Trustee, or the Indenture Trustee and such separate trustee or
separate trustees or co-trustee jointly with the Indenture Trustee subject to
all the terms of this Indenture, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed the
Indenture Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall be
exercised and performed by such separate trustee or separate trustees or
co-trustee, as the case may be. Any separate trustee or separate trustees or
co-trustee may, at any time by an instrument in writing, constitute the
Indenture Trustee its or his attorney-in-fact and agent with full power and
authority to do all acts and things and to exercise all discretion on its or his
behalf and in its or his name. In case any such separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, the title to the
Trust Indenture Estate and all assets, property, rights, powers, duties and
obligations and duties of such separate trustee or co-trustee shall, so far as
permitted by law, vest in and be exercised by the Indenture Trustee, without the
appointment of a successor to such separate trustee or co-trustee unless and
until a successor is appointed.
(c) All provisions of this Indenture which are for the benefit of the
Indenture Trustee (including without limitation Article XI hereof) shall extend
to and apply to each separate trustee or co-trustee appointed pursuant to the
foregoing provisions of this Section 12.06.
(d) Every additional trustee and separate trustee hereunder shall, to
the extent permitted by law, be appointed and act and the Indenture Trustee
shall act, subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights conferred upon
the Indenture Trustee in respect of the receipt, custody, investment
and payment of moneys shall be exercised solely by the Indenture
Trustee;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be conferred or
imposed and exercised or performed by the Indenture Trustee and such
additional trustee or trustees and separate trustee or trustees jointly
except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Indenture Trustee
shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the
holding of title to the Trust Indenture Estate in any such
jurisdiction) shall be exercised and performed by such additional
trustee or trustees or separate trustee or trustees;
(iii) no power hereby given to, or exercisable by, any such
additional trustee or separate trustee shall be exercised hereunder by
such additional trustee or separate trustee except jointly with, or
with the consent of, the Indenture Trustee; and
(iv) no trustee hereunder shall be liable either personally or
in its capacity as such trustee, by reason of any act or omission of
any other trustee hereunder.
If at any time the Indenture Trustee shall deem it no longer necessary or
prudent in order to conform to any such law, the Indenture Trustee shall execute
and deliver an indenture supplemental hereto and all other instruments and
agreements necessary or proper to remove any additional trustee or separate
trustee.
(e) Any request, approval or consent in writing by the Indenture
Trustee to any additional trustee or separate trustee shall be sufficient
warrant to such additional trustee or separate trustee, as the case may be, to
take such action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 12.06, the
powers of any additional trustee or separate trustee shall not exceed those of
the Indenture Trustee hereunder.
ARTICLE XIII
SUPPLEMENTS AND AMENDMENTS TO THIS
TRUST INDENTURE AND OTHER DOCUMENTS
Section 13.01. Supplemental Indentures Without Consent of Holders. The
Owner Trustee (when authorized by the Owner Participant) and the Indenture
Trustee, without consent of the Holders, may enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee
as security for the Certificates;
(b) to evidence the succession of another corporation to the Owner
Trustee or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Owner Trustee
herein and in the Certificates;
(c) to add to the covenants of the Owner Trustee such further
covenants, restrictions, conditions or provisions as it and the Indenture
Trustee shall consider to be for the protection of the Holders, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions, conditions or provisions an Indenture Event
of Default permitting the enforcement of all or any of the several remedies
provided herein; provided, that in respect of any such additional covenant,
restriction, condition or provision such supplemental indenture may provide for
a particular period of grace after default (which period may be shorter or
longer than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Indenture Event of Default or may limit the
remedies available to the Indenture Trustee upon such an Indenture Event of
Default or may limit the right of not less than the Majority in Interest of
Certificate Holders to waive such an Indenture Event of Default;
(d) to surrender any right or power conferred herein upon the Owner
Trustee or the Owner Participant;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture; or to make such other provisions in regard to matters or questions
arising under this Indenture or under any supplemental indenture as the Owner
Trustee may deem necessary or desirable and which shall not adversely affect the
interests of the Holders;
(f) to correct or amplify the description of any property at any time
subject to the Lien of this Indenture or better to assure, convey and confirm
unto the Indenture Trustee any property subject or required to be subject to the
Lien of this Indenture or to subject any Replacement Airframe or Replacement
Engine to the Lien of this Indenture in accordance with the provisions hereof or
with the Lease or to release from the Lien of this Indenture property that has
been substituted on or removed from the Aircraft as contemplated in Section 3.07
hereof; provided that supplements to this Indenture entered into for the purpose
of subjecting any Replacement Airframe or Replacement Engine to the Lien of this
Indenture need only be executed by the Owner Trustee and the Indenture Trustee;
(g) to provide for the issuance under this Indenture of Certificates in
coupon form (including Certificates registrable as to principal only) and to
provide for exchangeability of such Certificates with Certificates issued
hereunder in fully registered form, and to make all appropriate changes for such
purpose;
(h) to effect the re-registration of the Aircraft pursuant to Section 6.03(b) of the Participation
Agreement;
(i) to add, eliminate or change any provision hereunder so long as such
action shall not adversely affect the interests of the Holders; and
(j) to effect the amendments contemplated by Section 2.03 of the
Participation Agreement and/or Section 2.18 hereof, subject to the limitations
set forth therein.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture, to make any further appropriate agreements and
stipulations which may be contained therein and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Indenture Trustee shall not be obligated to enter into any such supplemental
indenture which adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any such supplemental indenture may be executed without the consent of
the Holders of Outstanding Certificates, notwithstanding any of the provisions
of Section 13.02 hereof.
Section 13.02. Supplemental Indentures With Consent of Holders. With
the consent (evidenced as provided in Article X) of the Majority in Interest of
Certificate Holders, the Owner Trustee (when authorized by the Owner
Participant) and the Indenture Trustee may, from time to time and at any time,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders; provided, however, that, without the
consent of each and every Holder and each Liquidity Provider, no such amendment
of or supplement to this Indenture or any indenture supplemental hereto, or
modification of the terms of, or consent under, any thereof, shall (a) modify
any of the provisions of Section 7.11 hereof or this Section 13.02, (b) reduce
the amount or extend the time of payment of any amount owing or payable under
any Certificate or reduce the interest payable on any Certificate (except that
only the consent of the Holder shall be required for any decrease in any amounts
of or the rate of interest payable on such Certificate or any extension for the
time of payment of any amount payable under such Certificate), or alter or
modify the provisions of Article V hereof with respect to the order of
priorities in which distributions thereunder shall be made as among Holders of
different Series of Certificates or as between the Holder and the Owner Trustee
or the Owner Participant or with respect to the amount or time of payment of any
such distribution, or alter or modify the circumstances under which a Make-Whole
Premium shall be payable, or alter the currency in which any amount payable
under any Certificate is to be paid, or impair the right of any Holder to
commence legal proceedings to enforce a right to receive payment hereunder, (c)
reduce, modify or amend any indemnities in favor of any Holder or in favor of or
to be paid by the Owner Participant (except as consented to by each Person
adversely affected thereby), or (d) create or permit the creation of any Lien on
the Trust Indenture Estate or any part thereof prior to or pari passu with the
Lien of this Indenture, except as expressly permitted herein, or deprive any
Holder of the benefit of the Lien of this Indenture on the Trust Indenture
Estate, except as provided in Section 7.02 hereof or in connection with the
exercise of remedies under Article VII. This Section 13.02 shall not apply to
any indenture or indentures supplemental hereto permitted by, and complying with
the terms of, Section 13.06 hereof.
Upon the request of the Owner Trustee (at the direction of the Owner
Participant) and upon the filing with the Indenture Trustee of evidence of the
consent of Holders and other documents, if any, required by Section 10.01, the
Indenture Trustee shall join with the Owner Trustee and the Lessee in the
execution of such supplemental indenture unless such supplemental indenture
affects the Indenture Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Indenture Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Owner Trustee, the Indenture
Trustee and the Lessee of any supplemental indenture pursuant to the provisions
of this Section, the Indenture Trustee shall mail a notice thereof by
first-class mail to the Holders at their addresses as they shall appear on the
registry books of the Registrar, setting forth in general terms the substance of
such supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
Section 13.03. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and
the Holders shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.
Section 13.04. Documents to Be Given to Indenture Trustee. The
Indenture Trustee, subject to the provisions of Sections 9.02 and 9.03, may
receive an Officer's Certificate and an Opinion of Counsel as conclusive
evidence that any such supplemental indenture complies with the applicable
provisions of this Indenture.
Section 13.05. Notation on Certificates in Respect of Supplemental
Indentures. Certificates authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Indenture Trustee as to any matter provided for
by such supplemental indenture. If the Owner Trustee or the Indenture Trustee
shall so determine, new Certificates so modified as to conform, in the opinion
of the Owner Trustee and the Indenture Trustee, to any modification of this
Indenture contained in any such supplemental indenture may be prepared by the
Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange
for the Outstanding Certificates.
Section 13.06. No Request Necessary for Lease Supplement or Indenture
Supplement. Notwithstanding anything contained in Section 13.02 hereof, no
written request or consent of the Indenture Trustee, any Holder or the Owner
Participant pursuant to Section 13.02 hereof shall be required to enable the
Owner Trustee to enter into any supplement to the Lease with the Lessee in
accordance with the terms and conditions of the Lease to subject a Replacement
Airframe or Replacement Engine thereto or to execute and deliver any supplement
to the Indenture (including the Indenture Supplement) pursuant to the terms
hereof.
Section 13.07. Notices to Liquidity Providers. Any request made to any
Holder for consent to any amendment, supplement or waiver pursuant to Section
7.11, 8.01 or this Article XIII shall be promptly furnished by the Indenture
Trustee to each Liquidity Provider.
ARTICLE XIV
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 14.01. Satisfaction and Discharge of Indenture: Termination of
Indenture. If at any time after (a) the Owner Trustee shall have paid or caused
to be paid the principal of and interest on all the Certificates outstanding
hereunder, as and when the same shall have become due and payable, or (b) the
Owner Trustee shall have delivered to the Indenture Trustee for cancellation all
Certificates theretofore authenticated (other than any Certificates which shall
have been destroyed, lost or stolen and which shall have been replaced or paid
as provided in Section 2.07 hereof) or (c) (i) all such Certificates not
theretofore delivered to the Indenture Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for prepayment within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice of prepayment by
the Indenture Trustee in the name and at the expense of the Owner Trustee, and
(ii) the Owner Trustee shall have irrevocably deposited or caused to be
deposited with the Indenture Trustee as trust funds the entire amount in cash
(other than moneys repaid by the Indenture Trustee or any paying agent to the
Owner Trustee in accordance with Section 14.04 hereof) or Government obligations
maturing as to principal and interest in such amounts and at such times as will
insure the availability of cash sufficient to pay at maturity all such
Certificates not theretofore delivered to the Indenture Trustee for
cancellation, including principal and interest due or to become due to such date
of maturity as the case may be, and if, in any such case, the Owner Trustee
shall also pay or cause to be paid all other sums then payable hereunder by the
Owner Trustee, then this Indenture shall cease to be of further effect (except
in the case of (c) above as to (A) rights of registration of transfer and
exchange, and the Owner Trustee's right of optional prepayment pursuant to
Section 6.02(a)(ii) hereof, (B) substitution of mutilated, defaced, destroyed,
lost or stolen Certificates, (C) rights of Holders to receive payments of
principal thereof and interest thereon, upon the original stated due dates
therefor (but not upon acceleration), (D) the rights, obligations, indemnities
and immunities of the Indenture Trustee hereunder, and (E) the rights of the
Holders as beneficiaries hereof with respect to the property so deposited with
the Indenture Trustee payable to all or any of them), and the Indenture Trustee,
on demand of the Owner Trustee accompanied by an Officer's Certificate and an
Opinion of Counsel (covering such matters reasonably requested by, and in form
and substance reasonably satisfactory to, the Indenture Trustee) and at the cost
and expense of the Owner Trustee, shall execute proper instruments acknowledging
such satisfaction of and discharging this Indenture. The Owner Trustee agrees to
reimburse and indemnify the Indenture Trustee for any costs or expenses
thereafter reasonably and properly incurred and to compensate the Indenture
Trustee for any services thereafter reasonably and properly rendered by the
Indenture Trustee in connection with this Indenture or the Certificates.
Upon (or at any time after) payment in full to the Indenture Trustee,
as trust funds, of the principal of and interest on and Make-Whole Premium, if
any, and all other amounts due hereunder and under all Certificates, and
provided that there shall then be no other amounts due to the Indenture Trustee
hereunder or under the Participation Agreement or otherwise secured hereby, the
Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as
directed in writing by the Owner Trustee an appropriate instrument releasing the
Aircraft from the Lien of this Indenture and releasing the Indenture Documents
from the assignment thereof hereunder, and the Indenture Trustee shall execute
and deliver such instrument as aforesaid and, at the Owner Trustee's expense,
will execute and deliver such other instruments or documents as may be
reasonably requested by the Owner Trustee to give effect to such release;
provided, however, that this Indenture and the trusts created hereby shall
terminate earlier and this Indenture shall be of no further force or effect upon
any sale or other final disposition by the Indenture Trustee of all property
forming a part of the Trust Indenture Estate and the final distribution by the
Indenture Trustee of all moneys or other property or proceeds constituting part
of the Trust Indenture Estate in accordance with the terms hereof. Except as
aforesaid otherwise provided, this Indenture and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.
Section 14.02. Application by Indenture Trustee of Funds Deposited for
Payment of Certificates. Subject to Section 14.04 hereof, all moneys deposited
with the Indenture Trustee pursuant to Section 14.01 hereof shall be held in
trust and applied by it to the prompt payment, either directly or through any
Paying Agent, to the Holders of the particular Certificates for the payment or
prepayment of which such moneys have been deposited with the Indenture Trustee,
of all sums due and to become due thereon for principal, interest and Make-Whole
Premium, if any, but such money need not be segregated from other funds except
to the extent required by law.
Section 14.03. Repayment of Moneys Held by Paying Agent. Upon the
satisfaction and discharge of this Indenture all moneys then held by any Paying
Agent under the provisions of this Indenture shall, upon demand of the Owner
Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such
Paying Agent shall be released from all further liability with respect to such
moneys.
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee
and Paying Agent.. Any moneys deposited with or paid to the Indenture Trustee or
any Paying Agent for the payment of the principal of or interest or Make-Whole
Premium on any Certificate and not applied but remaining unclaimed for two years
and eleven months after the date upon which such principal, interest or
Make-Whole Premium shall have become due and payable, shall, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be paid to the Owner Trustee (or, if the Trust Agreement shall no
longer be in effect, to the Owner Participant) by the Indenture Trustee or such
Paying Agent and the Holder of such Certificate, as a general unsecured
creditor, shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, thereafter look only to the
Owner Trustee (or the Owner Participant) for any payment which such Holder may
be entitled to collect, and all liability of the Indenture Trustee, or any
Paying Agent with respect to such moneys shall thereupon cease.
ARTICLE XV
MISCELLANEOUS
Section 15.01. Capacity in Which Acting. Each of SSB (or its permitted
successors or assigns) and FNBM acts hereunder not in its individual capacity
but solely as trustee except as expressly provided herein and in the other
Operative Documents, and, in the case of SSB (or its permitted successors or
assigns), in the Trust Agreement.
Section 15.02. No Legal Title to Trust Indenture Estate in Holders. No
Holder shall have legal title to any part of the Trust Indenture Estate. No
transfer, by operation of law or otherwise, of any Certificate or other right,
title and interest of any Holder in and to the Trust Indenture Estate or
hereunder shall operate to terminate this Indenture or entitle such Holder or
any successor or transferee of such Holder to an accounting or to the transfer
to it of legal title to any part of the Trust Indenture Estate.
Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is
Binding. Any sale or other conveyance of all or any part of the Trust Indenture
Estate by the Indenture Trustee made pursuant to the terms of this Indenture or
of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner
Participant and shall be effective to transfer or convey all right, title and
interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and
such Holders therein and thereto. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency or regularity
of such sale or conveyance or as to the application of any sale or other
proceeds with respect thereto by the Indenture Trustee.
Section 15.04. Indenture Benefits Trustees, Participants, Lessee, and
Liquidity Providers Only. Nothing in this Indenture, whether express or implied,
shall be construed to give to any person other than SSB, the Owner Trustee, the
Lessee, FNBM, the Indenture Trustee, the Owner Participant, each Liquidity
Provider and the Holders any legal or equitable right, remedy or claim under or
in respect of this Indenture. Upon termination of this Indenture pursuant to
Article XIV hereof, the Indenture Trustee in connection with the satisfaction of
the Indenture shall return to the Owner Trustee all property (and related
documents and instruments) constituting or evidencing the Trust Indenture
Estate.
Section 15.05. No Action Contrary to Lessee's Rights Under the Lease.
Notwithstanding any of the provisions of this Indenture or the Trust Agreement
to the contrary, so long as no Event of Default shall have occurred and be
continuing, neither the Indenture Trustee nor the Owner Trustee will take any
affirmative acts that interfere with the peaceful and quiet possession and
enjoyment of the Aircraft by the Lessee or any Permitted Sublessee.
Section 15.06. Notices. Unless otherwise expressly specified or
permitted by the terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted by this
Indenture to be made, given, furnished or filed shall be in writing, and shall
be given and become effective in the manner set forth in Section 14.01 of the
Participation Agreement. Any party hereto may change the address to which
notices to such party will be sent by giving notice of such change to the other
parties to this Indenture.
Section 15.07. Officer's Certificates and Opinions of Counsel.. Upon
any application or demand by the Lessee or the Owner Trustee to the Indenture
Trustee to take any action under any of the provisions of this Indenture, the
Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture
Trustee upon request (a) an Officer's Certificate stating that all conditions
precedent provided for in this Indenture relating to the proposed action have
been complied with and that the proposed action is in conformity with the
requirements of this Indenture, and (b) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
Any certificate, statement or opinion of an officer of SSB may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters information with respect to which is in the possession of the
Lessee or SSB, upon the certificate, statement or opinion of or representations
by an officer or officers of the Lessee or SSB, as the case may be, unless such
counsel knows that the certificate, statement or opinion or representations with
respect to the matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Lessee or
SSB or of counsel thereto may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of or representations by an accountant or
firm of accountants employed by the Lessee or the Owner Trustee, as the case may
be, unless such officer or counsel, as the case may be, knows that the
certificate or opinion or representations with respect to the accounting matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with the Indenture Trustee shall contain a statement that such
firm is independent.
Section 15.08. Severability. Any provision of this Indenture which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 15.09. No Oral Modifications or Continuing Waivers. No terms or
provisions of this Indenture or the Certificates may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party or other person against whom enforcement of the change, waiver,
discharge or termination is sought; and any waiver of the terms hereof or of any
Certificate shall be effective only in the specific instance and for the
specific purpose given.
Section 15.10. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
parties hereto and the successors and permitted assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by any Holder shall bind the successors and assigns of such Holder. This
Indenture and the 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 Indenture to
the Trust Agreement shall mean the Trust Agreement as amended and supplemented
from time to time to the extent permitted hereby and thereby.
Section 15.11. Headings. The headings of the various Articles and Sections herein and in the table of
contents hereto are for the convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
Section 15.12. Normal Commercial Relations. Anything contained in this
Indenture to the contrary notwithstanding, the Owner Participant, the Indenture
Trustee and any Holder, or any bank or other affiliate of any such party, may
conduct any banking or other financial transactions, and have banking or other
commercial relationships, with the Lessee fully to the same extent as if this
Indenture were not in effect, including without limitation the making of loans
or other extensions of credit to the Lessee for any purpose whatsoever, whether
related to any of the transactions contemplated hereby or otherwise.
Section 15.13. Governing Law; Counterparts. THIS INDENTURE AND EACH
CERTIFICATE 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. This Indenture may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture
and Security Agreement to be duly executed this ___th day of September, 1997 by
their respective officers thereunto duly authorized and acknowledge that this
Indenture has been made and delivered in the State of New York.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not
in its individual capacity,
except as specifically set
forth herein but solely as
Owner Trustee
By
Name:
Title:
THE FIRST NATIONAL BANK OF MARYLAND, not in its
individual capacity, but solely as Indenture Trustee
By
Name:
Title:
<PAGE>
9
Exhibit A
to
Trust Indenture and
Security Agreement
Indenture Supplement No. 1
This Indenture Supplement No. 1 (Atlantic Coast Airlines Trust No.
___________) dated ____________, 199_, of State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, not in its
individual capacity but solely as owner trustee (herein called the "Owner
Trustee") under the Trust Agreement dated as of September __, 1997 (the "Trust
Agreement") between State Street Bank and Trust Company and the Owner
Participant named therein,
WITNESSETH:
WHEREAS, the Trust Agreement provides for the execution and delivery of
this Indenture Supplement which shall particularly describe the Aircraft
included in the property covered by the Trust Agreement.
WHEREAS, the Trust Indenture and Security Agreement (Atlantic Coast
Airlines Trust No. __________) dated as of September 26, 1997 (the "Indenture")
between the Owner Trustee and The First National Bank of Maryland (herein called
the "Indenture Trustee") provides for the execution and delivery of an Indenture
Supplement substantially in the form of this Indenture Supplement No. 1, which
Supplement shall particularly describe the Aircraft included in the Trust
Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture
Trustee.
WHEREAS, the Indenture relates to the Aircraft and the Engines
described in the following paragraph and a counterpart of the Indenture is
attached to and made a part of this Indenture Supplement No. 1, and this
Indenture Supplement No. 1, together with such attachment, is being filed for
recordation on or promptly after the date of this Supplement No. 1 with the
Federal Aviation Administration as one document.
NOW, THEREFORE, this Supplement witnesseth, that, to secure the prompt
payment of the principal of and Make-Whole Premium, if any, and interest on, and
all other amounts due with respect to, all Outstanding Certificates under the
Indenture and all other amounts due hereunder and the performance and observance
by the Owner Trustee of all the agreements, covenants and provisions for the
benefit of the Holders contained in the Indenture, in the Lease, in the
Participation Agreement and the Certificates, and the prompt payment of any and
all amounts from time to time owing under the Participation Agreement by the
Owner Trustee, the Owner Participant or the Lessee to the Holders and for the
uses and purposes and subject to the terms and provisions of the Indenture and
the Certificates, and in consideration of the premises and of the covenants
contained in the Indenture, and of the purchase of the Certificates by the
Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee
at or before the delivery of the Indenture, the receipt of which is hereby
acknowledged, the Owner Trustee has granted, bargained, sold, assigned,
transferred, conveyed, mortgaged, pledged, granted a security interest in, and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge, grant a security interest in, and confirm, unto the Indenture
Trustee, its successors and assigns, in trust for the equal and ratable security
and benefit of the Holders, in the trust created by the Indenture, and subject
to all of the terms, conditions, provisions and limitations set forth in the
Indenture, a first priority security interest in and mortgage lien on all
estate, right, title and interest of the Owner Trustee in, to and under the
following described property:
AIRFRAME
One Airframe identified as follows:
FAA Manufacturer's
Registration Serial
Manufacturer Model Number Number
Canadair CL600-2B19 N___ ____________
together with all appliances, equipment, instruments and accessories (including,
without limitation, radio and radar) from time to time belonging thereto, owned
by the Owner Trustee and installed in or appurtenant to said aircraft.
AIRCRAFT ENGINES
Two aircraft engines, each such engine having 750 or more rated takeoff
horsepower or the equivalent thereof, identified as follows:
Manufacturer's
Serial
Manufacturer Model Number
General Electric CF34-3B1
together with all equipment and accessories belonging thereto, by whomsoever
manufactured, owned by the Owner Trustee and installed in or appurtenant to such
aircraft engines.
Together with all substitutions, replacements and renewals of the
property described above, and all property owned by the Owner Trustee which
shall hereafter become physically attached to or incorporated in the property
described above, whether the same are now owned by the Owner Trustee or shall
hereafter be acquired by it.
As further security for the obligations referred to above and secured
by the Indenture and hereby, the Owner Trustee has granted, bargained, sold,
assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does
hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and
confirm, unto the Indenture Trustee, its successors and assigns, for the
security and benefit of the Holders, in the trust created by the Indenture, and
subject to all of the terms, conditions, provisions and limitations set forth in
the Indenture, all of the estate, right, title and interest of the Owner Trustee
in, to and under the Lease Supplement (other than Excepted Payments, if any)
covering the property described above.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Indenture Trustee, its successors and assigns, for the benefit and security of
the Holders for the uses and purposes and subject to the terms and provisions
set forth in the Indenture.
This Supplement shall be construed as supplemental to the Indenture and
shall form a part thereof, and the Indenture is hereby incorporated by reference
herein and is hereby ratified, approved and confirmed.
This Supplement is being delivered in the State of New York.
AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft
(including Engines) referred to in this Supplement and the aforesaid Lease
Supplement has been delivered to the Owner Trustee and is included in the
property of the Owner Trustee and covered by all the terms and conditions of the
Trust Agreement, subject to the Lien of the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Indenture
Supplement No. 1 to be duly executed as of the date first written above by one
of its officers thereunto duly authorized.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not
in its individual capacity,
except as specifically set
forth herein, but solely as
Owner Trustee
By
Name:
Title:
<PAGE>
Exhibit B
to
Trust Indenture and
Security Agreement
[Form of Certificate]
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT
No. _________ $____________
EQUIPMENT TRUST CERTIFICATE
(Atlantic Coast Airlines Trust No. __________)
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity but solely as
OWNER TRUSTEE UNDER TRUST AGREEMENT
(Atlantic Coast Airlines Trust No. __________)
dated as of September __, 1997
SERIES _____
Interest Rate Maturity
___% ____________, 2___
State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity but
solely as Owner Trustee (herein in such capacity called the "Owner Trustee")
under that certain Trust Agreement (Atlantic Coast Airlines Trust No. _________)
dated as of September __, 1997, between the Owner Participant named therein and
State Street Bank and Trust Company of Connecticut, National Association (herein
as such Trust Agreement may be amended or supplemented from time to time called
the "Trust Agreement"), hereby promises to pay to The First National Bank of
Maryland, as Subordination Agent, or its registered assigns, the principal sum
of ______________________ ________________ Dollars, payable as set forth below
for the Maturity specified above, in such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts, and to pay interest on the principal outstanding from
time to time, semiannually on each January 1 and July 1, on such principal sum
in like coin or currency at the rate per annum set forth above from the January
1 or the July 1, as the case may be, next preceding the date of this Certificate
to which interest on the Certificates has been paid or duly provided for, unless
the date hereof is a date to which interest on the Certificates has been paid or
duly provided for, in which case from the date of this Certificate.
Notwithstanding the foregoing, if the date hereof is after any January 1 or July
1 and before the following January 1 or July 1, as the case may be, this
Certificate shall bear interest from such January 1 or July 1; provided that, if
the Owner Trustee shall default in the payment of interest due on such January 1
or July 1, then this Certificate shall bear interest from the next preceding
January 1 or July 1 to which interest on this Certificate has been paid or duly
provided for. The interest so payable on any January 1 or July 1 will, except as
otherwise provided in the Indenture referred to below, be paid to the person in
whose name this Certificate is registered at the close of business on the
December 15 or June 15 preceding such January 1 or July 1, whether or not such
day is a Business Day.
This Certificate shall bear interest at the Past Due Rate on any
principal hereof and on any other amount payable hereunder or under the
Indenture which shall not be paid in full when due (whether at stated maturity,
by acceleration, by mandatory prepayment or otherwise), for the period from and
including the date thereof to but excluding the date the same is paid in full,
payable from time to time on demand of the Indenture Trustee.
Principal and interest and other amounts due hereunder shall be payable
at the office or agency of The First National Bank of Maryland (the "Indenture
Trustee") maintained for such purpose in immediately available funds prior to
10:30 A.M. (New York time) on the due date thereof and the Indenture Trustee
shall remit all such amounts received by it to the Holders at such account or
accounts at such financial institution or institutions as the Holders shall have
designated to the Indenture Trustee in writing, in immediately available funds,
such payment to be made if the payment was received prior to 10:30 A.M. New York
time by the Indenture Trustee on any Business Day, by 12:00 noon New York time
on such Business Day; otherwise, the Indenture Trustee shall make payment
promptly, but not later than 11:00 A.M. New York time on the next succeeding
Business Day; provided that, at the option of the Indenture Trustee or its
Paying Agent, interest may be paid by mailing a check therefor payable to or
upon the written order of the registered holder entitled thereto at his last
address as it appears on the Register. If any amount payable under this
Certificate, or under the Indenture, falls due on a day that is not a Business
Day, then such sum shall be payable on the next succeeding Business Day, without
(provided that payment is made on such next succeeding Business Day) additional
interest thereon for the period of such extension.
State Street Bank and Trust Company of Connecticut, National
Association, and The First National Bank of Maryland are not acting individually
hereunder, but solely as Owner Trustee and Indenture Trustee, respectively.
Any Person, other than the Subordination Agent, any Pass-Through
Trustee and any pass-through trustee in respect of pass-through certificates, if
any, issued in accordance with Section 15.01 of the Participation Agreement, who
is acquiring the Certificates will be deemed to represent and warrant that (i)
no assets of an employee benefit plan subject to Title I of ERISA or an
individual retirement account or plan subject to Section 4975 of the Code, or
any trust established under any such plan or account, have been used to acquire
or hold any of the Certificates, or (ii) that one or more administrative or
statutory exemptions from the prohibited transaction rules under Section 406 of
ERISA and Section 4975 of the Code applies to its purchase and holding of the
Certificates such that its purchase and holding of the Certificates will not
result in a non-exempt prohibited transaction under Section 406 of ERISA and
Section 4975 of the Code.
This Certificate is one of a duly authorized issue of Certificates
issued and to be issued under the Trust Indenture and Security Agreement
(Atlantic Coast Airlines Trust No. _________) dated as of September 26, 1997
(herein as amended, supplemented or modified from time to time called the
"Indenture") between the Owner Trustee and the Indenture Trustee, designated as
Equipment Trust Certificates (Atlantic Coast Airlines Trust No. ________)
limited in aggregate initial principal amount to $_______________ consisting of
the following aggregate principal amounts of Certificates with the interest
rates per annum and Maturities shown:
Initial
Aggregate
Principal
Series Maturity Amount Interest Rate
A
B
C
D
Reference is made to the Indenture and all supplements and amendments
thereto (a copy of which is on file with the Indenture Trustee at its principal
corporate trust office) for a more complete statement of the terms and
provisions thereof, including a statement of the properties conveyed, pledged
and assigned thereby, the nature and extent of the security, the respective
rights of the Owner Trustee, the Owner Participant, the Lessee, the Indenture
Trustee and the Holders, and the terms upon which the Certificates are, and are
to be, executed and delivered, to all of which terms and conditions in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.
Capitalized terms not otherwise defined herein shall have the meanings
given to them in the Indenture.
The principal amounts of the Certificates are payable as set forth in
Schedule I attached hereto, which schedule is subject to amendment as provided
in Section 2.18 of the Indenture. The Certificates are subject to redemption in
part, pro rata (based on the face amount thereof), in each case through
mandatory sinking fund redemptions providing for the redemption on the Sinking
Fund Redemption Dates of the aggregate principal amounts set forth below,
together with interest accrued thereon to the applicable Sinking Fund Redemption
Date, but without Make-Whole Premium.
Except as expressly provided in the Indenture, all payments of
principal, Make-Whole Premium, if any, and interest and other amounts to be made
to the Holder hereof by or at the behest of the Owner Trustee hereunder or under
the Indenture shall be made only from the income and proceeds from the Lessor's
Estate to the extent included in the Trust Indenture Estate and only to the
extent that the Owner Trustee shall have sufficient income or proceeds from the
Lessor's Estate to the extent included in the Trust Indenture Estate to enable
the Indenture Trustee to make such distributions in accordance with the terms of
the Indenture; provided that under the Lease, the Lessee is obligated to pay or
cause to be paid, to the extent such payments are not required to be made from
the assets subject to the Lien of this Indenture or the income and proceeds
received by the Indenture Trustee therefrom, any net loss arising from the
investment of funds held by the Indenture Trustee which but for an Event of
Default would be payable to Lessee, and each Holder hereof, by its acceptance of
this Certificate, agrees that it will (except as aforesaid) look solely to the
income and proceeds from the Trust Indenture Estate to the extent available for
distribution to the Holder hereof as provided above and that neither the Owner
Participant, nor the Owner Trustee, nor State Street Bank and Trust Company of
Connecticut, National Association, nor the Indenture Trustee is personally
liable to the Holder hereof for any amounts payable or any liability under this
Certificate or under the Indenture, except as expressly provided in the
Indenture, in the case of State Street Bank and Trust Company of Connecticut,
National Association, the Owner Trustee and the Indenture Trustee.
The Certificates are subject to prepayment in the following
circumstances at the price determined as set forth below.
(i) If an Event of Loss occurs with respect to the Airframe or with
respect to the Airframe and the Engines or engines then installed on the
Airframe (unless pursuant to Section 11(a)(1) of the Lease and Section 9.08 of
the Indenture replacement equipment is substituted therefor).
(ii) If the Lessee, pursuant to Section 16 of the Lease, gives notice
of purchase of the Aircraft (and the Lessee shall not have revoked such notice
or effected an assumption of the Certificates as provided in Section 2.12 of the
Indenture).
(iii) If the Owner Participant, or the Owner Trustee on behalf of the
Owner Participant, gives notice of prepayment to the Indenture Trustee pursuant
to Section 8.02 of the Indenture.
(iv) If the Lessee, pursuant to Section 3(g) of the Lease, gives notice
of a voluntary termination for obsolescence or surplus, but subject to Section
6.02(c) of Indenture.
(v) Pursuant to Section 15.01 of the Participation Agreement in
connection with a Refinancing of the Certificates.
(vi) As contemplated by Section 2.16 of the Indenture and Section
3.05(b) of the Participation Agreement if the Delivery Date has not occurred on
or prior to the Cut-Off Date.
(vii) At the option of the Owner Trustee with the prior written consent
of the Lessee and the Owner Participant upon not less than 25 days' prior
written notice.
(viii) If a Triggering Event (as defined in the Intercreditor
Agreement) occurs prior to the earliest of (A) the Delivery Date, (B) the date
the obligations of the Owner Trustee under the Certificates are assumed by the
Lessee pursuant to Section 3.05(a) of the Participation Agreement and (iii) the
Cut-Off Date.
In the case of a prepayment of the Certificates pursuant to clauses
(ii), (iv) and (v) above, the Lessee, in accordance with and subject to the
terms (including timing of notice) of Section 3(g) or Section 16 of the Lease or
Article 15 of the Participation Agreement, as the case may be, shall give
irrevocable (subject to Section 6.02(c) of the Indenture) written notice to the
Owner Trustee and the Indenture Trustee and to the Holders of all of the
Certificates specifying the Business Day on which the Owner Trustee is directed
to prepay the Certificates. In the case of a prepayment pursuant to clause (i)
above, the Certificates shall be prepaid on the Loss Payment Date (as defined in
Section 11(a)(2) of the Lease). In the case of a prepayment pursuant to clause
(iii) above, the Certificates shall be prepaid on the date designated in the
notice of prepayment required by Section 8.02 of the Indenture. In the case of a
prepayment of the Certificates pursuant to clauses (ii) and (iv) above, the
Certificates shall be prepaid in full on the Termination Date. In the case of a
prepayment of the Certificates pursuant to clause (v) above, the Certificates
shall be prepaid on the effective date of the Refinancing. In the case of a
prepayment of the Certificates pursuant to clause (vi) above, the Certificates
shall be prepaid on the 15th day following the Cut-Off Date. In the case of a
prepayment of the Certificates pursuant to clause (vii) above, the Certificates
shall be prepaid on the date designated in the notice referred to therein. In
the case of a prepayment of the Certificates pursuant to Section 6.02(a)(viii)
above, the Certificates shall be prepaid on the Special Distribution Date (as
defined in the Intercreditor Agreement) as provided in Section 2.4(b)(ii) of the
Intercreditor Agreement. The day on which the Certificates are to be prepaid is
herein referred to as the "Prepayment Date". On or prior to the Prepayment Date,
immediately available funds shall be deposited with the Indenture Trustee in an
amount in respect of the Certificates equal to:
(1) if such prepayment is made pursuant to clause (i), (iii)
(if clause (i), but not clause (ii) or clause (iii) of the first
sentence of Section 8.02(a) of the Indenture is applicable and such
prepayment is made when an Event of Default has occurred and been
continuing for 180 days or more or if clause (ii) or clause (iii) of
the first sentence of Section 8.02(a) hereof is applicable), (vi) or
(viii) above, the sum of (A) the aggregate principal amount of such
Certificates then Outstanding, (B) accrued interest on the Certificates
to the Prepayment Date and (C) all other aggregate sums due the
Indenture Trustee under the Indenture or under the Participation
Agreement or the Lease, but excluding any Make-Whole Premium or other
premium or penalty, or
(2) if such prepayment is made pursuant to clause (ii), (iii)
(if clause (i), but not clause (ii) or clause (iii) of the first
sentence of Section 8.02(a) of the Indenture is applicable and such
prepayment is made when an Event of Default has occurred and been
continuing for less than 180 days), (iv), (v) or (vii) above, the sum
of the amounts specified in clauses (A), (B) and (C) of the preceding
clause (1) plus any Make-Whole Premium payable in respect of all
Certificates
(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").
If, in accordance with and subject to the satisfaction of the
conditions set forth in Section 7.11 of the Participation Agreement, the Lessee
shall assume all of the obligations of the Owner Trustee hereunder, under the
Certificates and all other Operative Agreements, the Owner Participant and the
Owner Trustee shall (except for prior acts) be released and discharged from any
further obligations hereunder and under the Certificates and all other Operative
Agreements (except any obligations that have accrued prior to such assumption).
If an Indenture Event of Default under the Indenture shall occur and be
continuing, the principal of the Certificates may be declared due and payable in
the manner and with the effect provided in the Indenture. The Indenture provides
that in certain events such declaration and its consequences may be waived by
the Majority in Interest of Holders. Any such consent or waiver shall be
conclusive and binding upon the Holder of this Certificate and upon all future
Holders and owners of this Certificate and any Certificate that may be issued in
exchange or substitution therefor, whether or not any notation thereof is made
upon this Certificate or such other Certificates. Moreover, if, and only if, an
Event of Default shall occur, the Indenture Trustee may declare the Lease to be
in default, and may, to the exclusion of the Owner Trustee, exercise one or more
of the remedies of the Owner Trustee provided in the Lease.
The Owner Trustee or the Owner Participant may cure a default by the
Lessee under the Lease arising from the failure of the Lessee to make any Basic
Rent payments under the Lease, but the Owner Trustee and the Owner Participant,
collectively, may not cure more than three consecutive such failures or more
than six such failures in total. The Owner Trustee or the Owner Participant may
cure any other default by the Lessee in the performance of its obligations under
the Lease, provided that such default can be cured by the payment of money.
If (A) an Event of Default shall have occurred and be continuing or (B)
the Indenture Trustee shall have taken action, or notified the Owner Participant
that it intends to take action, to foreclose the Lien of the Indenture or
otherwise commence the exercise of any significant remedy under Section 7.02 of
the Indenture or Section 15 of the Lease, or (C) the Certificates shall have
been accelerated, the Owner Participant (or the Owner Trustee on behalf of the
Owner Participant) may:
(1) direct the Owner Trustee to cause the prepayment of all
the Outstanding Certificates by notifying the Indenture Trustee of such election
and depositing the sum of amounts contemplated by paragraph "first" under
Section 5.03 of the Indenture and the aggregate Prepayment Price of all such
Certificates with the Indenture Trustee for distribution to the Holders; or
(2) purchase all of the Outstanding Certificates by paying to
the Indenture Trustee an amount equal to the aggregate unpaid principal amount
of all Outstanding Certificates, plus accrued interest on such amount to the
date of purchase, plus all other sums due any Holder or the Indenture Trustee
under the Indenture, the Participation Agreement or the Lease, but without any
Make-Whole Premium (provided that the Make-Whole Premium shall be included if
such purchase is made pursuant to clause (i) of Section 8.02(a) of the Indenture
(but not pursuant to clause (ii) or clause (iii) of Section 8.02(a) of the
Indenture) when the Event of Default shall have occurred and been continuing for
less than 180 days).
The right of the Holder hereof to institute an action for any remedy
under the Indenture is subject to certain restrictions specified in the
Indenture, except that the right of the Holder of this Certificate to receive
payment of the principal of and interest and Make-Whole Premium, if any, on this
Certificate on or after the respective due dates, or to institute suit for the
enforcement of any such payment, shall not be impaired or affected without the
consent of such Holder.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $1,000 and integral multiples thereof. So long as
any of the Certificates remain Outstanding, the Indenture Trustee will maintain
an office or agency where the Certificates may be presented for payment and a
facility or agency in New York, New York where the Certificates may be presented
for registration of transfer and for exchange as provided in the Indenture. As
provided in the Indenture and subject to certain limitations therein, this
Certificate is transferable, and upon surrender of this Certificate for
registration of transfer at the principal corporate trust office of the
Indenture Trustee, or at the office or agency maintained for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Indenture Trustee duly executed by,
the Holder or his attorney duly authorized in writing, one or more new
Certificates of the same Series and Maturity and interest rate and of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
As provided in the Indenture and subject to certain limitations
therein, the Certificates are exchangeable for an equal aggregate principal
amount of Certificates of the same Series and Maturity and interest rate and of
authorized denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office of
the Indenture Trustee, or at an office or agency maintained for such purpose.
No service charge shall be levied for any such registration of transfer
or exchange, but the Indenture Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to the due presentment for registration of transfer of this
Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner
Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and
the Lessee shall deem and treat the person in whose name this Certificate is
registered as the absolute owner hereof for all purposes whether or not this
Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee
(nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying
Agent, if any, the Registrar nor the Lessee shall be affected by notice to the
contrary.
The indebtedness evidenced by this Certificate is, to the extent and in
the manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of the Secured Obligations (as defined in
the Indenture) in respect of [Series A Certificates]1, [Series A and Series B
Certificates]2 [Series A, Series B, and Series C Certificates]3 and this
Certificate is issued subject to such provisions. The Holder of this
Certificate, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Indenture Trustee on such Holder's
behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture, and (c) appoints the Indenture
Trustee such Holder's attorney-in-fact for such purpose.*
As provided in the Indenture, the Indenture and the Certificates shall
be construed in accordance with and governed by the laws of the State of New
York.
This Certificate shall not be secured by or be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose unless
authenticated by the Indenture Trustee as evidenced by the manual signature of
one of its authorized officers on the certificate below.
- -------------------------
1To be inserted in the case of a Series B Certificate. 2To be inserted
in the case of a Series C Certificate. 3To be inserted in the case of a
Series D Certificate.
*To be inserted for each Certificate other than any Series A Certificate.
<PAGE>
IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust
Certificate (Atlantic Coast Airlines Trust No. ____________) to be duly executed
in its corporate name by its officer thereunto duly authorized.
Dated: September __, 1997 STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual capacity,
but solely as Owner Trustee
By
Name:
Title:
FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Equipment Trust Certificates (Atlantic Coast Airlines Trust No. _________) referred
to in the within mentioned Indenture.
Dated: September __, 1997 THE FIRST NATIONAL BANK OF MARYLAND, not in its individual
capacity, but solely as Indenture Trustee
By
Name:
Title:
<PAGE>
1
O7853/O59/N670FE/TRUST/trust.agt
Federal Express Corporation Trust No. N67OFE
0156828.07
===================================================================================================================
TRUST AGREEMENT
(ATLANTIC COAST AIRLINES TRUST NO. ____________)
Dated as of September 1, 1997
between
ATLANTIC COAST AIRLINES,
Trustor
and
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION,
Owner Trustee
COVERING ONE CANADAIR REGIONAL JET, SERIES 200 ER AIRCRAFT
SERIAL NO._______, REGISTRATION NO. ___________
===================================================================================================================
<PAGE>
16
TRUST AGREEMENT
(ATLANTIC COAST AIRLINES TRUST NO.__________)
TRUST AGREEMENT (ATLANTIC COAST AIRLINES TRUST NO.____________) dated
as of September 1, 1997 (this "Agreement") between STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in
its individual capacity, "SSB", and not in its individual capacity but solely as
trustee hereunder, the "Owner Trustee"), and ATLANTIC COAST AIRLINES, a
California corporation (together with its successors and permitted assigns, the
"Trustor"). The capitalized terms used herein, unless otherwise herein defined
or the context hereof shall otherwise require, shall have the respective
meanings set forth in Schedule I attached hereto.
W I T N E S S E T H:
WHEREAS, the Trustor desires to create a trust for the purpose of
issuing Certificates, the proceeds of which issuance shall initially be held by
the Indenture Trustee on behalf of the Owner Trustee in the Collateral Account
and released, subject to the proviso to Section 3.02(b) of the Participation
Agreement, on the Delivery Date in order to finance a portion of the Purchase
Price of the Aircraft, to acquire the Aircraft from Seller on the Delivery Date,
to lease the Aircraft to the Lessee on the Delivery Date and to receive the
benefits provided for herein.
WHEREAS, SSB is willing to accept the trust as herein provided and to
perform its obligations hereunder in its individual capacity or as the Owner
Trustee as the case may be.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, SSB and the Trustor agree as follows:
ARTICLE 1
THE LESSOR'S ESTATE
Section 1.01. Authorization and Direction to Owner Trustee. The Trustor
hereby authorizes and directs (or has authorized and directed) the Owner
Trustee, not individually but solely as the Owner Trustee hereunder:
(a) to execute and deliver as and when specified in Sections
4.01 and 4.02 of the Participation Agreement, the Participation
Agreement and each of the other Operative Agreements to which the Owner
Trustee is a party and to enter into and perform the transactions
contemplated thereby including, without limitation, accepting title to,
and delivery of, the Aircraft from Seller on the Delivery Date, and
taking all appropriate action to cause the Airframe to be registered
with the Federal Aviation Administration in the name of the Owner
Trustee;
(b) to execute and deliver from time to time the Certificates
in the manner and subject to the terms and conditions provided in the
Participation Agreement and the Indenture;
(c) to execute and deliver each other document referred to in
the Operative Agreements to which the Owner Trustee is a party or which
the Owner Trustee is required to deliver pursuant to the Operative
Agreements;
(d) subject to the terms of this Agreement, to perform the
obligations and duties and, upon instruction of the Trustor, exercise
the rights of the Owner Trustee under the Operative Agreements; and
(e) to execute and deliver all such other instruments,
documents or certificates and take all such other actions in accordance
with the directions of the Trustor, as the Trustor may deem necessary
or advisable in connection with the Certificate Closing Date and the
Delivery Date and the transactions contemplated hereby, the taking of
any such action by the Owner Trustee in the presence of the Trustor or
its counsel to evidence, conclusively, the direction of the Trustor.
Section 1.02. Declaration of Trust. SSB hereby declares and agrees, in
its individual capacity, that it will, and in its capacity as the Owner Trustee
does, hold the Lessor's Estate upon the trust herein set forth for the use and
benefit of the Trustor, subject, however, to the provisions of, and the Lien
created by, the Indenture. This Agreement is not intended by the Trustor to
create, and the trust created hereby is not intended by the Trustor and the
other parties interested herein to constitute a business trust for purposes of
the Bankruptcy Code.
Section 1.03. Conditions Precedent. The right and obligation of the
Owner Trustee to take the actions required by Section 1.01 hereof shall be
subject to the condition that the terms and conditions of Section 4.01 or 4.02,
as the case may be, of the Participation Agreement shall have been complied with
in a manner satisfactory to the Owner Trustee and the Trustor.
ARTICLE 2
DISTRIBUTIONS
Section 2.01. Predelivery Funding; Rent, Etc. (a) The Trustor and the
Owner Trustee acknowledge that the proceeds from the sale of the Certificates to
be effected on the Certificate Closing Date are to be held by the Indenture
Trustee in the Collateral Account in the manner specified in the Indenture for
application as provided therein and in Section 3.02 of the Participation
Agreement.
(b) The Trustor and the Owner Trustee acknowledge that the
Lease will be security for the Certificates pursuant to the Indenture
which provides that all moneys payable by the Lessee to the Owner
Trustee under the Lease (other than Excepted Payments) are to be first
paid to the Indenture Trustee while the Lien of the Indenture is in
effect, for distribution in accordance with the terms of Article V of
the Indenture. Except for amounts received from the Indenture Trustee,
which shall be applicable only in accordance with clause (iii) below,
the Owner Trustee shall promptly apply each payment of the Rent (other
than Excepted Payments), Stipulated Loss Value, Termination Value, and
any proceeds from the sale, requisition or disposition of the Aircraft
received by it as follows:
(i) prior to the release of the Lien of the
Indenture, each such payment shall be payable directly to the
Indenture Trustee (and if any of the same are received by the
Owner Trustee shall, upon receipt, be paid over to the
Indenture Trustee without deduction, set off or adjustment of
any kind) for distribution in accordance with the provisions
of Article V of the Indenture; provided, that any payments
received by the Owner Trustee from (x) the Lessee with respect
to SSB's or the Owner Trustee's fees and disbursements under
this Agreement, or (y) the Trustor pursuant to Section 5.01
hereof shall not be paid over to the Indenture Trustee but
shall be retained by the Owner Trustee and applied toward the
purpose for which such payments were made;
(ii) after the release of the Lien of the Indenture,
any amount remaining after application in full in accordance
with paragraph (b)(i) of this Section 2.01 and which
represents payments for which provision as to the application
thereof is made in any other Operative Agreement shall be
applied promptly to the purpose for which such payment shall
have been made in accordance with the terms of such Operative
Agreement; and
(iii) after application in accordance with paragraphs (i) and
(ii) of this Section 2.01(b), or to the extent received from
the Indenture Trustee under the terms of the Indenture, the
balance, if any, remaining shall be paid to the Trustor.
Section 2.02. Excepted Payments. Notwithstanding any other provision
contained herein, all Excepted Payments at any time received by the Owner
Trustee shall be distributed promptly to the applicable Person entitled thereto,
and such payment shall not be deemed under any circumstances to be part of the
Lessor's Estate.
Section 2.03. Distributions after Release of Lien of Indenture. Except as otherwise provided in
Sections 2.01 and 2.02 hereof:
(a) all payments received and amounts realized by the Owner
Trustee under the Lease or otherwise with respect to the Aircraft or
any part thereof (including, without limitation, all payments received
pursuant to Section 15(a) of the Lease and amounts realized upon the
sale or lease of the Aircraft or any part thereof after the termination
of the Lease with respect thereto), to the extent received or realized
at any time after the Lien of the Indenture shall have been released
pursuant to the terms of the Indenture, and
(b) moneys not included in paragraph (a) of this Section 2.03
remaining as part of the Lessor's Estate after the Lien of the
Indenture has been released,
shall, to the extent required, be retained by the Owner
Trustee as reimbursement for all expenses hereunder or under the Lease not
theretofore reimbursed under this Agreement, the Lease or otherwise and to
which the Owner Trustee is entitled to be reimbursed pursuant to the
provisions thereof, and any balance remaining thereafter shall be
distributed to the Trustor.
Section 2.04. Manner of Making Distributions. The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Trustor pursuant
to this Article 2 by transferring by wire transfer in immediately available
funds the amount to be distributed to the account set forth in the Participation
Agreement or to such other account or accounts of the Trustor as it may
designate from time to time by written notice to the Owner Trustee (and the
Owner Trustee shall use best efforts to cause such funds to be transferred by
wire transfer on the same day as received, but in any case not later than the
next succeeding Business Day), and (ii) the Indenture Trustee pursuant to this
Article 2 by paying the amount to be distributed to the Indenture Trustee in the
manner specified in the Indenture; provided, that the Owner Trustee shall invest
overnight, for the benefit of the Trustor, in investments that would be
permitted by Section 11(e) of the Lease (but only to the extent funds are
received on or prior to 2:00 P.M. (Eastern Time) and such investments are
available and, if such investments are not available to the Owner Trustee in
investments which, after consultation with the Trustor, the Trustor shall
direct) all funds not transferred by wire transfer on the same day as they were
received. Notwithstanding the foregoing but subject always to the provisions of,
and the Lien created by, the Indenture, the Owner Trustee will, if so requested
by the Trustor by written notice, pay in immediately available funds any and all
amounts payable by the Owner Trustee hereunder to the Trustor as directed by the
Trustor.
ARTICLE 3
THE OWNER TRUSTEE
Section 3.01. Acceptance of Trust and Duties. SSB accepts the trust
hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner
Trustee agrees to perform the same, including without limitation, subject to
Section 1.03 hereof, the actions specified in Section 1.01 hereof as herein
provided. The Owner Trustee agrees to disburse all monies that it receives under
the Operative Agreements in accordance with the terms hereof. The Owner Trustee
shall not be answerable or accountable in its individual capacity except as a
result of or arising from (a) the Owner Trustee's willful misconduct or gross
negligence (in its individual capacity or as trustee), (b) any breach by the
Owner Trustee of its representations, warranties and covenants given in its
individual capacity in this Agreement, Section 6 of the Lease, and Sections
7.02(a) and (b) and 7.04 of the Participation Agreement or its representations,
warranties and covenants given in its individual capacity in Sections 3.05 and
3.08 of the Indenture, (c) the failure to use ordinary care in receiving,
handling and disbursing funds, (d) Lessor's Liens attributable to it in its
individual capacity, and (e) taxes, fees, or other charges on, based on, or
measured by, any fees, commissions or compensation received by SSB or the Owner
Trustee in connection with the transactions contemplated by the Lease, the
Indenture and the Operative Agreements including this Agreement.
Section 3.02. Limitation on Authority of Owner Trustee. The Owner
Trustee shall have no power, right, duty or authority to, and agrees that it
will not, manage, control, possess, use, sell, lease, dispose of or otherwise
deal with the Aircraft, Airframe, Engines, any Part thereof or any other
property at any time constituting a part of the Lessor's Estate, or otherwise to
take or refrain from taking any action under or in connection with the Operative
Agreements, except (i) to execute and deliver the Operative Agreements to which
it is a party, (ii) to exercise and carry out or cause to be exercised or
carried out the rights, duties and obligations of the Owner Trustee hereunder
and under the other Operative Agreements, or (iii) as expressly provided in
written instructions from the Trustor given pursuant to Section 3.03 or 3.04
hereof; provided, that nothing in this Section 3.02 shall limit in any manner
the obligations of the Owner Trustee hereunder.
Section 3.03. Notice of Default. In the event that a Responsible
Officer in the Corporate Trust Department of the Owner Trustee shall have actual
knowledge of a Default or an Event of Default, or an Indenture Default or an
Indenture Event of Default, the Owner Trustee shall give or cause to be given to
the Trustor and the Indenture Trustee prompt telephone or facsimile notice,
followed by prompt confirmation thereof by certified mail, postage prepaid (in
any event within two Business Days of the discovery thereof), in accordance with
Article 14 of the Participation Agreement, of such Default, Event of Default,
Indenture Default or Indenture Event of Default. Subject to the terms of Section
3.06(e) hereof and the rights of the Indenture Trustee under the Indenture, the
Owner Trustee shall take such action with respect to such Default, Event of
Default, Indenture Default or Indenture Event of Default as shall be specified
in written instructions from the Trustor; provided that the Owner Trustee shall
have no duty to take any (and shall take no) action whatsoever in the absence of
written instructions from the Trustor. For all purposes of this Agreement and
the Lease, in the absence of actual knowledge of a Responsible Officer of the
Owner Trustee, the Owner Trustee shall not be deemed to have knowledge of a
Default, Event of Default, Indenture Default or Indenture Event of Default
unless notified in writing by the Lessee, the Trustor, the Indenture Trustee or
any Certificate Holder.
Section 3.04. Action Upon Instructions. Upon the written instructions
at any time and from time to time of the Trustor, the Owner Trustee will take or
refrain from taking such action, not inconsistent with provisions of the
Indenture, as may be specified in such instructions.
Section 3.05. Certain Duties and Responsibilities of Owner Trustee.
(a)(i) The Owner Trustee undertakes to perform such duties and only such duties
as are specifically set forth herein, and with the degree of care specified in
Section 3.01 hereof, and in accordance with written instructions given by the
Trustor hereunder, and no implied duties, covenants or obligations shall be read
into this Agreement, any such instructions or the Operative Agreements against
the Owner Trustee, and the Owner Trustee agrees that it will not manage,
control, possess, use, sell, lease, dispose of or otherwise deal with the
Aircraft or any part of the Lessor's Estate except as required by the terms of
the Operative Agreements, any such instructions and as otherwise provided
herein; and
(ii) in the absence of bad faith on its part, the
Owner Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Owner
Trustee and conforming to the requirements of this Agreement
or the other Operative Agreements, but in the case of any such
certificates or opinions which by any provisions hereof or
thereof are specifically required to be furnished to the Owner
Trustee, the Owner Trustee shall be under a duty to examine
the same to determine whether or not they conform to the
requirements of this Trust Agreement or the Operative
Agreements.
(b) No provision hereof shall require SSB in its individual
capacity 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. Notwithstanding the foregoing, SSB agrees in its
individual capacity that it will, at its own cost and expense, promptly
take such action as may be necessary to discharge duly all Lessor's
Liens attributable to it in its individual capacity and will claim no
indemnity therefor hereunder, or under the Participation Agreement or
any Operative Agreement.
(c) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to the Owner Trustee shall be
subject to the provisions of this Section 3.05, except that in the
event of a conflict between this Section 3.05 and Section 3.01 hereof,
Section 3.01 hereof shall be controlling.
(d) The Owner Trustee will furnish to the Trustor, promptly
upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other
instruments furnished to the Owner Trustee hereunder or under the other
Operative Agreements (including those furnished to the Indenture
Trustee pursuant to the terms of the Indenture) and not otherwise
furnished to the Trustor.
(e) Notwithstanding anything herein to the contrary, the Owner
Trustee shall not be authorized and shall have no power to "vary the
investment" of the Trustor within the meaning of Treasury Regulations
Section 301.7701-4(c)(1), it being understood that the Owner Trustee
shall have the power and authority to fulfill its obligations under
Section 2.06 hereof and Section 11(e) of the Lease.
Section 3.06. Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof:
(a) in the absence of bad faith on its part, the Owner Trustee
may rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order or other paper or
document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction or authorization by the Trustor or
any other party to any other Operative Agreement shall be sufficiently
evidenced by a request, direction or authorization in writing,
delivered to the Owner Trustee, and signed in the name of such party by
any of the Chairman of the Board, the President, any Vice President,
the Treasurer or Assistant Treasurer or the Secretary or Assistant
Secretary or other duly authorized officer of such party; and any
resolution of the Board of Directors or committee thereof of such party
shall be sufficiently evidenced by a copy of such resolution certified
by the Secretary or an Assistant Secretary of such party, to have been
duly adopted and to be in full force and effect on the date of such
certification, and delivered to the Owner Trustee;
(c) whenever in the administration of this Agreement the Owner
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder or under
any of the other Operative Agreements, the Owner Trustee (unless other
evidence be herein or therein specifically prescribed), absent actual
knowledge of a Responsible Officer of the Owner Trustee to the
contrary, may rely in good faith upon a certificate in writing,
delivered to the Owner Trustee and signed by any of the Chairman of the
Board, the President, any Vice President, the Treasurer or Assistant
Treasurer or the Secretary or Assistant Secretary of the Lessee, the
Trustor, or the Indenture Trustee and notice of such need for such
proof or establishment shall be delivered to the Trustor, who may
advise the Owner Trustee in respect of such matter and the Owner
Trustee shall act in conformity with such advice;
(d) the Owner Trustee may exercise its powers and perform its
duties by or through such attorneys, agents and servants as it shall
appoint with due care, and it shall be entitled to rely upon the advice
of counsel reasonably selected by it with due care and shall be
protected by the advice of such counsel in anything done or omitted to
be done in accordance with such advice;
(e) the Owner Trustee shall not be under any obligation to
take any action under this Agreement or under any of the other
Operative Agreements at the request or direction of the Trustor unless
the Persons making such request or direction shall have offered to the
Owner Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance
with such request or direction; nor shall the Owner Trustee be required
to take any action deemed to impose on the Owner Trustee any obligation
to take any action, if the Owner Trustee shall have been advised by its
counsel that such action is unlawful or is contrary to the terms of
this Agreement or the other Operative Agreements;
(f) the Owner 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 or other paper or document unless a
Responsible Officer of the Owner Trustee has actual knowledge that the
facts or matters stated therein are false or inaccurate, but the Owner
Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Owner Trustee shall determine to make such further inquiry or
investigation, it shall be entitled, to the same extent permitted to
the Lessor under the Lease, to examine the books and records of the
Lessee to reasonably determine whether the Lessee is in compliance with
the terms and conditions of the Lease and to examine the Aircraft,
Airframe, Engines or any Part thereof personally or by agent or
attorney; and
(g) without limiting the generality of Section 3.05 hereof,
except as otherwise provided in written instructions given to the Owner
Trustee by the Trustor or as otherwise provided in the Indenture or the
Participation Agreement, the Owner Trustee shall not have any duty (i)
to see to any recording or filing of the Lease or of this Agreement or
any financing statement or other notice or document relating thereto or
contemplated under the Operative Agreements or to see to the
maintenance of any such recording or filing (other than FAA reporting
requirements contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to
see to any insurance on the Aircraft or any part thereof or to effect
or maintain any such insurance, whether or not the Lessee shall be in
default with respect thereto, other than to forward to the Trustor and
(to the extent provided in the Indenture) the Indenture Trustee copies
of all certificates, reports and other written information which it
receives from the Lessee pursuant to the Lease, (iii) to see to the
payment or discharge of any tax, assessment or other governmental
charges or any Lien (except any Lessor's Lien attributable to it in its
individual capacity) owing with respect to, or assessed or levied
against any part of the Lessor's Estate, (iv) to confirm or verify any
financial statements or reports of the Lessee, or (v) to inspect the
Aircraft at any time or ascertain or inquire as to the performance or
observance of any of the Lessee's covenants under the Lease.
Section 3.07. No Representations or Warranties as to Certain Matters.
NEITHER THE OWNER TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS,
VALUE, CONDITION, WORKMANSHIP, DESIGN, COMPLIANCE WITH SPECIFICATIONS,
CONSTRUCTION, OPERATION, MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR
PURPOSE OF THE AIRCRAFT, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER
OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT,
TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS
OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that SSB
represents and warrants that on the Delivery Date the Owner Trustee shall have
received whatever right, title and interests in, to and under the Aircraft that
were conveyed to it by the Seller and SSB represents, warrants and covenants
that at all times on and after the Delivery Date the Aircraft shall be free of
all Lessor's Liens attributable to it, and that the Owner Trustee shall comply
with the last sentence of Section 3.05(b) hereof, or (b) any representation or
warranty as to the validity, legality or enforceability of this Agreement or any
other Operative Agreement to which the Owner Trustee is a party, or any other
document or instrument, or as to the correctness of any statement contained in
any thereof, except to the extent that any such representation, warranty or
statement is expressly made herein or therein as a representation or warranty by
the Owner Trustee or SSB and except that SSB hereby represents and warrants that
this Agreement has been, and (assuming the due authorization, execution and
delivery of this Agreement by the Trustor) the other Operative Agreements to
which the Owner Trustee is a party have been (or at the time of execution and
delivery of any such instrument by the Owner Trustee hereunder or pursuant to
the terms of the Participation Agreement that such an instrument will be) duly
executed and delivered by one of its officers who is or will be, as the case may
be, duly authorized to execute and deliver such instruments on behalf of the
Owner Trustee and that this Agreement has been duly authorized, executed and
delivered by SSB and (assuming due authorization, execution and delivery of this
Trust Agreement by the Trustor) constitutes the legal, valid and binding
obligation of SSB enforceable against it in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity.
Section 3.08. Status of Moneys Received. All moneys received by the
Owner Trustee under or pursuant to any provision of this Agreement or any
Operative Agreement shall constitute trust funds for the purpose for which they
were paid or are held, but need not be segregated in any manner from any other
moneys except to the extent required by law and may be deposited by the Owner
Trustee under such conditions as may be prescribed or permitted by law for trust
funds, or may be invested in direct obligations of the United States.
Section 3.09. Self-Dealing. The Owner Trustee in its individual
capacity, or any corporation in or with which the Owner Trustee may be
interested or affiliated, or any officer or director of any such corporation,
may have normal commercial relations, and otherwise deal, in the ordinary course
of business, with the Lessee or any other corporation having relations with the
Lessee to the full extent permitted by law.
Section 3.10. Definition of a Responsible Officer. For purposes of this
Trust Agreement only, "Responsible Officer" when used with respect to the Owner
Trustee means the Chairman or the Vice-Chairman of the Board of Directors, the
Chairman or Vice-Chairman of the Executive Committee of the Board of Directors,
the President, any Vice President (whether or not designated by a number or a
word or words added before or after the title "Vice President"), the Secretary,
any Assistant Secretary, or any other officer in the Corporate Trust Department
of SSB customarily performing functions similar to those performed by any of the
above designated officers.
Section 3.11. Resignation or Removal of Owner Trustee. The Owner
Trustee or any successor thereof (a) shall resign if required to do so pursuant
to Section 7.02(b) of the Participation Agreement and (b) may resign at any time
without cause by giving at least 60 days' prior written notice to the Trustor
and the Indenture Trustee, such resignation in each case to be effective only
upon the appointment of a successor trustee and the acceptance of such
appointment by such successor. In addition, the Trustor may at any time remove
the Owner Trustee without cause by an instrument in writing delivered to the
Owner Trustee and the Indenture Trustee, such removal to be effective only upon
the appointment by the Trustor of a successor Owner Trustee and the acceptance
of such appointment by such successor. Upon the giving of notice of resignation
or removal of the Owner Trustee, the Trustor may appoint a successor Owner
Trustee by an instrument signed by the Trustor. If the Trustor shall not have so
appointed a successor Owner Trustee within 30 days after such resignation or
removal, the Owner Trustee, the Indenture Trustee or the Trustor may apply to
any court of competent jurisdiction to appoint a successor Owner Trustee to act
until such time, if any, as a successor or successors shall have been appointed
by the Trustor as above provided. Any successor Owner Trustee so appointed by a
court shall be superseded by any successor Owner Trustee subsequently appointed
by the Trustor.
The appointment of any successor Owner Trustee shall be subject to the
conditions set forth in Section 11.01 of the Participation Agreement.
Section 3.12. Estate and Rights of Successor Owner Trustee. Any
successor Owner Trustee, however appointed, shall execute and deliver to the
predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee,
an instrument accepting such appointment, in form and substance acceptable to
the predecessor Owner Trustee and the Trustor and thereupon each successor Owner
Trustee, without further act, shall become vested with all the estates,
properties, rights, powers, duties and trust of the predecessor Owner Trustee in
the trust hereunder with like effect as if originally named as an Owner Trustee
herein, but nevertheless upon the written request of such successor Owner
Trustee, such predecessor Owner Trustee shall execute and deliver an instrument
transferring to such successor Owner Trustee, upon the trust herein expressed,
all estates, properties, rights, powers, duties, property or moneys then held by
such predecessor Owner Trustee upon the trust herein expressed. Upon any such
transfer by a predecessor Owner Trustee, such predecessor Owner Trustee shall
provide the successor Owner Trustee and Trustor an accounting of the Lessor's
Estate and the trust hereunder.
Upon the appointment of any successor Owner Trustee hereunder, the
predecessor Owner Trustee will use its best efforts to cause registration of the
Aircraft included in the Lessor's Estate to be transferred upon the records of
the Aeronautics Authority or other registry where the Aircraft may then be
registered into the name of the successor Owner Trustee and shall otherwise use
its best efforts to comply, or assist the successor Owner Trustee in complying,
with the provisions of Section 11.01 of the Participation Agreement.
Section 3.13. Merger or Consolidation of SSB. Any corporation into
which SSB in its individual capacity may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which SSB shall be a party, or any corporation to which substantially all the
business of the Owner Trustee in its individual capacity may be transferred,
shall, subject to Section 11.01 of the Participation Agreement, be the Owner
Trustee under this Agreement without further act; provided, that such
corporation shall not also be the Indenture Trustee.
Section 3.14. Co-Trustees. At any time, if the Owner Trustee or the
Trustor shall deem it necessary or prudent or desirable in order to conform to
legal requirements of any jurisdiction in which any part of the Lessor's Estate
may at the time be located, the Owner Trustee by an instrument in writing signed
by it, shall appoint one or more Persons approved by the Trustor to act as
co-trustee, or co-trustees, jointly with the Owner Trustee, or separate trustee
or separate trustees (except insofar as local law makes it necessary or prudent
or desirable for any such co-trustee or separate trustee to act alone), of all
or any part of the Lessor's Estate, and to vest in such Person or Persons, in
such capacity, such title to the Lessor's Estate or any part thereof, and such
rights, powers, duties, trusts or obligations as the Trustor may consider
necessary or prudent or desirable. The Owner Trustee shall not be liable for any
act or omission of any co-trustee or separate trustee appointed under this
Section 3.14. No appointment of, or action by, any co-trustee or separate
trustee appointed under this Section 3.14 will relieve the Owner Trustee of any
of its obligations under any Operative Agreement or otherwise affect any of the
terms of the Indenture or adversely affect the interests of the Indenture
Trustee or the Certificate Holders in the Trust Indenture Estate.
Any co-trustee or separate trustee may, at any time by an instrument in
writing, constitute the Owner Trustee its or his attorney-in-fact and agent with
full power and authority to do all acts and things and to exercise all
discretion on its or his behalf and in its or his name subject to the conditions
of this Agreement.
Every additional trustee hereunder shall be a Citizen of the United
States and, to the extent permitted by law, be appointed and act, and the Owner
Trustee and its successors shall act, subject to the following provisions and
conditions:
(A) all powers, duties, obligations and rights conferred upon
the Owner Trustee in respect of the custody, control and management of
monies, the Aircraft or documents authorized to be delivered hereunder
or under the Participation Agreement shall be exercised solely by the
Owner Trustee;
(B) all other rights, powers, duties and obligations conferred
or imposed upon the Owner Trustee shall be conferred or imposed upon
and exercised or performed by the Owner Trustee and such additional
trustee jointly, except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(including the holding of title to the Lessor's Estate) the Owner
Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations shall
be exercised and performed by such additional trustee;
(c) no power given to, or which is provided hereby may be
exercised by, any such additional trustee, except jointly with, or with
the consent in writing of, the Owner Trustee;
(D) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder except as
otherwise provided hereunder; and
(E) the Trustor, at any time, by an instrument in writing may
remove any such additional trustee.
Section 3.15. Interpretation of Agreements. In the event that the Owner
Trustee is unsure as to the application of any provision of this Agreement or
any other Operative Agreement or any other agreement relating to the
transactions contemplated by the Operative Agreements or such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement or any other
Operative Agreement permits any determination by the Owner Trustee or is silent
or incomplete as to the course of action which the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee shall request
in writing sent in accordance with Article 14 of the Participation Agreement
instructions of the Trustor and, to the extent that the Owner Trustee acts in
good faith in accordance with any instructions received from the Trustor, shall
not be liable to any Person; provided, that in the event that no response is
made to the Owner Trustee by the Trustor within 25 Business Days after such
request, the Owner Trustee shall not be liable to any Person for acts taken by
the Owner Trustee in good faith in what it deems to be the best interests of the
Trustor or for any failure to act in any situation described above in this
Section 3.15. The provisions of this Section 3.15 shall not be applicable to the
Owner Trustee's obligations set forth in the last sentence of Section 3.01
hereof.
Section 3.16. Not Acting in Individual Capacity. In carrying out the
trust hereby created, the Owner Trustee will act solely as trustee hereunder and
not in its individual capacity except as expressly provided herein or in the
other Operative Agreements to which it is a party; and all Persons, other than
the Trustor as provided in this Agreement, having any claim against the Owner
Trustee by reason of the transactions contemplated hereby shall look only to the
Lessor's Estate for payment or satisfaction thereof, except to the extent
provided in the last sentence of Section 3.01 hereof.
Section 3.17. Books and Records: Tax Returns. The Owner Trustee shall
be responsible for the keeping of all appropriate books and records relating to
its receipt and disbursement of all moneys under this Agreement or any Operative
Agreement and shall, upon the request of the Trustor or its duly authorized
representative, make available such books and records at its principal trust
office during normal business hours for inspection and copying. The Owner
Trustee agrees to sign and file all returns with respect to Taxes that the
Trustor prepares (or causes to be prepared) and directs the Owner Trustee to
sign and file. The Owner Trustee, upon request, will furnish the Trustor with
all such information as may be reasonably required or necessary from the Owner
Trustee in connection with the preparation of such tax returns and in connection
with any other filing or audit and related litigation obligations. At the
request of the Trustor, and at the expense of the Lessee, the Owner Trustee
shall file an application with the Internal Revenue Service for a taxpayer
identification number with respect to the trust created hereunder and prepare or
cause to be prepared and sign and/or file the Federal fiduciary tax return with
respect to Taxes due and payable by the Trust in connection with the
transactions contemplated hereby or by any other Operative Agreement; provided,
however, that the Owner Trustee shall send a completed copy of each such return
to the Trustor not more than 60 nor less than 30 days prior to the due date of
such return; provided that the Owner Trustee shall have timely received all
necessary information to complete and deliver to the Trustor such return. The
Trustor, upon request, will furnish the Owner Trustee with all such information
as may be required from the Trustor in connection with the preparation of such
income tax returns.
The Owner Trustee shall keep copies of all returns delivered to or filed by it.
ARTICLE 4
TERMINATION OF TRUST
Section 4.01. Termination. This Agreement and the trust created and provided for hereby shall cease
and be terminated in any one of the following events, whichever shall first occur:
(a) The sale or other final disposition by the Owner Trustee
of all of its interest in all property constituting or included in the
Lessor's Estate and, if the Indenture shall then be in effect, the sale
or other disposition by the Indenture Trustee of all of its interest in
all property constituting or included in the Lessor's Estate, and the
final disposition by the Owner Trustee and, if the Indenture shall then
be in effect, the Indenture Trustee, of all moneys or other property or
proceeds constituting part of the Lessor's Estate in accordance with
the terms hereof; or
(b) 21 years less one day from the death of the last survivor
of the descendants of Queen Victoria of England living on the date of
this Agreement; provided, however, that if the Trust shall be or become
valid under applicable law for a period subsequent to 21 years less one
day from the death of the last survivor of the descendants of Queen
Victoria of England living on the date of this Agreement or, without
limiting the generality of the foregoing, if legislation shall become
effective providing for the validity or permitting the effective grant
of such trust for a period, in gross, exceeding the period for which
such trust is hereinabove stated to extend and be valid, then such
trust shall not terminate as provided in the first part of this
sentence but shall extend to and continue in effect until, but only if
such non-termination and extension shall then be valid under applicable
law, such time as the same shall, under applicable law, cease to be
valid.
Section 4.02. Termination at Option of the Trustor. Notwithstanding
Section 4.01 hereof, this Agreement and the trust created hereby shall terminate
and the Trust Estate shall be distributed to the Trustor, and this Agreement
shall be of no further force and effect, upon the election of the Trustor 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
Trustor assuming all the 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 Indenture is discharged under Section 14.01
of the Indenture and the Lease has terminated unless the Trustor shall have
received the prior written consent of the Indenture Trustee to any such
termination in which case such notice may be given while the Lien of the
Indenture is outstanding.
Section 4.03. Distribution of Lessor's Estate upon Termination. Upon
any termination of this trust pursuant to the provisions of Section 4.01 hereof,
the Owner Trustee shall convey the Lessor's Estate (subject to all obligations,
if any, of the Owner Trustee then existing under the Operative Agreements to
which the Owner Trustee is a party) to such purchaser or purchasers or the
Trustor, as the case may be, and for such amount and on such terms as shall be
specified in written instructions from the Trustor delivered to the Owner
Trustee prior to the date of termination; provided, that (i) if at the time of
any termination the Lease remains in force and effect, then the Lessor's Estate
shall be sold as a unit (and not in parcels) and subject to the Lease, and (ii)
in the event such written instructions are not delivered to the Owner Trustee on
or before the date of termination, the Owner Trustee shall transfer title to the
Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting
for all funds which have come into its hands, the Owner Trustee shall be
entitled to receipt of any sums due and owing to the Owner Trustee for expenses
incurred pursuant hereto as set forth in Section 2.05 hereof.
ARTICLE 5
TRANSFER OF BENEFICIAL INTEREST
The Initial Owner Participant may, on the Delivery Date (or, if
earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial
Interest to one or more Persons to enable the Owner Trustee to purchase the
Aircraft pursuant to Section 3.02 of the Participation Agreement.
ARTICLE 6
MISCELLANEOUS
Section 6.01. Indemnification. The Trustor shall assume liability for,
and shall indemnify, protect, save and keep harmless SSB from and against any
and all liabilities, obligations, losses, damages, penalties, taxes, claims,
actions, proceedings, suits, costs (including reasonable attorneys' fees),
expenses and disbursements of any kind and nature whatsoever ("Trust Claims")
imposed on, incurred by or asserted against the Owner Trustee or SSB, as the
case may be (but only to the extent the Owner Trustee or SSB, as the case may
be, is not indemnified by the Lessee for such Trust Claims under any Operative
Document or is not indemnified by any other Person for such Trust Claims, within
a reasonable time after demand therefor), in any way relating to or arising out
of (X) the Trust Estate or any of the properties included therein and (Y) the
administration of the Trust Estate or the action of inaction of the Owner
Trustee hereunder or under the Operative Documents including, but not limited
to, claims under any Environmental Laws; provided, however, that (a) the Trustor
shall not be required to indemnify the Owner Trustee or SSB in the case of (i)
willful misconduct, negligence with respect to handling of funds, gross
negligence or bad faith of the Owner Trustee or SSB, as the case may be, (ii)
the Owner Trustee's or SSB's failure to use ordinary care in the handling of
monies constituting part of the Trust Estate, (iii) Taxes of the Owner Trustee
or SSB, as the case may be, that are based on or measured by the compensation
received by SSB for acting as Owner Trustee hereunder, and (iv) items excluded
from indemnification by the Lessee as, as to the extent, provided in Section
8.01(b)(i)-(xiii) and 9.01(b)(i)-(xii) of the Participation Agreement, and (b)
the Trustor shall not be required to indemnify with respect to Trust Claims
resulting from a breach of the covenants by SSB in Article 3 hereof or Trust
Claims resulting because any representation or warranty of the Owner Trustee or
SSB, as the case may be, contained in any Operative Document proves to be untrue
or inaccurate or the failure by the Owner Trustee or SSB, as the case may be, to
perform or observe any agreements, covenants or conditions to be performed or
observed by it in any of the Operative Documents. None of the foregoing
exclusions shall limit the obligation of the Trustor to indemnify SSB (but SSB
shall still be required to seek indemnification from the Lessee before making a
claim against the Trustor hereunder unless such exclusion is otherwise limited
under Sections 8.01(b) and 9.01(b) of the Participation Agreement), (i) for
actions taken in accordance with written instructions received from the Trustor,
and (ii) to the extent such exclusions are attributable to acts or omissions of
the Trustor. The payor of any indemnity under this Section 5.01 shall be
surrogated to any right of the person indemnified in respect of the matter as to
which such indemnity was paid. The indemnities contained in this Section 6.01
shall survive the termination of this Agreement.
Section 6.02. Limitations on the Trustor's Liability. The Trustor shall
not have any liability for the performance of this Agreement except as expressly
set forth herein.
Section 6.03. Fees; Compensation. Except as provided in Section 3.06(e)
or 6.01 hereof, the Owner Trustee agrees that it shall have no right against the
Trustor or the Trust Estate for any fee as compensation for its services
hereunder.
Section 6.04. Supplements and Amendments. At any time and from time to
time, only upon the written request of the Trustor (a) SSB and the Trustor shall
execute a supplement hereto for the purpose of adding provisions to, or changing
or eliminating provisions of, this Agreement as specified in such request and
(b) the Owner Trustee shall, subject to the provisions of Section 8.01 of the
Indenture, enter into or consent to such written amendment or modification of or
supplement to any of the Operative Agreements as the Trustor and any other
necessary parties may agree to in writing and as may be specified in such
request, or execute and deliver such written waiver of the terms of any of the
Operative Agreements as may be agreed to in writing by the Trustor and as may be
specified in such request; provided, that (i) the Owner Trustee shall not
execute any such supplement, amendment, waiver or modification without the prior
written consent of the Trustor, (ii) if in the reasonable opinion of the Owner
Trustee any document required to be executed by it pursuant to this Section
adversely affects any right or duty of, or immunity or indemnity in favor of,
the Owner Trustee under this Agreement or any other Operative Agreement, the
Owner Trustee may in its discretion decline to execute such document and (iii)
any amendment or supplement to this Agreement shall comply with the provisions
of Section 7.13 of the Participation Agreement. It shall not be necessary that
any request pursuant to this Section specify the particular form of the proposed
document to be executed pursuant to such request, but it shall be sufficient if
such request shall indicate the substance thereof. Promptly after the execution
by SSB or the Owner Trustee of any document pursuant to this Section, the Owner
Trustee shall mail a conformed copy thereof to the Trustor, the Indenture
Trustee and the Lessee, but the failure of the Owner Trustee to mail such
conformed copies shall not impair or affect the validity of such document.
Section 6.05. Nature of Title of Trustor. The Trustor shall not have
any legal title to any part of the Lessor's Estate. No transfer, by operation of
law or otherwise, of the right, title and interest of the Trustor in and to the
Lessor's Estate or the trust hereunder shall operate to terminate this Agreement
or Lessor's Estate.
Section 6.06. Power of Owner Trustee to Convey. Any assignment, sale,
transfer or other conveyance by the Owner Trustee of the interest of the Owner
Trustee in the Operative Agreements or in the Aircraft or any part thereof
pursuant to and in compliance with the terms of this Agreement or the Operative
Agreements shall bind the Trustor and shall be effective to transfer or convey
all right, title and interest of the Owner Trustee in and to the Operative
Agreements or the right, title and interest of the Owner Trustee and the Trustor
in and to the Aircraft or such part thereof. No purchaser or other grantee shall
be required to inquire as to the authorization, necessity, expediency or
regularity of such assignment, sale, transfer or conveyance or as to the
application of any sale or other proceeds with respect thereto by the Owner
Trustee.
Section 6.07. Notices. All notices, demands, declarations and other communications required by this
Agreement shall be given and become effective in the manner prescribed in the Participation Agreement.
Section 6.08. Situs of Trust; Applicable Law; Severability. THIS
AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT, INCLUDING ALL MATTERS OF
VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall
be invalid or unenforceable, the remaining provisions hereof shall continue to
be fully effective; provided, that such remaining provisions do not increase the
obligations or liabilities of the Owner Trustee or the Trustor.
Section 6.09. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their respective successors and permitted assigns, including any
successive holder of the Beneficial Interest, but only to the extent the
Beneficial Interest has been transferred or assigned in accordance with the
limitations of Section 7.03(d) of the Participation Agreement.
Section 6.10. Headings and Table of Contents. The headings of the
Articles and Sections of this Agreement and the Table of Contents are inserted
for convenience only and shall not affect the meaning or construction of any of
the provisions hereof.
Section 6.11. Identification of Trust. This trust may for convenience be referred to as the "Atlantic
Coast Airlines Trust No. _______________."
Section 6.12. Counterparts. This instrument may be executed in any
number of counterparts or upon separate signature pages bound together in
several counterparts, each fully-executed set of which when so executed shall be
deemed to be an original, and such counterparts together shall constitute and be
one and the same instrument.
Section 6.13. Trustor Interest. The Trustor has only a beneficial
interest in any specific property of this Trust. No creditor of the Trustor
shall have any right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the property of this trust (as opposed to
the Trustor's beneficial interest in this trust).
Section 6.14. Performance by the Trustor. Any obligation of the Owner
Trustee hereunder or under any Operative Agreement or other document
contemplated herein may be performed by the Trustor and any such performance
shall not be construed as a revocation of the trust created hereby.
<PAGE>
IN WITNESS WHEREOF, SSB and the Trustor have caused this Agreement to
be duly executed all as of the date first above written.
ATLANTIC COAST AIRLINES
By:
Name: ______________________
Title: _______________________
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
By:
Name: ______________________
Title: _______________________
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.50 (e)
GUARANTY
(Atlantic Coast Airlines Trust No. N__)
dated as of September 30, 1997
of
ATLANTIC COAST AIRLINES, INC.
One Canadair Regional Jet Series 200ER Aircraft
===================================================================================================================
<PAGE>
ii
TABLE OF CONTENTS
Page
1. Guarantee of Obligations.......................................................................................1
(a) Guarantee............................................................................................1
(b) Absolute Guarantee...................................................................................2
(c) Guarantee of Payment and Performance.................................................................3
(d) Waiver...............................................................................................3
(e) Termination..........................................................................................3
2. Rights Limited to Guaranteed Parties...........................................................................4
3. Bankruptcy, etc................................................................................................4
4. Subrogation....................................................................................................4
5. Amendments and Other Actions...................................................................................4
6. Assignment.....................................................................................................4
7. Written Changes Only...........................................................................................5
8. Payments.......................................................................................................5
9. Representations, Warranties, and Covenants.....................................................................5
(a) Organization.........................................................................................5
(b) Authorization; Compliance............................................................................5
(c) Approvals............................................................................................6
(d) Validity of Guaranty.................................................................................6
(e) Litigation...........................................................................................6
(f) Financial Statements.................................................................................6
(g) Tax Assessments......................................................................................6
(h) Annual Reporting.....................................................................................6
(i) ERISA................................................................................................6
10. Consent to Jurisdiction.......................................................................................7
11. Integration; Successors and Assigns...........................................................................7
12. Notices.......................................................................................................7
13. Governing Law.................................................................................................8
14. Costs and Expenses............................................................................................8
15. Performance...................................................................................................8
<PAGE>
8
GUARANTY
(Atlantic Coast Airlines Trust No. N__)
This Guaranty (Atlantic Coast Airlines Trust No. N___) is issued as of
September 30, 1997 by Atlantic Coast Airlines, Inc. (the "Guarantor"), a
Delaware corporation, in favor of the parties listed in Schedule I hereto (the
"Guaranteed Parties").
The terms in this Guaranty have the same meanings and usage as in the
Participation Agreement (Atlantic Coast Airlines Trust No. _______) (the
"Participation Agreement"), dated as of the date of this Guaranty, among the
Guaranteed Parties and Atlantic Coast Airlines (the "Lessee"), a California
corporation.
The Guarantor is the direct or indirect owner of all of the common
stock of the Lessee.
The Guaranteed Parties are unwilling to consummate the transactions
contemplated by the Participation Agreement unless the Guarantor issues this
Guaranty.
The Guarantor therefore agrees as follows:
. 1. Guarantee of Obligations
(a) Guarantee. The Guarantor acknowledges that it is fully aware of the
terms and conditions of the Participation Agreement, the Lease (in the
unexecuted form attached to the Participation Agreement), and the other
Operative Agreements in effect on the date hereof (the "Guaranteed Documents"),
and hereby irrevocably and unconditionally guarantees to the Guaranteed Parties,
as primary obligor and not merely as surety, without offset or deduction, (1)
the Lessee's payment of all its payment obligations under the Guaranteed
Documents when due (including when due by virtue of the declaration of the Lease
to be in default) (the "Financial Obligations"), and (2) the Lessee's
performance of all its other obligations under the Guaranteed Documents (the
"Nonfinancial Obligations") (the Financial Obligations and Nonfinancial
Obligations being the "Obligations").
If the Lessee fails to pay any Financial Obligation within the
applicable grace period after it becomes due and payable, the Guarantor will pay
all Financial Obligations then due and payable, upon first demand of any
Guaranteed Party (such demand to be sent to the Lessee and the Guarantor;
provided, that the failure to make any such demand shall not relieve the
Guarantor of its obligations or liabilities hereunder and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
any Guaranteed Party against the Guarantor).
If the Lessee fails to perform any Nonfinancial Obligation for any
reason when it is required to be performed and any applicable grace period has
expired, the Guarantor will cause such Nonfinancial Obligation to be performed
within five Business Days following any Guaranteed Party's first demand (such
demand to be sent to the Lessee and the Guarantor; provided, that the failure to
make any such demand shall not relieve the Guarantor of its obligations or
liabilities hereunder and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of any Guaranteed Party against the
Guarantor).
(b) Absolute Guarantee. The Guarantor's obligations under this Guaranty
shall be absolute and unconditional, shall remain in full force and effect until
irrevocable payment, performance, or observance in full of all of the
Obligations, and shall not be affected by any action taken or not taken by any
Guaranteed Party, by any lack of prior enforcement or retention of any rights
against the Lessee or the Guarantor, by any illegality, unenforceability, or
invalidity of the Obligations or the Guaranteed Documents, by any other guaranty
or other obligations, or by any other circumstance or condition (whether or not
the Guarantor or the Lessee shall have any knowledge or notice thereof),
including: (1) any termination, amendment, modification, or other change in, or
supplement to, any of the Guaranteed Documents or any other agreement, or to the
Aircraft or any part thereof, or any assignment, mortgage, or transfer thereof,
or any leasing or subleasing of the Aircraft, or any furnishing or acceptance of
additional security, or release of any security, for the obligations of the
Lessee under the Guaranteed Documents, or the failure of any security or any
failure to perfect any interest in any collateral given by the Lessee under the
Guaranteed Documents; (2) any failure, omission, or delay on the part of any
Person to conform or comply with any term of any Guaranteed Document or any
other agreement, including failure to give notice to the Guarantor of the
occurrence of a Default; (3) any waiver of the payment, performance, or
observance of any of the obligations, conditions, covenants, or agreements
contained in any Guaranteed Document or any other agreement or any other waiver,
consent, extension, indulgence, compromise, settlement, release, or other action
or inaction under or in respect of any Guaranteed Document, or any exercise or
nonexercise of any right or remedy under any Guaranteed Document or any
obligation or liability of the Lessee or any Guaranteed Party, or any exercise
or nonexercise of any right, remedy, power, or privilege under or in respect of
any Guaranteed Document or any such obligation or liability; (4) any extension
of time for payment or performance of any Obligation; (5) the exchange,
modification, substitution, or surrender of any collateral; (6) any failure,
omission, or delay on the part of any Guaranteed Party to enforce, assert, or
exercise any right, power, or remedy conferred on it in connection with any
Guaranteed Document, or any other action on the part of any Guaranteed Party;
(7) any voluntary or involuntary bankruptcy, insolvency, assignment for the
benefit of creditors, receivership, conservatorship, custodianship, liquidation,
marshalling of assets and liabilities, or similar proceeding with respect to the
Lessee, the Guarantor, or any other Person or any of their respective properties
or creditors, or the disaffirmance in whole or in part of any of the Guaranteed
Documents in any such proceeding, or any action taken by any trustee or receiver
or by any court in any such proceeding; (8) any limitation on the Lessee's
liability or obligations (or the liabilities and obligations of any other
Person) or any discharge, termination, cancellation, frustration, irregularity,
invalidity, or unenforceability, in whole or in part, of any of the Guaranteed
Documents or any other agreement; (9) any defect in the title, compliance with
specifications, condition, design, operation, or fitness for use of the
Aircraft, or any damage to or loss or destruction of the Aircraft, or any
interruption or cessation of the use of the Aircraft for any reason (including
any force majeure and any act of a governmental or military authority); (10) any
merger or consolidation of the Lessee or the Guarantor into or with any other
corporation, or any sale, lease, or other transfer of any of the assets of the
Lessee or the Guarantor to any other Person or any change in the ownership of
the Guarantor or in the control of any such owner; (11) to the extent permitted
by law, any release or discharge, by operation of law, of the Guarantor from the
performance or observance of any obligation, covenant, or agreement contained in
this Guaranty; and (12) any other condition or circumstance which might
otherwise constitute a legal or equitable discharge, release, or defense of a
surety or guarantor, or which might otherwise limit recourse against the
Guarantor, including any discharge, release, defense, or limitation arising out
of any laws of the United States of America or any state thereof or any other
governmental entity having authority thereover which would exempt, modify, or
delay the due or punctual payment and performance of the obligations of the
Guarantor hereunder (it being agreed that the obligations of the Guarantor
hereunder shall not be discharged except by payment or performance). No failure
or delay in exercising any right under this Guaranty shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right of any
Guaranteed Party under this Guaranty or the Guaranteed Documents.
(c) Guarantee of Payment and Performance. This Guaranty is a guarantee
of payment and performance and not merely of collection, and the Guarantor
waives any right to require that any action against the Lessee or any other
Person or any collateral or security be taken or exhausted before action is
taken against the Guarantor. No Guaranteed Party shall be required (1) to file
suit or to proceed to obtain or assert a claim against the Lessee for the
Obligations, (2) to make any effort at collection of the Obligations from the
Lessee, (3) to foreclose against or seek to realize upon any present or future
security for the Obligations, (4) to file suit or to proceed to obtain or assert
a claim for personal judgment against any other Person liable for the
Obligations, or to make any effort at collecting the Obligations from any such
other Person, or to exercise or assert any other right or remedy to which any
Guaranteed Party is or becomes entitled in connection with the Obligations or
any security or other guarantee therefor, or (5) to assert or to file any claim
against the assets of the Lessee or any other guarantor or any other Person
liable for the Obligations, or any part thereof, either before or as a condition
to enforcing the Guarantor's liability under this Guaranty or to require the
Guarantor to pay or perform the Obligations at any time thereafter.
(d) Waiver. Except as otherwise expressly provided in this Guaranty or
any other Operative Agreement, the Guarantor hereby waives diligence,
presentment, demand, protest, and notice of any kind whatsoever with respect to
this Guaranty or the Obligations, including (1) notice of acceptance of this
Guaranty, notice of nonpayment or nonperformance of any of the Obligations, and
notice of a Default; (2) any requirement to exhaust any remedies exercisable
upon a default under any Guaranteed Document or other agreement; (3) any notice
of any sale, transfer, or other disposition of any right or title to or interest
in the Aircraft or any part thereof; and (4) any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge, release, or
defense of a guarantor or surety or which might otherwise limit recourse against
the Guarantor.
(e) Termination. The Guarantor's obligations under this ss. 1 shall
terminate (subject to reinstatement under ss. 3 hereof) when the Obligations
have been irrevocably paid and performed in full.
2. Rights Limited to Guaranteed Parties. This Guaranty shall not create
any right in any Person except the Guaranteed Parties (and their permitted
successors and assigns), and shall not be construed in any respect to be a
contract in whole or in part for the benefit of any other Person.
If at any time all or any part of any payment or performance theretofore
applied to any of the Obligations is or must be rescinded or returned for any
reason whatsoever (including the bankruptcy, insolvency, or reorganization of
the Lessee), such Obligations shall, for purposes of this Guaranty, to the
extent rescinded or returned, be deemed to have continued in existence,
notwithstanding such application by any Guaranteed Party, and this Guaranty
shall continue to be effective or be reinstated, as the case may be, as to such
Obligations all as though such application by any Guaranteed Party had not been
made. If an event permitting the declaration of default under a Guaranteed
Document exists at any time, and such declaration of default is prevented by the
pendency against Lessee or any other Person of a case or proceeding under a
bankruptcy or insolvency law, then for purposes of this Guaranty and the
Guarantor's obligations hereunder, such Guaranteed Document shall be deemed to
have been declared in default with the same effect as if such Guaranteed
Document had been enforceable in accordance with the terms thereof, and the
Guarantor shall forthwith pay the amounts due hereunder as specified by any
Guaranteed Party, any interest thereon, and any other amounts guaranteed
hereunder, without further notice or demand.
4. Subrogation. If the Guarantor makes a payment to a Guaranteed Party
under this Guaranty, the Guarantor shall be subrogated to that Guaranteed
Party's claims against the Lessee or any other Person relating to that payment.
Any such subrogation right shall be subject and subordinate to the Guaranteed
Parties' rights under the Guaranteed Documents. No payment or performance
hereunder by the Guarantor shall give rise to any claim of the Guarantor against
any of the Guaranteed Parties; provided, that this sentence shall not prevent
the Guarantor from being subrogated to any claim available to the Lessee.
5. Amendments and Other Actions. Any Guaranteed Party may, in its
discretion, and without affecting the Guarantor's absolute and unconditional
liability under this Guaranty, agree to amendments, modifications, or
supplements to the Lease, the Indenture, the other Guaranteed Documents, or any
other agreement, give or withhold consents, waivers, or approvals, and exercise
or refrain from exercising rights under the Lease, the Indenture, the other
Guaranteed Documents, or any other agreement.
6. Assignment. Any Guaranteed Party may at any time sell, assign,
transfer, or otherwise dispose of its interest in all or any part of this
Guaranty, the Lease, the Indenture, the other Guaranteed Documents, or any other
agreement and in the property and interests subject thereto and hereto, subject
to any limitations and conditions thereon in any such Guaranteed Document or
other agreement. To the extent of the interest acquired by it, any purchaser,
assignee, transferee, or other party so acquiring any Guaranteed Party's
interest shall have the same rights as such assigning Guaranteed Party hereby
and shall be deemed and declared a "Guaranteed Party" hereunder. The Guarantor
shall not assign any of its rights or obligations hereunder, including any claim
arising by subrogation.
. No amendment, waiver, or consent under the terms of this Guaranty shall be
effective unless evidenced by an instrument in writing signed by the Guarantor
and each Guaranteed Party.
. All payments by the Guarantor hereunder shall be made in the United States in
U.S. dollars and in immediately available funds, and otherwise as provided in
the Guaranteed Documents pursuant to which the relevant Obligations are created.
All payments hereunder shall be made free and clear of, and without deduction or
withholding for or on account of, any taxes, levies, fees, imposts, duties,
expenses, commissions, withholdings, assessments, or other charges, together
with all penalties, fines, additions to tax, and interest thereon (collectively,
"Taxes") to the extent that any such Taxes would reduce the amount that the
Guaranteed Party receiving the payment otherwise would have received had the
Lessee made such payment. If any Taxes must be deducted or withheld from any
payment hereunder, the Guarantor shall increase the amount paid so that the
Guaranteed Party receiving the payment receives the full amount of the payment
provided for in this Guaranty on an After-Tax Basis.
9. Representations, Warranties, and Covenants. The Guarantor hereby represents, warrants, and
covenants to the Guaranteed Parties as follows:
(a) Organization. The Guarantor is a corporation duly organized and
existing under the laws of Delaware, and has the power and authority to carry on
its business as now conducted, to own or to hold under lease the properties it
holds itself out as owning or leasing, and to enter into and perform its
obligations under this Guaranty.
(b) Authorization; Compliance. The Guarantor has the power and
authority to issue this Guaranty. This Guaranty has been duly authorized by all
necessary action on the Guarantor's part, and does not require any approval or
other action of the shareholders of the Guarantor or approval or consent of any
trustee or holders of any indebtedness or obligations of the Guarantor or of any
other Person, except such as have been obtained, and the Guarantor has duly
executed and delivered this Guaranty. The Guarantor's execution, delivery, and
performance of this Guaranty are not inconsistent with the Guarantor's
certificate of incorporation or by-laws, do not contravene any law, judgment,
decree, governmental rule, regulation, or order applicable to or binding on the
Guarantor, and do not contravene, result in any breach of, or constitute any
default or result in the creation of any Lien under, any indenture, mortgage,
security agreement, deed of trust, or other agreement or instrument to which the
Guarantor is a party or by which the Guarantor or its properties are bound which
reasonably may be expected to have a materially adverse effect on the
Guarantor's financial condition or ability to perform its obligations under this
Guaranty.
(c) Approvals. Neither the Guarantor's execution and delivery of this
Guaranty, nor the Guarantor's consummation of any of the transactions
contemplated hereby, requires the consent or approval of, giving of notice
(other than subsequent reporting requirements) to, registration with, or taking
of any other action in respect of, any governmental authority or agency, except
any which are in full force and effect.
(d) Validity of Guaranty. This Guaranty has been duly entered into,
executed, and delivered and constitutes a legal, valid, and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with its
terms. The Guarantor's obligations under this Guaranty rank, and until
discharged in full will continue to rank, in right of payment and security,
equally and ratably in all respects with all the Guarantor's present and future
unsecured and unsubordinated indebtedness for borrowed money.
(e) Litigation. There are no pending or, to the Guarantor's knowledge,
threatened actions or proceedings before any court or administrative agency of
the United States or any state thereof, which may be expected to have a
materially adverse effect on the Guarantor's financial condition or ability to
perform its obligations under this Guaranty.
(f) Financial Statements. All financial statements of the Guarantor
that the Guarantor or its agents delivered to any Guaranteed Party before the
date of this Guaranty have been prepared in accordance with generally accepted
accounting principles and are true and correct as of the date thereof. No
materially adverse change has occurred in the Guarantor's financial condition
since the latest date of such financial statements.
(g) Tax Assessments. The Guarantor does not know of any proposed tax
assessment against it and, in the Guarantor's opinion, all the Guarantor's tax
liabilities are adequately provided for.
(h) Annual Reporting. During the Term, the Guarantor shall furnish to
each Guaranteed Party: (x) in such quantities as each Guaranteed Party
reasonably requests, within 120 days after close of each fiscal year, an audited
balance sheet and related statements of operations and changes in financial
position of the Guarantor as of the end of such fiscal year, and (y) within the
period set forth in clause (x) above, a certificate of the Guarantor signed on
its behalf by the President or a financial officer stating that it has reviewed
the activities of the Lessee and that, to the best of its knowledge, no Default
exists (or if a Default exists, specifying the nature and period of existence
thereof and the action that Lessee has taken or proposes to take with respect
thereto).
(i) ERISA. The Guarantor does not maintain or contribute to, and is not
obligated to contribute to, any Plan.
10. Consent to Jurisdiction. The Guarantor irrevocably agrees that any
legal action or proceeding brought against the Guarantor with respect to this
Guaranty may be brought and determined in the Supreme Court of the State of New
York, New York County, or in the United States District Court for the Southern
District of New York, and the Guarantor hereby irrevocably accepts with regard
to any such action or proceeding, for itself and in respect of its properties,
generally and unconditionally, the nonexclusive jurisdiction of those courts.
The Guarantor hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense or counterclaim, or otherwise, in any such action or
proceeding, any claim that it is not personally subject to the jurisdiction of
the foregoing courts, that it or its property is exempt or immune from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, or
otherwise), and, to the extent permitted by law, that the suit, action, or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action, or proceeding is improper, or that this Guaranty or the subject matter
hereof may not be enforced in or by such courts, and further irrevocably waives,
to the extent permitted by law, the benefit of any defense that would hinder or
delay the levy, execution, or collection of any amount to which any Guaranteed
Party is entitled pursuant to a final judgment of any court having jurisdiction
(provided, that this sentence shall not waive any requirement of service of
process). Nothing herein shall affect any Guaranteed Party's right to commence
legal proceedings or otherwise proceed against the Guarantor in any other
jurisdiction in which the Guarantor shall be subject to suit.
11. Integration; Successors and Assigns. This Guaranty constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the Guarantor and the Guaranteed Parties, with respect
to the subject matter hereof. This Guaranty shall bind the Guarantor's
successors and assigns, and shall benefit, and be enforceable by, the Guaranteed
Parties and their successors and assigns.
12. Notices. All requests, demands, notices, and other communications
hereunder shall be in writing (including telecopies), shall be in English, shall
be effective on delivery, and shall be addressed as follows (or to such other
address as any such person shall designate by notice to each other such person):
if to the Guarantor:
Atlantic Coast Airlines, Inc.
515A Shaw Road
Dulles, VA 20166
Attention: General Counsel
Fax: (703) 925-6294
Tel: (703) 925-6006
if to any Guaranteed Party:
to its address set forth in the Participation Agreement.
. This Guaranty is delivered in, and shall in all respects be governed by and
construed in accordance with the laws of, the state of New York, U.S.A.
(excluding any conflicts-of-laws rule that would apply the laws of any other
jurisdiction).
. The Guarantor agrees to pay to any Guaranteed Party any and all reasonable
expenses (including reasonable legal fees and expenses) incurred by such
Guaranteed Party in enforcing this Guaranty, together with any reasonable
expenses (including reasonable legal fees) incurred on account of the
Guarantor's bankruptcy or insolvency.
. The Guarantor's performance of any or all of the Obligations shall, for all
purposes of the Guaranteed Documents, constitute performance by the Lessee of
such Obligations.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty (Atlantic Coast Airlines Trust No. N___).
ATLANTIC COAST AIRLINES, INC.
By: ___________________________
Title: ___________________________
<PAGE>
Schedule I
to Guaranty
Guaranteed Parties
State Street Bank and Trust Company of Connecticut, National Association, individually and as trustee [Owner
Trustee and Lessor]
The First National Bank of Maryland, individually and as trustee [Indenture Trustee, Pass-Through Trustee and
Subordination Agent]
ING Bank N.V. [Liquidity Provider]
</TABLE>
<TABLE>
<S> <C>
EXHIBIT 10.80
GROUND LEASE AGREEMENT
BETWEEN
THE
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
AND
ATLANTIC COAST AIRLINES
TO
DESIGN, CONSTRUCT, OPERATE AND MAINTAIN
AN AIRCRAFT MAINTENANCE FACILITY
AT
WASHINGTON DULLES INTERNATIONAL AIRPORT
<PAGE>
INDEX
ATLANTIC COAST AIRLINES
AIRCRAFT MAINTENANCE FACILITY
ARTICLE SUBJECT PAGE
I Airport Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
II Rights and Obligations of the Lessee . . . . . . . . . . . . . . . . . . . . . . . 2
III Term of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
IV Rental Fees and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
V Establishment of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
VI Schedule for Submitting Plans and Specifications . . . . . . . . . . . . . 29
VII Title to the Facility, Fixed Improvements,
and Operating Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31
VIII Certified Cost of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
IX Maintenance of the Aircraft Maintenance Premises. . . . . . . . . . . . . 35
X Leasehold Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
XI Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64
XII Termination by the Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
XIII Termination by the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71
XIV Destruction and Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
XV Insurance and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
XVI Performance Guarantee and Bonds . . . . . . . . . . . . . . . . . . . . . . . . 79
XVII Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
<PAGE>
Page 2
ARTICLE SUBJECT PAGE
XVIII Airport Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
XIX Copartnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
XX Participation in Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
XXI Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 83
XXII Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 83
XXIII Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
XXIV Right of Inspection of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
XXV Saving Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
XXVI Waiver of Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
XXVII Certification of the Lessee's Status . . . . . . . . . . . . . . . . . . . . . . . 85
XXVIII Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
XXIX Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
XXX Federal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
<PAGE>
Lease No. MWAA-LD-97-04
Page 1 of 97 Pages
This Ground Lease Agreement (hereinafter referred to as the "Lease"),
entered into by and between the Metropolitan Washington Airports Authority
(hereinafter referred to as the "Authority") and Atlantic Coast Airlines, a
California corporation qualified to transact business in the Commonwealth of
Virginia d.b.a United Express (hereinafter referred to as the "Lessee"). The
Authority and the Lessee together are referred to as the "Parties."
W I T N E S S E T H
WHEREAS, pursuant to the lease agreement, dated March 2, 1987, between
the United States of America, acting through the Secretary of Transportation,
and the Authority, the Authority controls certain real property known as
Washington Dulles International Airport (hereinafter referred to as the
"Airport") and, subject to the lease, has full power and dominion over, and
discretion in the operation and development of the Airport; and
WHEREAS, the Lessee desires to construct, operate and maintain an
aircraft maintenance facility for the purpose of performing routine and special
maintenance on its fleet of aircraft and aircraft operated by other scheduled
air carriers; and
WHEREAS, the Authority has an aircraft maintenance site available for
development on the Airport; and WHEREAS, the Lessee has submitted a
proposal to design, construct, operate, and maintain such an
aircraft maintenance facility, and the Authority has accepted the Lessee's proposal to do so on the terms and
conditions expressed herein; and
<PAGE>
WHEREAS, the Lessee intends to utilize the proceeds of bonds issued by
the Industrial Development Authority of Loudoun County, Virginia, to finance the
development of the aircraft maintenance facility.
NOW, THEREFORE, in consideration of the charges, fees, mutual
covenants, conditions, and agreements contained herein, the Parties hereto agree
as follows:
ARTICLE I - AIRPORT PREMISES
For the purpose of designing, constructing, financing, operating,
maintaining, repairing, replacing, renovating, and restoring, an aircraft
maintenance facility that includes an aircraft maintenance hangar with office,
shops, and parts warehouse storage, a concrete aircraft parking apron, and
automobile parking area, the Authority hereby demises and leases to the Lessee
and the Lessee hereby accepts and leases from the Authority, subject to all of
the terms and conditions expressed herein, the plot of land on the Airport
containing 5.64 acres and the aircraft maintenance facility and related
improvements to be constructed thereon (hereinafter referred to as the "Aircraft
Maintenance Premises") as shown on Drawing No. 2231-001, attached hereto and
made a part hereof as Exhibit A, together with rights of ingress, egress, and
access from the North Service Road to the Aircraft Maintenance Premises.
ARTICLE II - RIGHTS AND OBLIGATIONS OF THE LESSEE
<PAGE>
A. The Authority does hereby grant unto the Lessee the
nonexclusive right and privilege to design, construct,
finance, operate, maintain, repair, replace, renovate, and
restore, an aircraft maintenance facility on the Airport on
behalf of the Authority, but not as the agent, representative,
or partner of the Authority. The Authority may, at its
discretion, either construct and operate itself, or permit
others to construct and operate, other aircraft maintenance
facilities on the Airport.
B. The Authority does hereby grant unto Lessee the exclusive lease of the Aircraft Maintenance
Premises and the nonexclusive right to provide routine and special maintenance from the
Aircraft Maintenance Premises for the servicing of aircraft operated by the Lessee, aircraft
of other companies providing commercial air transportation of persons, property, and/or mail
pursuant to published schedules to and from the Airport and holding the necessary authority
from the appropriate Federal or state agencies to provide such air transportation services
(hereinafter referred to as "Scheduled Air Carriers") or Scheduled Air Carriers who have
executed an Airport Use Agreement and Premises Lease with the Authority (hereinafter referred
to as "Airlines"). The Lessee shall not have the right to perform maintenance services on
---
private or corporate aircraft not used in the common carriage of passengers, cargo, or
freight, or aircraft used as a non-scheduled charter operation or air taxi (hereinafter
referred to as "General Aviation aircraft").
<PAGE>
C. The routine and special maintenance service (hereinafter referred to as "Aircraft Maintenance
Services") to be performed from the Aircraft Maintenance Premises shall include, but not be
limited to, the maintenance, servicing, testing, and modification of aircraft, including
without limitation the finishing, refitting, repairing, inspecting, installing, painting,
stripping, cleaning, rewiring, reprogramming, and replacing of components (including without
limitation, avionics, power plants, interiors, mechanical systems, navigation systems, and
communication systems); retrofitting, upgrading, refurbishing, reconfiguring, re-engining and
conversion of aircraft; the maintenance of such hanger, office and shop space and related
facilities necessary for, or related to, such activities; maintenance and repair of ground
support equipment including without limitation vehicles, tugs, baggage carts, special-purpose
vehicles and other airfield equipment; and undertaking of ground activity necessary for the
support of such activities. Aircraft Maintenance Services shall also include the obtaining,
installing, storing, and operating of all necessary material, machinery, and equipment to
maintain, repair, store, and park vehicles and equipment used and necessary to support the
services permitted herein. No other use may be made of the Aircraft Maintenance Premises
without the advanced written approval of the Authority.
D. The Authority shall have the continuing right to approve the
kind and scope of any additional activities proposed to be
conducted on or from the Aircraft Maintenance Premises in
addition to those specifically referred to herein.
<PAGE>
E. No other commercial business or concession shall be operated on or from the Aircraft
Maintenance Premises unless authorized in advance by this Lease, or approved in writing by the
Authority. The Lessee shall not use, or suffer or permit any person or party to use, the
Aircraft Maintenance Premises for any purpose not authorized under this Lease or by separate
written approval of the Authority. All restrictions or requirements imposed by this Lease on
the Lessee shall be deemed to extend to the Lessee's agents, customers, tenants, employees,
contractors, subcontractors, and guarantors. It shall be the Lessee's obligation to cause
these persons and parties to comply with the restrictions or requirements of this Lease.
F. The Lessee shall provide, at its own cost and expense, the
necessary skilled management and labor to ensure, on a
continuing basis throughout the term of this Lease, that the
Aircraft Maintenance Premises is operated and maintained
efficiently, and in a manner reasonably satisfactory to the
Authority.
<PAGE>
G. The Lessee shall, at its own cost and expense, comply with all mandatory Federal, state, or
local laws, ordinances, rules or regulations including directives and regulations of the
Authority, now or hereafter in force, governing the establishment, maintenance, and operation
of the Aircraft Maintenance Premises. All such ordinances, rules, or regulations shall be
applied in a nondiscriminatory manner, provided, provisions of future Authority directives and
rules and regulations, as applied to Lessee, shall not adversely affect Lessee's use of the
Aircraft Maintenance Premises as provided for by this Lease. The Lessee shall obtain and pay
for all licenses and permits necessary for the establishment, maintenance, and operation of
the Aircraft Maintenance Premises by the Lessee, and shall pay all fees and charges applicable
to the Lessee and assessed under state, local, or Federal statutes or ordinances.
<PAGE>
H. For the purposes described in Article II hereof, and elsewhere herein, the Authority grants to
the Lessee, and the employees, customers, contractors, suppliers, service personnel,
licensees, guests, patrons, tenants, and invitees of the Lessee, without charge therefor, the
right of ingress to and egress from the Aircraft Maintenance Premises over the Airport roadway
system; PROVIDED, that such rights of ingress and egress shall at all times be exercised in
compliance with any and all regulations promulgated by lawful authority for the care,
operation, maintenance, and protection of the Airport and applicable to all users of the
Airport; AND PROVIDED FURTHER, that such rights of ingress and egress shall not be construed
to prohibit the Authority from establishing and assessing a reasonable fee or charge for the
privilege of entry upon the Airport when such a fee or charge is levied upon all users of the
Airport, nor to prohibit the Authority from assessing a fee or charge on persons conducting a
commercial business on the Airport; AND PROVIDED FURTHER, that in no event shall the Authority
prevent or impede access to the Aircraft Maintenance Premises.
I. The Lessee, and the customers, tenants, and invitees of the
Lessee may make use of the runways and taxiways of the Airport
to gain access to the Aircraft Maintenance Premises as is
permitted by the Authority's rules and regulations and subject
to the fees and charges assessed aircraft for the use of the
Airport.
<PAGE>
J. The Lessee shall abide by all airfield and other security related requirements established by
the Authority, which apply to the Lessee and employees, service personnel, guests, visitors,
contractors, patrons, and invitees of the Lessee. The Authority is required by Federal
Aviation Regulations (FAR), Part 107, to, "adopt and put into use facilities and procedures
designed to prevent and deter persons and vehicles from unauthorized access to the "Air
Operations Area." The Lessee understands that the Authority has met said requirements by
developing a security plan for the Airport, and the operations of the Lessee shall not
conflict with the security standards set forth in said plan. The Lessee shall prepare and
submit for the Authority's approval, which approval shall not be unreasonably withheld, its
own plans to provide facilities and procedures designed to prevent and deter persons and
vehicles from unauthorized access to the Air Operations Area from and through any premises
controlled or used by the Lessee in accordance with the provisions of FAR, Part 107, and the
security plan for the Airport. To meet the requirements of Part 107, the Lessee's security
procedures and facilities on the Aircraft Maintenance Premises shall insure positive control
which shall prevent the entrance of unauthorized persons and vehicles onto the Air Operations
Area of the Airport and shall include but not be limited to:
1. Fencing and locked gates,
2. Visible identification materials for persons
authorized to enter the Air Operations Areas,
3. An electronic entry control system where gates or
doorways cannot reasonably be controlled by locks,
and
4. Other facilities and procedures as may be reasonably
required by the Authority.
<PAGE>
K. Prohibited Uses. Lessee shall not use the Aircraft Maintenance Premises nor permit the same
---------------
to be used by its customers, tenants, invitees, contractors, service personnel or employees to
provide services, facilities, commodities, or supplies made available through concessionaires
or other contractors under contract with the Authority to provide such services, facilities,
commodities, or supplies on the Airport ("Prohibited Uses"); provided, however, that Aircraft
-------- -------
Maintenance Services, as defined in Article II.C. above, shall not be prohibited hereunder.
Prohibited Uses include, but are not limited to: the providing of services, facilities,
commodities, or supplies now or hereafter made available through other concessionaires and
contractors on the Airport (other than Aircraft Maintenance Services), and the operation of
automobile or vehicle rental businesses, airline inflight kitchens, air cargo facilities, or
commercial vehicle parking for the general public. Lessee shall not use the Aircraft
Maintenance Premises for the storage, transportation, disposal, discharge, or handling of any
hazardous substances, except for the storage, transportation, disposal, discharge, or handling
of such substances reasonably necessary for the conduct of Aircraft Maintenance Services.
Under no circumstances shall any use be made of, or conduct occur on, the Aircraft Maintenance
Premises, which use would cause the Aircraft Maintenance Premises or any part thereof to be
deemed a hazardous waste treatment, storage, or disposal facility requiring a permit, interim
status, or any other special authorization under any Environmental Laws. Lessee agrees that
storage of aircraft fuel upon or within the Aircraft Maintenance Premises (except for fuel
brought on the same in fuel tanks of aircraft) is prohibited and that purchases of aircraft
fuel for delivery at the Airport shall be made only from service contractors authorized by the
Authority to deliver or sell such fuel. All subleases involving any portion of the Aircraft
Maintenance Premises shall incorporate in substance the terms of this Lease.
ARTICLE III - TERM OF LEASE
A. The term of this Lease shall commence upon the date of execution by the Authority and shall
expire at the end of the Operating Period of the Lease. The Operating Period of the Lease
shall extend for a period not to exceed twenty-six (26) years ten (10) months and twenty-one
(21) days from the date on which the Authority issues its occupancy permit or equivalent
stating that the Aircraft Maintenance Premises is ready for occupancy and use by the Lessee.
The Parties hereto shall establish this date in writing, and that date, when established,
shall begin the Operating Period. There shall be no occupancy or use of the Aircraft
Maintenance Premises by Lessee for the conduct of Aircraft Maintenance Services prior to the
beginning of the Operating Period.
<PAGE>
In no event shall the Operating Period exceed 80% of the
confirmed or adjusted expected useful economic life of the
Aircraft Maintenance Premises. In this regard, the Lessee has
provided the Authority with a written appraisal, acceptable to
the Authority, establishing the expected useful economic life
of the Aircraft Maintenance Premises at thirty-three and
six-tenths (33.6) years. Eighty percent (80%) of the 33.6 year
expected useful economic life of the Aircraft Maintenance
Premises is the term of the Operating Period stated in this
paragraph A.
B. In the event that Lessee does not comply with the schedule set forth in Article VI.C. hereof,
but subject to the conditions and extensions of time provided for herein, the Authority shall
have the option to terminate this Lease and all of Lessee's rights hereunder after such date
by giving sixty (60) days prior written notice of the termination to Lessee and by designating
any improvements on the Aircraft Maintenance Premises to be removed by Lessee. Lessee shall
then, at its own expense, demolish and remove all Authority-designated improvements, including
the aircraft maintenance hangar building and any related improvements on the Aircraft
Maintenance Premises. Upon such termination becoming effective, the Authority shall be hereby
relieved of its obligations hereunder and shall be free to lease the land to other parties.
C. Upon the termination or expiration of this Lease, the Lessee
shall deliver the Aircraft Maintenance Premises to the
Authority in good condition, reasonable wear and tear
excepted. Lessee shall pay to the Authority the costs, if any,
incurred by the Authority to bring the Aircraft Maintenance
Premises up to such condition.
<PAGE>
D. Lessee understands that there is no renewal or purchase option
contained herein or otherwise agreed to and that there is no
expectation of any such renewal or purchase option.
ARTICLE IV - RENTAL FEES AND OTHER CHARGES
In consideration of the rights and privileges granted herein, the
Lessee agrees to pay to the Authority an annual ground rental; a service cost
fee; utility payments; and, if applicable, a percentage and sublease rental fee
from the gross receipts realized by the Lessee by virtue of providing Aircraft
Maintenance Services and/or the sublease of space on the Aircraft Maintenance
Premises to its customers as permitted by this Lease. Except for the percentage
and sublease rental fee that is paid quarterly, all other payments shall be made
monthly, commencing at the beginning of the Operating Period and continuing
monthly until the expiration of the term of this Lease, as follows:
A. Annual Ground Rental - An annual ground rental shall be
prorated monthly and paid monthly in advance beginning on the
first day of each calendar month of the Operating Period and
continuing until the expiration of this Lease. If the
Operating Period begins or this Lease terminates on a day
other than the first day of the month, rental shall be
prorated on a daily basis for that portion of the first and
last month.
<PAGE>
1. The annual ground rental shall be calculated as the
appraised market value of the land leased under this
Lease times a seven percent (7%) capitalization
ratio; PROVIDED, HOWEVER, that no annual ground
rental shall be charged for the land comprising the
aircraft parking apron on the Aircraft Maintenance
Premises.
2. For the initial five (5) years of the Operating Period, the Lessee shall pay an
annual ground rental of Sixty-Six Thousand Nine Hundred and Twelve Dollars
($66,912.00) payable in monthly payments of Five Thousand Five Hundred and
Seventy-Six Dollars ($5,576.00) This is calculated as (1) the initial appraised
market value of the land leased under this Lease at $4.85 per square foot, multiplied
by (2) the portion of the Aircraft Maintenance Premises to which the annual ground
rental applies (197,090 sq. ft.), multiplied by (3) the capitalization ratio of seven
percent (7%).
<PAGE>
3. For the second and each of the subsequent five (5) year terms of the Operating
Period, the annual ground rental shall be adjusted to reflect any change in the
appraised market value of land leased under this Lease. In this regard, land shall
be reappraised during the fifth, tenth, fifteenth, twentieth and twenty-fifth year of
the Operating Period to facilitate the rental adjustment. Once the new appraised
market value of the land has been determined, the new annual ground rental shall be
calculated by multiplying 7% times the new appraised market value of the land leased
under this Lease to which the ground rental applies (i.e. the Aircraft Maintenance
Premises less the land area comprising the aircraft apron on the Aircraft Maintenance
Premises). The new annual rental shall become effective and due on the first day of
the sixth year of the Operating Period and shall continue each and every month until
it is again adjusted on the first day of the eleventh, sixteenth, twenty-first and
twenty-sixth year of the Operating Period. Notwithstanding the foregoing, however,
in no event shall the adjusted annual ground rental for any of the subsequent five
(5) year terms of the Operating Period be increased by more than thirty percent (30%)
above the annual ground rental for the immediately preceding five (5) year term of
the Operating Period.
<PAGE>
4. The adjustments of the annual rental shall be determined by the Authority on the
basis of appraisals made by two (2) commercial real estate appraisers who are members
of the Master Appraisers Institute. The Authority shall select one such appraiser
and the Lessee shall select the other, with the understanding that the fee due and
payable to the appraisers shall be made by the Authority and the Lessee respectively
to their selected appraiser. The Aircraft Maintenance Premises shall be considered
as unimproved land for purpose of these appraisals. Unimproved land shall mean land
with adjacent Airport infrastructure improvements, but without any leasehold
improvements, structures, or paving. The appraised value shall be set at the
arithmetic average of the two (2) appraisals; PROVIDED, HOWEVER, that in the event
that such appraisals differ by more than twenty percent (20%), the appraisers
selected by the Authority and Lessee shall select a third appraiser who shall
thereupon complete his appraisal of the Aircraft Maintenance Premises considering
such as unimproved land. In the latter situation, the fair market value of the
Aircraft Maintenance Premises shall be computed by selecting the two (2) appraisals
which are closest in value, be they the two (2) highest or two (2) lowest appraisals,
discarding the third, and thereafter taking the arithmetic average of such appraised
values as in the situation where only two (2) appraisals were made. The fee of the
third appraiser shall be borne equally by the Authority and the Lessee.
B. Service Cost Fee - An annual service fee to recover the
allocated costs of services provided to the Lessee by the
Authority for each year of the Operating Period. 1. The
service costs for the Airport shall consist of that portion of
the Airport's
annual maintenance and operating costs for police,
fire/crash rescue, maintenance of roads and grounds,
and maintenance of the access highway allocated to
the commercially leased land areas of the Airport,
other than the passenger
<PAGE>
terminals and airfield buildings and areas. See
Exhibit B for the service cost fees for the
commercially leased areas on the Airport for FY 1997.
2. The service costs shall be established by the Authority annually to reflect the
latest fiscal year costs experienced by the Authority in providing these services to
the commercially leased areas of the Airport. An Airport service cost per square
foot shall be calculated annually by dividing the total service costs experienced by
the Authority by the total commercially leased areas of the Airport subject to a
service cost fee. The annual service cost fee for the Lessee shall then be
calculated as the product of the land area leased under this Lease and the service
cost per square foot for the commercially leased areas of the Airport.
<PAGE>
3. The annual service cost fee shall be prorated on a monthly basis and paid monthly in
advance beginning on the first day of each calendar month of the Operating Period and
continuing on the first of each month until written notice is received from the
Authority establishing the new annual service fee. The initial annual service fee
shall be Sixty-Two Thousand Six Hundred and Fifty-One Dollars ($62,651.00) payable in
monthly payments of Five Thousand Two Hundred and Twenty-One Dollars ($5,221)
beginning on the first day of the Operating Period. If the Operating Period becomes
effective or terminates on a day other than the first day of the month, service costs
shall be prorated on a daily basis for that portion of the first and last month of
the Operating Period.
C. Percentage and Sublease Rent
1. Lessee shall pay to the Authority percentage rent on the gross receipts received from
performing Aircraft Maintenance Services on aircraft of other Airlines and the
aircraft of Scheduled Air Carriers serving the Airport from the Aircraft Maintenance
Premises, except that percentage rent shall not be due for any Aircraft Maintenance
Services performed on behalf of United Airlines or any other code sharing partner,
any affiliate or subsidiary thereof or any successor thereto, nor for any affiliate,
subsidiary or successor to Lessee. The percentage rent shall consist of eight
percent (8%) of the adjusted gross receipts derived by the Lessee from providing
Aircraft Maintenance Services. Gross receipts shall be adjusted to first deduct the
acquisition cost for equipment acquired by the Lessee on behalf of its customer and
installed on the aircraft of its customer prior to applying the 8% fee (i.e., total
gross receipts received from a customer minus the cost of any equipment acquired on
behalf of the customer and included in gross receipts times 8% shall be the
percentage rent due the Authority).
<PAGE>
2. The Lessee shall pay to the Authority percentage rent
on the gross receipts derived from performing Ground
Support Equipment Maintenance Services related to the
maintenance and repair of ground support equipment
such as vehicles, tugs, baggage carts,
special-purpose vehicles, and other airfield
equipment of other Airlines. The percentage rent
shall consist of eight percent (8%) of the gross
receipts received for Ground Support Equipment
Maintenance Services.
<PAGE>
3. Subject to the provisions of Article X herein, the Lessee shall pay sublease rent for
approved subleases on the Aircraft Maintenance Premises to parties other than the
Lessee or its affiliates. For the initial five (5) years of the Operating Period,
the sublease rent shall be initially established at $2.25 per square foot per year
times the amount of approved subleased space on the Aircraft Maintenance Premises
times the actual time, on a daily basis, that such sublease is in effect (i.e.,
sublease right is only for 3 hours per day, etc.) or eight percent (8%) of the
sublease rental paid to Lessee, whichever is the greater amount. The sublease rent
based on percentage shall remain at 8% for the term of this Lease. The sublease rent
based on a dollar rental per square foot shall be adjusted for each five (5) year
term of the Operating Period in accordance with the Index now known as the United
States Bureau of Labor Statistics, Consumer Price Index, all Urban Consumers,"
1982-1984 = 100 Base, All Items, U.S. City Average (hereinafter referred to as the
"Index"). Such adjustment shall be calculated by multiplying the sublease rent in
effect by the percentage increase in the Index from the Index most recently published
prior to the commencement of the five (5) year term of the Operating Period to the
Index most recently published prior to the date on which the adjustment becomes
effective. Any resulting positive number shall be added to the applicable sublease
rent per square foot to determine the adjusted sublease rent. In no event shall the
increase of the sublease rent be greater than thirty percent (30%) above the sublease
rent for the preceding five year term of the Operating Period.
<PAGE>
If such Index shall be discontinued with no successor
or comparable successor Index, or if a substantial
change is made in the term or number of items
contained in this Index, or if the Index ceases to
use 1982-1984 = 100 as the basis for calculation, the
Parties shall attempt to agree upon a substitute
formula, but if the Parties are unable to agree upon
a substitute formula, then the matter shall be
determined by arbitration in accordance with the
rules of the American Arbitration Association then
prevailing.
The percentage and sublease rent for each quarter
shall be due and payable on or before the 15th
calendar day following the close of each quarter for
the previous quarter's activity. The Lessee shall
submit a statement on or before the 15th calendar day
following the close of each quarter, certified to be
true by the signature of an authorized official of
the Lessee, that details the Lessee's total gross
receipts and the calculation of the percentage and
sublease rent due the Authority. Certified statements
shall be required each quarter, regardless of whether
the Lessee has any gross receipts to report.
<PAGE>
D. Utility Service Payments - The Authority shall furnish to the Lessee all utilities (including,
------------------------
without
limitation,
electricity,
gas,
water,
and
sanitary
sewer)
required
for
the
use
and
operation
of the
Aircraft
Maintenance
Premises
as
contemplated
by
this
Lease.
In
addition
to the
annual
ground
rental,
service
cost
fee,
and
percentage
and
sublease
rent
stated
above,
the
Lessee
shall
pay
the
Authority
as
additional
rent
an
amount
necessary
to pay
for
all
utilities
(electricity,
gas,
water,
and
sanitary
sewage)
furnished
by the
Authority
to the
Aircraft
Maintenance
Premises.
Charges
for
utilities
consumed
by the
Lessee
shall
be
reasonably
established
by the
Authority
and be
consistent
with
like
charges
assessed
other
users
of the
utilities
on the
Airport.
Utility costs for the Airport consist of system costs and
invoice costs. System costs are those derived from the
maintenance and operation of the utility distribution system
and invoice costs are the Authority's cost of acquiring
utilities from the utility providers. The system and invoice
costs are combined and divided by the previous year's utility
consumption to derive the utility rate for each utility. The
utility rates are applied to Lessee's metered consumption to
derive the utility charges due the Authority.
Payment for utilities shall be made by the Lessee within
thirty (30) calendar days from receipt of billing by the
Authority. The utility rates may be changed periodically
during the term of this Lease. The Authority agrees to notify
the Lessee in writing of changes in utility rates prior to the
effective date of such changes.
<PAGE>
E. Project Rental - With respect to the financing of the Aircraft Maintenance Premises, the Lessee
--------------
shall also pay Project Rental (i) in the amount of the principal and interest on the bonds
("Bonds") or the portion of the purchase price corresponding thereto, to be issued by the
Industrial Development Authority of Loudoun County, Virginia ("the IDA") or (ii) if the Bonds are
secured by a letter of credit or similar credit enhancement (the "Credit Facility") that will be
drawn upon to pay principal and interest and the purchase price of the Bonds, in an amount equal
to the amount necessary to reimburse the issuer of the Credit Facility (the "Credit Facility
Provider"), or any guarantor of such obligations of the Lessee (the "Guarantor"), for draws under
the Credit Facility to pay principal and interest and the purchase price of the Bonds. A pro rata
portion of the Project Rental that corresponds to the principal of the Bonds, or the portion of a
drawing under the Credit Facility that corresponds to principal on the Bonds, shall be allocable
to, and shall accrue in, for tax purposes, each year of the Operating Period during which Project
Rental is paid. Such Project Rental shall be payable in the amounts and at the times necessary to
make all payments due to the IDA and the Credit Facility Provider and the Guarantor. The
Authority hereby assigns the Project Rental to the IDA and the Credit Facility Provider and the
Guarantor and the Lessee is hereby directed to pay such Project Rental to or at the direction of
the IDA; provided, however, that as long as the Credit Facility remains outstanding or any amounts
are owed the Credit Facility Provider or the Guarantor (and the Credit Facility Provider has not
failed to pay a drawing in strict compliance therewith) the Lessee is directed to pay such amount
to, or as directed by, the Credit Facility Provider and Guarantor. Except for the above
direction, the Authority shall not have any liability for the payment of any principal of,
interest on, or other costs due on the Bonds or amounts due the Credit Facility Provider or
Guarantor. Notwithstanding any other provision contained herein to the contrary, any requirement
for the payment of Project Rental shall terminate upon the repayment in full of the Bonds, or
other satisfaction of the indebtedness thereunder, including, without limitation, pursuant to any
foreclosure or other remedial action by or on behalf of the holders of such Bonds; provided that
such obligation shall not terminate without the written consent of the Guarantor and the Credit
Facility Provider unless the Credit Facility has terminated and all amounts owed to the Guarantor
and the Credit Facility Provider have been paid in full.
F. Priority of Payment
1. After the payment of those costs necessary for
maintaining and operating the Aircraft Maintenance
Premises in accordance with Article IX hereof, Lessee
shall pay the rental fees and other charges in
accordance with this Article IV in the following
order or priority:
First - Utility Service Payments
Second - Project Rental
Third - Annual Ground Rental and Service Cost Fee
Fourth - Percentage and Sublease Rent
<PAGE>
2. In the event that insufficient funds are available
during any quarter to pay all of the rental fees and
other charges required under this Article IV, Lessee
shall provide the Authority, within thirty (30)
calendar days following the close of the quarter, a
detailed statement of cash flow for the previous
month setting forth in detail all income and expenses
for the prior quarter, the allocation of the funds in
accordance with the priority set forth herein, and
the amount accrued and due the Authority, including
any late charges.
3. The Authority may, at its option, exercise its right
to claim the annual performance guarantee, provided
for under Article XVI herein, should the Lessee fail
to pay utility payments and/or rental fees and other
charges due the Authority and that are greater than
thirty (30) calendar days past due. The annual
renewal of the performance guarantee shall be
considered as a cost necessary for the maintenance
and operation of the Aircraft Maintenance Premises as
outlined in paragraph F.1. above.
4. The priority of payments set forth in this Paragraph
F. shall apply only during the period that the
initial financing is in place, as the same may be
modified or amended (with Authority approval) from
time to time.
<PAGE>
G. All remittances due the Authority by the terms and conditions
of this Lease shall be made payable to the "Metropolitan
Washington Airports Authority" and forwarded to: Metropolitan
Washington Airports Authority, P.O. Box 2143, Merrifield,
Virginia 22116-2143. The certified statements shall also be
forwarded to the above address. Each payment submitted to the
Authority shall include a statement that identifies the
specific type of payment being made (i.e., ground rental
payment, service cost fee, percentage and sublease rent, or
utility payment), the period of time the payment covers, and
the number of this Lease.
ARTICLE V - ESTABLISHMENT OF FACILITY
<PAGE>
The Lessee agrees to design, construct, finance, operate, maintain,
repair, restore, renovate, and replace, an aircraft maintenance facility and
related improvements comprising the Aircraft Maintenance Premises on behalf of
the Authority, but not as the agent, representative, or partner of the
Authority, which will reasonably conform with the scope and quality of the
aircraft maintenance facility and related improvements as described herein and
presented by the Lessee to the Authority. The Lessee's total investment in
Aircraft Maintenance Premises is estimated to be approximately Ten Million
Dollars ($10,000,000.00). The Authority shall construct a taxiway connector to
connect the airfield (Taxiway W-2) with the Aircraft Maintenance Premises. The
Lessee agrees that the taxiway connector is to be used in common by such
lessee(s) and aircraft operators authorized by the Authority. The Authority
shall cut and remove the trees from the Aircraft Maintenance Premises. The
Aircraft Maintenance Premises may undergo design changes during the
pre-development and development periods, and, to the extent such changes are not
within the scope of the work as described herein, they shall be subject to the
separate written approval of the Authority, as provided for under Article VII
herein. The Lessee's obligations shall include, but not be limited to the
following:
A. The construction of an aircraft maintenance hangar building
with approximately 65,000 square feet of gross interior hangar
space and approximately 25,000 square feet of office, shops,
and warehouse storage space.
B. The construction of a concrete aircraft parking apron adjacent
to the aircraft maintenance hangar of approximately 48,600
square feet in size.
C. The construction of suitable open equipment storage areas and
an automobile parking area adjacent to the aircraft
maintenance hangar for the employees, customers, tenants,
contractors, service personnel, and invitees of the Lessee.
D. The construction of on-site concrete curbing and gutters,
on-site concrete sidewalks, the connection of gutters to the
Airport storm drainage system, exterior lighting, security
fencing and gates, and landscaping, all as considered
necessary for the development and use of the Aircraft
Maintenance Premises.
<PAGE>
E. Connection to the dual electrical feeder system located along
the North Service Road at an existing manhole in order to
ensure a continuous supply of power in the event of failure of
the existing feeder or in the event the feeder must be shut
down for maintenance or repairs.
F. The landscaping of the approximately forty (40) foot wide
setback between the eastern border of the Aircraft Maintenance
Premises and the western edge of North Service Road, in
accordance with the Authority's Design Manual.
G. A fire suppression system to comply with fire code
requirements for the maintenance activity conducted within the
hangar.
H. The installation of a Best lock keying system on all primary
building entrances and mechanical room entrances for police,
security, fire protection, and maintenance access.
I. The plans and specifications applicable to the construction of
the aircraft maintenance facility must show the following
items and shall be subject to the specific approval of the
Authority, which will not be unreasonably withheld, prior to
commencement of any work: 1. The design and construction
detail of the mass and facade of the aircraft maintenance
hangar building, including the roof, exterior
lighting, windows, the foundation, the steel
structure, and exterior finish material. A listing of
the specifications and capacity of the electrical,
plumbing, water, sewage, heating, ventilating, and
air conditioning systems.
<PAGE>
2. The pavement section details and specifications for the concrete aircraft parking apron.
3. The pavement section details and specifications of the automobile parking area and the
access roadway connection to the Airport roadway system.
4. Architectural and landscaping plans and the exterior sign plans.
5. A storm water management plan, including runoff calculations.
6. The fire suppression system design and specifications for the hangar.
J. The latest edition of the following codes and regulations shall apply to the construction of the
aircraft maintenance facility:
1. The 1987 Uniform Building Code of Virginia which shall have priority in the event of a
conflict with any other applicable code.
2. 1987 Building Officials and Code Administration:
(a) Basic Building Code
(b) Basic Mechanical Code
(c) Basic Plumbing Code
3. National Electrical Code.
4. National Fire Protection Association's National Fire Codes.
5. Uniform Federal Accessibility Standards as published
in the Federal Register on August 7, 1984.
6. Applicable Federal Aviation Administration Regulations
(FAR) and Advisory Circulars (AC).
<PAGE>
7. Metropolitan Washington Airports O&I No. 6-3-1B, Construction and Alterations to
Buildings.
To the extent of any inconsistency between the above codes and
regulations and the plans and specifications as approved by
the Authority, the approved plans (and any waivers or
modifications contained in the plans, as approved) will
control.
ARTICLE VI - SCHEDULE FOR SUBMITTING PLANS AND SPECIFICATIONS
The Lessee shall obtain the Authority's written approval, which shall
not be unreasonably withheld, of final plans and specifications, prior to
commencement of construction work on the Aircraft Maintenance Premises. The
Lessee agrees to diligently pursue the design and construction of the facility.
A. The Lessee has submitted preliminary plans and specifications for the facility that are acceptable
to the Authority.
B. Lessee intends to submit major design components for approval
in phases. Such components may include, but are not limited
to, the pre-engineered building, site work and mechanical,
electrical and plumbing systems. Review of any of the plans
for any major design component submitted to the Authority
shall be completed and approved or disapproved by the
Authority within 45 calendar days. Any revision or
resubmission of disapproved plans
<PAGE>
or components shall be made within 30 days, and the Authority
shall have 14 days to review such resubmitted plans or
components. Each plan or component, when approved, shall
entitle Lessee to proceed with ordering the materials and
parts and commencing that portion of the work. Lessee shall
submit final plans and specifications for the entire facility
to the Airport Manager for approval within 120 days after
execution of this Lease.
C. Subject to the ability of Lessee to obtain necessary permits and other governmental approvals and
subject to other circumstances beyond Lessee's reasonable control, the Lessee agrees to commence
construction of the aircraft maintenance facility and to totally erect and have the facility ready
for occupancy within fifteen (15) months after the date of commencement of the construction;
PROVIDED, that the total elapsed time from the commencement of the Lease Term to completion and
occupancy of the facility shall be no more than two (2) years unless the construction is
temporarily stopped, interrupted, or otherwise handicapped or prevented for reasons beyond the
control and without the fault or negligence of the Lessee including, but not limited to, acts of
God, fire, floods, windstorms, or tornadoes. In such a case, the applicable period of time
required to complete construction shall be suspended for such time as may be deemed reasonable by
the Authority.
<PAGE>
D. The construction work to be performed by or for the Lessee shall be accomplished in substantial
accordance with plans and specifications approved by the Authority and shall be subject to the
Authority's inspection and approval, both during the work and after its completion. The Authority
will not unreasonably delay or interfere with Lessee's construction schedule, and to that end, the
Authority and its inspectors will coordinate its inspection activities with the Lessee and its
construction manager and/or contractor. Whenever possible, the Authority will conduct its
inspections at the same time as the architect's inspection of the construction progress so that
any issues that may arise can be handled jointly. The Lessee shall redo or replace, at its own
expense, any work not in substantial accordance with plans and specifications approved by the
Authority.
ARTICLE VII - TITLE TO THE FACILITY, FIXED IMPROVEMENTS,
AND OPERATING FACILITIES
<PAGE>
A. Title to the aircraft maintenance facility and all fixed improvements on the Aircraft Maintenance
Premises constructed by the Lessee under this Lease, and to any and all subsequent alterations,
modifications, and enlargements completed during the term of this Lease, as approved by the
Authority, shall, subject to the requirements of the Bonds, vest in the Authority as they are
constructed. The Lessee shall have the contractual obligation to construct the improvements, in
accordance with the plans and specifications approved by the Authority, to a quality level which
is commercially reasonable, conforms to industry standards for such facilities and therefore is
acceptable to the Authority and shall make such corrections to the work as the Authority
reasonably requests.
B. The Lessee shall have no right during the term of this Lease
to demolish, in whole or in part, any building, structure, or
fixed improvement constructed under the terms and conditions
of this Lease except with the written consent of the Authority
and any leasehold mortgagee(s) with an interest in the
building, structure, or fixed improvement to be demolished,
which may at the discretion of the Authority be conditioned on
the obligation of the Lessee to replace the same by a
building, structure, or fixed improvement acceptable to the
Authority.
C. The Lessee and its subtenants shall have the right to lease, encumber, or own and use such trade
equipment, furniture, operating facilities, and trade fixtures directly related to the operation
at the aircraft maintenance facility, and other trade personalty as may be deemed desirable in the
use of the aircraft maintenance facility. The Lessee and any subtenant or secured party, to the
extent of their respective interests in such personalty, shall have the right at any time to
remove or replace any and all thereof; PROVIDED, that any damage caused to real property by such
removal or replacement shall be repaired to the satisfaction of the Authority by and at the
expense of the Lessee.
<PAGE>
ARTICLE VIII - CERTIFIED COST OF CONSTRUCTION
A. Certified Statement
The Lessee shall, within 180 calendar days following
commencement of the Operating Period, submit a certified
statement for the total cost of construction of the aircraft
maintenance facility and all fixed improvements constructed on
the Aircraft Maintenance Premises to the Authority for
approval and in sufficient itemized detail to clearly identify
the actual sums expended. The certified statement shall
identify which costs of the aircraft maintenance facility have
been paid from proceeds of the Bonds.
B. Allowable Costs of Construction to Determine Certified Costs
Allowable costs of construction to determine the certified
costs reported under paragraph A. above shall include all
costs, fees, and expenses paid, incurred or to be incurred by
the Lessee on behalf of the Authority, but not as the agent,
representative, or partner of the Authority, in connection
with the design, development, financing, and construction of
the aircraft maintenance facility. The costs of construction
shall specifically include:
<PAGE>
1. Amounts paid for all construction, equipment, and
material costs for the aircraft maintenance facility
including the hangar, offices, shops, and storage
warehouse and all equipment attached to and made a
permanent part of the facility, the aircraft parking
apron, and all other fixed improvements made on the
Aircraft Maintenance Premises.
2. Amounts paid by Lessee to connect the Aircraft
Maintenance Premises to the Airport roadway system
and to extend utility lines servicing the Aircraft
Maintenance Premises to the Authority-owned utility
service lines.
3. Amounts paid architects, engineers, attorneys,
accountants, consultants, and others for the design,
development, financing, and construction of the
aircraft maintenance facility.
4. Premiums paid for all insurance and payment bonds
required during the construction period; and
5. All costs, fees, and expenses, excluding Lessee's
overhead, incurred in obtaining and settling for
construction money financing and permanent financing,
as well as the interest carry applicable thereto.
<PAGE>
C. Neither the Lessee nor any successor in interest to the Lessee under this Lease may claim, for
income tax purposes, depreciation or investment credit with respect to the aircraft
maintenance facility or any part thereof, and the Parties acknowledge that the Authority will
be the owner of the entire aircraft maintenance facility and the Aircraft Maintenance
Premises. An election under Section 142(b)(1)(B) of the Internal Revenue Code of 1986, as
amended, shall be made at the time of execution of this Lease and a copy of the election shall
be delivered to the Authority and the IDA. The Authority and the Lessee shall retain copies
of the election in their respective records for the Operating Period. The Lessee shall cause
the IDA to retain copies of the election in its records for the Operating Period. Any
publicly recorded document recorded in lieu of this Lease will state in effect that neither
Atlantic Coast Airlines (the "Lessee") nor any successor in interest to the Lessee under this
Lease, between the Authority and the Lessee may claim, for income tax purposes, depreciation
or investment credit with respect to the aircraft maintenance facility, or any part thereof.
ARTICLE IX - MAINTENANCE OF THE AIRCRAFT MAINTENANCE PREMISES
A. The Lessee, at its sole cost and expense, shall be responsible
to the Authority throughout the term of this Lease for the
maintenance of the aircraft maintenance facility and all fixed
improvements located on the Aircraft Maintenance Premises,
except to the extent of any damage caused by the Authority, or
its agents, employees, contractors, and licensees, and in
particular:
<PAGE>
1. Lessee shall perform, on a continuous basis, all general and structural maintenance
upon the aircraft maintenance hangar building and all other improvements constructed
on the Aircraft Maintenance Premises, including exterior and interior building
structure, installed and operating equipment, landscaping of the Aircraft Maintenance
Premises and the frontage on North Service Road described in Article V.F., pavement,
exterior and interior lighting, fencing, and connections to the Authority-owned
utility service lines and to the Authority roadway. In addition, the Lessee shall
perform, on a continuous basis, complete recurring maintenance services, including
all necessary snow removal services, janitorial and custodial services, trash removal
services, and any and all other related services necessary to maintain the Aircraft
Maintenance Premises in good condition and appearance, normal wear and tear
excepted. All such maintenance shall be subject to the general monitoring by the
Authority to ensure a continued high quality of appearance and structural condition.
<PAGE>
2. Lessee shall, subject to the provisions of Article
XIV herein, take timely action to repair, replace,
rebuild, and paint all or any part of the fixed
improvements constructed upon the Aircraft
Maintenance Premises which may be worn, damaged, or
destroyed. All repairs or replacements made by the
Lessee shall be of materials, specifications, and
workmanship at least equal to the original
improvement, equipment, or material.
3. Lessee shall take such care as would be reasonably prudent with respect to all fixed
improvements constructed upon the Aircraft Maintenance Premises, including, but not
limited to: the building exteriors and interiors, the operating mechanism of
windows, screens, roofs, foundations, steelwork, columns, doors, partitions, floors,
ceilings, inside and outside paved and unpaved areas, the aircraft parking apron,
pavement markings, glass of every kind, fences, landscaping, and the utility,
mechanical, electrical, and other systems so that at the expiration of this Lease,
the foregoing shall be in good condition, except for reasonable wear and tear which
does not materially adversely affect the efficient or proper use of any part of the
premises or the improvements thereon.
4. Lessee shall provide complete, proper, and adequate
sanitary handling and disposal, off the Airport, of
all trash, garbage, and other refuse caused as a
result of the operation and use of the aircraft
maintenance facility and provide suitable covered
receptacles for all trash, garbage, and other refuse
on the Aircraft Maintenance Premises.
<PAGE>
5. Lessee shall comply with the Authority's storm water detention requirements as well
as any and all Federal and state regulations addressing storm water and ensure,
through proper controls, that the Authority's sewerage and drainage control systems
are protected from contamination from toxic or hazardous waste products abandoned or
disposed of on the Aircraft Maintenance Premises by the Lessee or its tenants.
Lessee shall perform routine maintenance service on the storm water detention pond
located adjacent to but outside of the Aircraft Maintenance Premises until such time
as it may be relocated by the Authority or another party under contract to the
Authority. Such routine maintenance service shall include the periodic cleaning and
cutting of vegetation to permit the continued operation of the storm water detention
pond.
Contractors authorized by the Authority under
contract to provide fueling, defueling, handling,
and/or servicing of aircraft on the Airport shall be
liable to the Authority for the containment,
handling, and cleanup, if necessary, of any toxic or
hazardous waste brought on to the Aircraft
Maintenance Premises. The Lessee shall not be liable
to the Authority for the actions of the Authority
contractors on the Aircraft Maintenance Premises.
<PAGE>
6. Lessee shall not materially alter, modify, remove, or
improve the Aircraft Maintenance Premises without the
prior written approval of the Authority, which
approval shall not be unreasonably withheld. In the
event that an alteration, modification, removal, or
improvement is required to be made to the Aircraft
Maintenance Premises in order to conform with state
or Federal regulations, the Lessee shall make such
alteration, modification, removal, or improvement at
its sole expense.
B. The Authority shall provide all maintenance service for the
taxiway connector to the Aircraft Maintenance Premises. The
Lessee shall maintain and repair all utility service line
extensions and connections to the Authority-owned utility
service lines, and the roadway connecting the Aircraft
Maintenance Premises to the Authority's roadway system.
ARTICLE X - LEASEHOLD MORTGAGES
<PAGE>
A. The Lessee shall have the unrestricted right, from time to time, to encumber, hypothecate, or
mortgage its interest in this Lease and the leasehold estate created hereby under one or more
"Leasehold Mortgage(s)" (as hereinafter defined) to a "Leasehold Mortgagee" (as hereinafter
defined) without the prior consent of the Authority upon the condition, however, that all
rights acquired under a Leasehold Mortgage shall be subject to all the covenants, conditions,
and restrictions set forth in this Lease that the Lessee is required to observe, pay, and
perform. The right of the Lessee to grant a Leasehold Mortgage without having to obtain the
consent of the Authority shall also include the refinancing of such Leasehold Mortgage and all
renewals, modifications, consolidations, replacements, and extensions thereof upon the
condition, however, that all rights acquired under such Leasehold Mortgage shall be subject to
the covenants, conditions, and restrictions set forth in this Lease that the Lessee is
required to observe, pay, and perform. In the event a Leasehold Mortgagee or any other party
succeeding to the rights of the Lessee under this Lease, whether through foreclosure,
acceptance of an assignment or deed in lieu of foreclosure, or any possession, surrender,
assignment, judicial action, or any other action taken by or on behalf of a Leasehold
Mortgagee, the Authority agrees that this Lease shall not terminate as a result of such
transfer, surrender, assignment, judicial or other action and the Authority shall recognize
such Leasehold Mortgagee or such other party as the Lessee under this Lease in accordance with
the terms and provisions hereof. As used herein, the term "Leasehold Mortgagee" shall mean:
(i) any life insurance company, trust company, bank, national banking association, federal or
state savings and loan association, state licensed branch or agency office of a foreign bank,
pension plan, real estate investment trust (as defined in Section 856 of the Internal Revenue
Code
<PAGE>
of 1986 as amended), or other institutional lender or any
subsidiary or affiliate of any of the foregoing, including
specifically, without limitation, the Credit Facility Provider
and its subsidiaries and affiliates who are institutional
lenders, or (ii) any noninstitutional lender approved by the
Authority which holds a Leasehold Mortgage. As used herein,
the term "Leasehold Mortgage" shall mean any mortgage, deed of
trust, or any other real property security instrument by which
the Lessee may encumber, hypothecate, or mortgage all or part
of the Lessee's interest in this Lease and in the leasehold
estate created hereby.
B. Should the Lessee give a Leasehold Mortgage encumbering its
leasehold estate to a Leasehold Mortgagee, and if there shall
be delivered to the Authority a conformed original or
certified copy of the recorded Leasehold Mortgage containing
the name and address of the Leasehold Mortgagee, it is agreed
by and between the Authority and the Lessee as follows:
<PAGE>
(1) The Authority agrees to provide the Leasehold
Mortgagee with a copy of any notice of default or
similar kind of notice served upon Lessee
simultaneously with the giving of such notice to the
Lessee. No default or event of default or termination
of this Lease or of the Lessee's right to possession
of the Aircraft Maintenance Premises or any reletting
of the Aircraft Maintenance Premises by the Authority
predicated on the giving of any notice to the Lessee
shall be complete unless like notice in writing shall
have been given to the Leasehold Mortgagee and
Leasehold Mortgagee has been given the cure period as
provided in subsection B(2) below. Upon the
expiration of any applicable cure period for the
Lessee, the Authority will notify the Leasehold
Mortgagee of the Lessee's failure to effectuate a
cure within said cure period.
(2) In the event of any default by the Lessee under any
of the provisions of this Lease, the Leasehold
Mortgagee will have a period to cure the default
beginning on the same day as the cure period given
Lessee for remedying such default or causing it to be
remedied, plus, in each case, the Leasehold Mortgagee
will have an additional period of thirty (30) days
after the expiration of the Lessee's cure period
(such additional period being herein called the
"Extended Grace Period").
<PAGE>
(3) In the event the Lessee defaults under any of the
provisions of this Lease, regardless of whether such
default consists of a failure to pay rent or a
failure to do any other thing which the Lessee is
required to do hereunder, the Leasehold Mortgagee,
without prejudice to any of its rights against the
Lessee, shall have the right (but not the obligation)
to make good such default hereunder within the
Extended Grace Period, and the Authority shall accept
such performance on the part of the Leasehold
Mortgagee as though the same had been performed by
the Lessee; and for such purpose, the Authority and
the Lessee hereby authorize the Leasehold Mortgagee
to enter upon the Airport and the Aircraft
Maintenance Premises and to exercise any of the
Lessee's rights and powers under this Lease.
<PAGE>
(4) The term "Incurable Default" as used herein means a
default which cannot be reasonably cured by a
Leasehold Mortgagee such as, by way of example, a
default arising out of the causes set forth in
Article XII, A.3., 4., 5., and 6. hereof. The term
"Curable Default," as used herein, means any default
which is not an Incurable Default. In the event of
any Curable Default by the Lessee under any of the
provisions of this Lease and prior to the expiration
of the Extended Grace Period, the Leasehold Mortgagee
may, at its option, (a) give the Authority written
notice that it intends to undertake the curing of
such Curable Default or cause the same to be cured,
or to exercise its rights to acquire the interest of
the Lessee in this Lease by foreclosure or otherwise,
and (b) tender payment of all rental fees and other
charges (except Project Rental) then due and owing to
the Authority prior to the expiration of the Extended
Grace Period. In the event the Leasehold Mortgagee
does not give such notice to the Authority and tender
such payments to the Authority, the Authority may
proceed to exercise the remedies available to it
under Article XII, B. of this Lease, subject
nevertheless to the provisions of subsection B(5)
below. Upon the giving of such notice by the
Leasehold Mortgagee, the Authority will not terminate
or take any action to effectuate a termination of
this Lease nor reenter, take possession or relet the
Aircraft Maintenance Premises or otherwise enforce
performance of this Lease for so long as (a) the
Leasehold Mortgagee is with reasonable due diligence
and in good faith engaged in effecting a foreclosure
of the Leasehold Mortgage or the curing of such
Curable Default and (b) all rental fees and other
charges (with the exception of Project Rental) due
and owing to the Authority are paid; provided that
the Leasehold Mortgagee shall not be required to
continue such foreclosure proceedings or cause such
rental fees and other charges to be paid after such
Curable Default is cured. In the event the nature of
any such Curable Default is such that the Leasehold
Mortgagee must take possession of the Aircraft
Maintenance Premises in order to cure such Curable
Default, or there is an official restraint, such as
judicial order or administrative order applicable to
the Leasehold Mortgagee, including without
limitation, an automatic stay, the running of all
applicable cure periods (including the Extended Grace
Period) shall be tolled so long as rental fees and
other charges (with the exception of Project Rental)
due and owing the Authority are paid and the
Leasehold Mortgagee is diligently attempting to
obtain relief from such judicial restraint to
exercise its remedies under the Leasehold Mortgage.
Nothing herein shall preclude the Authority from
terminating this Lease with respect to any additional
default which may occur during the aforesaid period
of forbearance which is not remedied within the
period of cure, if any, applicable to any such
additional default, except that the Leasehold
Mortgagee shall have the same rights specified in
this Section with respect to any additional defaults.
<PAGE>
(5) In the event of termination of this Lease for any
reason, or in the event the Lessee's interest in this
Lease shall be sold, assigned, or transferred
pursuant to the exercise of any remedy under the
Leasehold Mortgage, or pursuant to judicial
proceedings or an assignment or deed in lieu of
foreclosure, and in the event that within thirty (30)
days thereafter the Leasehold Mortgagee (or its
nominee or the purchaser, assignee, or transferee
from the Leasehold Mortgagee or the trustee under the
Leasehold Mortgage) shall have paid or arranged to
the reasonable satisfaction of the Authority for the
payment of, all rental fees and other charges (with
the exception of Project Rental) which but for such
termination would have become so due and payable from
the date of such termination through the sixtieth
(60th) day thereafter, and shall have arranged to the
reasonable satisfaction of the Authority for the
curing of any Curable Default on the part of the
Lessee, then the Authority, within thirty (30) days
after receiving a written request therefor given any
time prior to such sixtieth (60th) day and upon
payment of all reasonable expenses incurred by the
Authority in connection with the enforcement of its
rights under this Lease (including reasonable
attorneys' fees), will execute and deliver to the
Leasehold Mortgagee or its nominee or to the
purchaser, assignee, or transferee, as the case may
be, a new lease of the Aircraft Maintenance Premises.
Such new lease shall be for a term equal to the
remainder of the term of this Lease before giving
effect to such termination, shall be subject only to
encumbrances and other matters existing as of the
date hereof, and shall contain the identical
covenants, agreements, conditions and limitations as
this Lease, with the exception that (a) the
provisions of Article XI, E. of this Lease shall not
apply, (b) the provisions of Article IV, C.3. shall
be modified as set forth in subsection B(10) below,
and (c) if the lessee under the new lease is a
Leasehold Mortgagee or a Leasehold Mortgagee
Affiliate (as hereinafter defined), the new lease
shall be subject to the provisions of subsection B(8)
below. Upon the execution and delivery of such new
lease, the new tenant may take all appropriate steps
as may be necessary to remove the Lessee from the
Aircraft Maintenance Premises, but the Authority
shall not be subjected to any liability for the
payment of any reasonable fees (including reasonable
attorney's fees), costs or expenses in connection
therewith. The new lessee shall pay all such fees,
costs and expenses or, on demand, make reimbursement
therefor to the Authority.
<PAGE>
(6) No surrender (except a surrender upon the expiration
of the term of this Lease or upon termination by the
Authority pursuant and subject to the provisions of
this Lease) by the Lessee to the Authority of this
Lease, or any part thereof, or of any of the
improvements thereon, or of any interest therein, and
no termination or rejection of this Lease by the
Lessee shall be valid or effective without the prior
written consent of the Leasehold Mortgagee, which may
be withheld in the Leasehold Mortgagee's absolute and
sole discretion. The Authority agrees that, without
the prior written consent of the Leasehold Mortgagee,
which will not be unreasonably withheld, it will not
enter into any amendment, modification, or alteration
of this Lease with the Lessee which is either (a) not
contemplated by or provided for in this Lease (it
being agreed that amendments to change a notice
address or to reflect the new Annual Ground Rental as
recalculated and set pursuant to Article IV every
fifth year during the term of this Lease are
contemplated by or provided for in this Lease and
therefore permitted without the prior written consent
of the Leasehold Mortgagee) or (b) which may
materially and adversely affect the Leasehold
Mortgagee's interest in this Lease (it being agreed
that amendments to change this Article X, or to
change the term of this Lease, or to introduce new
categories of rental fees and other charges due the
Authority and not contemplated by this Lease or
required by Federal, State, or local laws, or to
change the use provisions of this Lease may
materially and adversely affect the Leasehold
Mortgagee and therefore require the prior written
consent of the Leasehold Mortgagee). Furthermore, any
cancellation, surrender, amendment, modification, or
alteration of this Lease requiring the Leasehold
Mortgagee's prior consent, but made without the
Leasehold Mortgagee's prior written consent, shall be
null and void and of no force or effect. Provided,
however, the Leasehold Mortgagee shall give written
notice to the Authority within thirty (30) days after
receiving a proposed amendment ("Proposed Amendment")
to this Lease from the Authority of its decision to
grant or withhold its consent to the Proposed
Amendment. If the Leasehold Mortgagee withholds its
consent to the Proposed Amendment, it shall also
specify in such notice its reasons therefor in
detail. If the Leasehold Mortgagee does not give
notice of the granting or withholding of its consent
to the Proposed Amendment within such thirty (30) day
period, then the Leasehold Mortgagee shall be deemed
to have granted its consent and the Authority and
Lessee may execute such amendment to this Lease.
In the event the Authority disagrees with the
Leasehold Mortgagee's decision to withhold its
consent to the Proposed Amendment on the basis that
such consent was unreasonably withheld (hereinafter a
"Dispute"), the Authority may elect, within thirty
(30) days after its receipt of the Leasehold
Mortgagee's denial of the Proposed Amendment, to
submit the Dispute to the same binding arbitration
procedure afforded the Leasehold Mortgagee under
subsections B(8)(b)(iii), (iv), (v), (vi), (vii), and
(viii) of this Article X.
(7) The Authority hereby consents to the inclusion of a
provision in the Leasehold Mortgage for the
assignment of rents from subleases of the Aircraft
Maintenance Premises to the Leasehold
<PAGE>
Mortgagee, effective upon any default under the Leasehold Mortgage.
(8) (a) If the Lessee is in default under a Leasehold Mortgage, this Lease may be
assigned (i) to a Leasehold Mortgagee (or
any subsidiary or affiliate of a Leasehold
Mortgagee or of the parent company of a
Leasehold Mortgage ("Leasehold Mortgagee
Affiliate") by a deed or assignment in lieu
of foreclosure of a Leasehold Mortgage or
(ii) to a Leasehold Mortgagee, or a
Leasehold Mortgagee Affiliate, in each case
without the consent of the Authority, but
otherwise subject to all of the other
covenants, conditions, and restrictions set
forth in this Lease. In addition, this Lease
may be assigned (i) by a Leasehold Mortgagee
or a Leasehold Mortgagee Affiliate to a
third party assignee or (ii) to any
purchaser pursuant to a foreclosure sale or
sale pursuant to power of sale under a
Leasehold Mortgage (such assignee under
clause (i) or (ii) being herein called a
"Proposed Assignee"), in each case with the
prior written consent of the Authority,
which consent shall not be unreasonably
withheld, but otherwise subject to all of
the other covenants, conditions, and
restrictions set forth in this Lease.
<PAGE>
(b) (i) With regard to a proposed assignment ("Proposed
Assignment") of this Lease by a Leasehold Mortgagee or
Leasehold Mortgagee Affiliate to a Proposed Assignee, such
Leasehold Mortgagee or Leasehold Mortgagee Affiliate shall
provide or cause to be provided to the Authority, in
writing by registered or certified mail:
(A) the name and address of the Proposed Assignee;
(B) a detailed description of the Proposed Assignee's
business and the specific business it will conduct
on the Aircraft Maintenance Premises; and
(C) such reasonable financial information required by
the Authority so
that the Authority
can evaluate the
Proposed Assignee
under this
subsection B(8).
<PAGE>
(ii) The Authority shall give written notice to the Leasehold
Mortgagee and to the Proposed Assignee within thirty (30)
days after receiving all of the information required in
subsection B(8)(b)(i) above of its decision whether to
grant or withhold its consent to the Proposed Assignment.
If the Authority withholds its consent to the Proposed
Assignment, it shall also specify in such notice its
reasons therefor in detail. If the Authority does not give
notice of the granting or withholding of its consent to the
Proposed Assignment within such thirty (30) day period,
then the Authority shall be deemed to have granted its
consent to the Proposed Assignment and this Lease may be
assigned to the Proposed Assignee.
<PAGE>
(iii) In the event the Leasehold Mortgagee disagrees with the
Authority's decision to withhold its consent to the
Proposed Assignment on the basis that such consent was
unreasonably withheld (hereinafter a "Dispute"), the
Leasehold Mortgagee may elect, within thirty (30) days
after its receipt of the Authority's denial of the Proposed
Assignment to submit the Dispute to binding arbitration as
provided herein. Such arbitration shall be initiated by
either the Authority or the Leasehold Mortgagee within ten
(10) days after the Leasehold Mortgagee shall have sent
written notice (an "Arbitration Notice") of a demand to
arbitrate by registered or certified mail to the Authority
and to Judicial Arbitration and Mediation Services, Inc.
("JAMS"). The dispute shall be determined by binding
arbitration before a retired judge from the highest court
of general jurisdiction of the Commonwealth of Virginia
(the "Arbitrator") under the auspices of JAMS. The
Authority and the Leasehold Mortgagee shall, within ten
(10) days after the initiation of the arbitration, attempt
to agree on a retired judge from the JAMS panel to serve as
the Arbitrator. If they are unable to so agree, JAMS will
provide a list of three (3) available judges, and each
party may strike one. The remaining judge (or if there is
more than one judge remaining, one of the remaining judges
as selected by JAMS) will serve as the Arbitrator. If JAMS
shall no longer exist or if JAMS fails or refuses to accept
submission of the Dispute, the Dispute shall be resolved by
binding arbitration before the American Arbitration
Association ("AAA") under the AAA's commercial arbitration
rules then in effect.
<PAGE>
(iv) The Arbitrator shall schedule a pre-hearing conference to
resolve procedural matters, arrange, for the exchange of
information, obtain stipulations, and narrow the issues.
The parties will submit proposed discoveries and schedules
to the Arbitrator at the pre-hearing conference. The scope
and duration of discovery shall be within the sole
discretion of the Arbitrator. The Arbitrator shall have
the discretion to order a pre-hearing exchange of
information by the parties, including, without limitation
production of requested documents, exchange of summaries of
testimonies of proposed witnesses, and examination by
depositions of parties and third-party witnesses. This
discretion shall be exercised to limit the scope of
discovery to the amount of discovery which the Arbitrator
determines to be reasonable under the circumstances.
(v) The Arbitration shall be
conducted in Loudoun
County, Virginia. Any party
may be represented by
counsel or other authorized
representative. The parties
may offer such evidence as
is relevant and material to
the Dispute. The Arbitrator
shall be the judge of
relevance and materiality.
(vi) In rendering a decision,
the Arbitrator shall
determine the rights and
obligations of the parties
according to the
substantive and procedural
laws of the Commonwealth of
Virginia and the terms and
provisions of this Lease.
<PAGE>
(vii) The Arbitrator shall issue the award as soon as reasonably
possible following the conclusion of the arbitration
hearing, but in no event, any later than thirty (30) days
after the conclusion of the arbitration hearing. The
Arbitrator's award shall be based on the evidence at the
hearing, including all logical and reasonable inferences
therefrom. The Arbitrator may make any determination
and/or grant any remedy or relief that is just and
equitable. The award must be based on, and accompanied by,
a written decision explaining the factual and legal basis
for the award. The award shall be conclusive and binding,
and it may thereafter be confirmed as a judgment in any
court having jurisdiction.
(viii) The Arbitrator may award
costs, including, without
limitation, attorney's
fees, and expert and
witness costs to the
prevailing party, if any is
determined by the
Arbitrator in the
Arbitrator's discretion.
The Arbitrator's fees and
costs shall be paid by the
non-prevailing party as
determined by the
Arbitrator in his or her
discretion.
<PAGE>
(ix) Commencing on the date that the Arbitration Notice shall
have been given, and continuing through and including the
date on which the Arbitrator shall issue the award with
respect to the Dispute (the "Award Date"), the obligation
to pay all rental fees and other changes due and owing
under this Lease for such period shall be suspended (the
"Suspended Rent"). If the decision of the Arbitrator shall
be that the Authority shall not have unreasonably withheld
its consent to the Proposed Assignment, then the Leasehold
Mortgagee shall pay the Suspended Rent to the Authority
within ten (10) days after the Award Date, together with
interest at the rate of eight percent (8%) per annum from
and after the date each portion of the Suspended Rent would
have otherwise been due and payable under this Lease. In
the event the Arbitrator's award shall determine that the
Authority unreasonably withheld its consent to the Proposed
Assignment, then (A) this Lease may be assigned to the
Proposed Assignee that was the subject of the Dispute and
(B) no rental fees or other charges shall be due or owing
under the Lease for the period commencing on the date the
Arbitration Notice shall have been given and continuing
through and including (1) the date on which the Proposed
Assignee that was the subject of the Dispute shall become
the Lessee under this Lease pursuant to an assignment
hereof or 30 days after the date of the Arbitrator's award,
whichever comes first, or (2) if this Lease is not
assigned because the Authority unreasonably withheld its
consent to the Proposed Assignment to such Proposed
Assignee and through no fault of the Leasehold Mortgagee or
the Leasehold Mortgagee Affiliate, the date on which this
Lease is assigned with the consent of the Authority to a
subsequent Proposed Assignee. All rental fees and other
charges payable hereunder shall once again commence to
accrue from and after the effective date of such assignment
(whether to the Proposed Assignee that was the subject of
the Dispute or a subsequent Proposed Assignee).
(x) Unless the Authority and a Leasehold Mortgagee otherwise
agree in writing, the Authority and a Leasehold Mortgagee
shall have no right to resolve a Dispute in a manner which
is contrary to the provisions of this subsection B(8)(b).
The parties shall at all times conduct themselves in
accordance with the terms of this subsection B(8)(b), and
all attempts to circumvent the terms of this subsection
B(8)(b) shall be absolutely null and void and of no force
or effect whatsoever.
<PAGE>
(c) The ultimate assignee of this Lease shall assume the Lessee's
obligations under this Lease, including, without limitation, the
payment of all rental fees and other charges (with the exception of
Project Rental) as they become due, and an executed counterpart of
such assumption shall be delivered to the Authority. If the
Leasehold Mortgagee (or a Leasehold Mortgagee Affiliate) shall be
the assignee of this Lease, its liability under such assumption
agreement shall be limited to the period of ownership of this
Lease, provided that the party to whom this Lease is assigned by
the Leasehold Mortgagee (or a Leasehold Mortgagee Affiliate) shall
deliver to the Authority at the time of such assignment a like
assumption agreement, but without limitation as to duration of
liability. Furthermore, the Authority expressly agrees that it
shall look solely to the estate and property of a Leasehold
Mortgagee (or a Leasehold Mortgagee Affiliate) created under this
Lease for the collection or enforcement of any judgment (or other
judicial process), requiring the payment of money or the
performance of any obligation by a Leasehold Mortgagee (or such
Leasehold Mortgagee Affiliate) as the lessee of the Aircraft
Maintenance Premises in the event of any default or breach by a
Leasehold Mortgagee (or such Leasehold Mortgagee Affiliate) as the
lessee of the Aircraft Maintenance Premises with respect to any of
the terms and provisions of this Lease to be observed or performed
by it; and no other assets of the Leasehold Mortgagee (or a
Leasehold Mortgagee Affiliate) shall be subject to levy, execution,
or other judicial process for the satisfaction of the Authority's
claim.
(9) Notwithstanding anything contained in this Lease to
the contrary, during such period of time as a
Leasehold Mortgagee (or a Leasehold Mortgagee
Affiliate) shall be the Lessee under this Lease, the
Leasehold Mortgagee (or a Leasehold Mortgagee
Affiliate) shall not be required to operate and keep
open for business any portion of the Aircraft
Maintenance Premises, provided that the Leasehold
Mortgagee (or the Leasehold Mortgagee Affiliate) is
using reasonable efforts in cooperation with the
Authority to find a replacement lessee to operate the
Aircraft Maintenance Premises.
<PAGE>
(10) Notwithstanding anything contained in this Lease to
the contrary, upon and after the foreclosure of a
Leasehold Mortgage or the conveyance or assignment of
this Lease and the leasehold estate created hereby to
the Leasehold Mortgagee or Leasehold Mortgagee
Affiliate in lieu of foreclosure: (a) the provisions
of Article XI, E., appearing on page 66 of this
Lease, which limits the total space within the
aircraft maintenance hangar which shall be under
sublease at any one time, shall terminate and be of
no further force or effect, and (b) the provisions of
Article IV.C.3. pertaining to the payment of
percentage and sublease rent shall apply only if any
lessee, sublessee, or occupant of the Aircraft
Maintenance Premises or any part thereof is providing
aircraft maintenance services to third parties or
subleasing space to third parties and not for its own
account. Any airline utilizing all or a portion of
the Aircraft Maintenance Premises for the maintenance
and servicing of its own fleet shall not be liable
for percentage and sublease rent under this Lease.
Any firm providing maintenance services to third
parties, including warranty work performed by
manufacturers, shall be subject to and liable to pay
percentage rent and sublease rent if it subleases
space to third parties in accordance with Article
IV.C.3.
<PAGE>
(11) There shall be no merger of the Lessee's leasehold
estate with the leasehold estate or fee estate in the
land upon which the Aircraft Maintenance Premises is
located by reason of the fact that the Lessee's
leasehold estate may be held directly or indirectly
by or for the account of any person who shall also
hold directly or indirectly the greater estate, or
any interest in such greater estate, nor shall there
by any such merger by reason of the fact that all or
any part of the Lessee's leasehold estate may be
conveyed or mortgaged to a Leasehold Mortgagee who
shall also hold directly or indirectly such greater
estate, or any part thereof, in the land upon which
the Aircraft Maintenance Premises are located or any
interest of the Authority under this Lease.
(12) The provisions of Article X, Sections A and B are for
the benefit of, and are to be enforceable by, a
Leasehold Mortgagee.
(13) In the event that there is more than one Leasehold
Mortgage encumbering the leasehold estate created
hereby, the most senior Leasehold Mortgagee shall
have priority in terms of exercising the rights of a
Leasehold Mortgagee pursuant to the provisions of
this Section.
<PAGE>
(14) The Authority and the Lessee hereby agree to
cooperate in including in this Lease, by suitable
amendment from time to time, any provision which may
reasonably be requested by any proposed Leasehold
Mortgagee for the purpose of implementing the
Leasehold Mortgagee protection provisions contained
in this Lease and allowing such Leasehold Mortgagee
reasonable means to protect and to preserve the lien
of the Leasehold Mortgage on the occurrence of an
event of default under this Lease. The Authority and
the Lessee each agrees to execute and deliver (and to
acknowledge, if necessary, for recording purposes)
any agreement necessary to effectuate any such
amendments; provided, however, any such amendment,
shall not in any way affect the term or rental fees
and other charges due the Authority or grant to the
Lessee rights prohibited ("Prohibited Uses") under
this Lease, nor otherwise in any material respect
adversely affect any rights of the Authority under
this Lease, or the rights heretofore granted other
lessees on the Airport by the Authority.
ARTICLE XI - ASSIGNMENT AND SUBLETTING
<PAGE>
A. Assignment and Sublease by Lessee. Except as otherwise provided in this Lease, Lessee
---------------------------------
covenants that it shall not assign, transfer, convey, sell, mortgage, pledge or encumber
(hereinafter collectively referred to as an "assignment") or sublet the Aircraft Maintenance
Premises or any part thereof, or any rights of the Lessee hereunder or allow the use of the
Aircraft Maintenance Premises by any other person without the prior written consent of the
Authority. Such consent shall not be unreasonably withheld. Provided, however, that without
such consent Lessee may assign its rights under this Lease to any corporation with which
Lessee may merge or consolidate or to any corporation with which there is common ownership.
Consent by the Authority to any type of transfer described in this Article or elsewhere in
this Lease shall not in any way be construed to relieve Lessee from obtaining further
authorization from the Authority for any subsequent transfer of any nature whatsoever. If
Lessee fails to obtain prior written approval of any such assignment or sublease, the
Authority shall have the right to refuse to recognize the assignment or sublease and the
assignee or sublessee shall acquire no interest in this Lease or any rights to use the
Aircraft Maintenance Premises;
B. Notwithstanding any assignment, sublease or any other transfer
of the Aircraft Maintenance Premises or any rights under this
Lease, Lessee shall remain fully and primarily liable for the
payment of all rental fees and other charges due hereunder and
fully responsible for the performance of all of its other
obligations hereunder until expressly released in writing by
the Authority, subject to the provisions of Article X herein.
<PAGE>
C. Lessee, when requesting an approval of an assignment or
sublease agreement under Paragraph A., shall include with its
request a copy of the proposed agreement, if prepared, or a
detailed summary of the material terms and conditions to be
contained in such agreement. Any proposed agreement or
detailed summary thereof shall provide the following
information:
1. The Premises to be assigned, sublet or used;
2. The terms;
3. If a sublease, the rentals and fees to be charged;
4. If a sublease, a provision that the subtenant shall
use its subleased premises for only the permitted
usage herein unless otherwise authorized in writing
by the Authority, that the term shall not exceed the
unexpired term of this Lease, and that the sublease
shall be subject to and subordinate to this Lease;
5. All other material terms and conditions of the
assignment or sublease agreement that the Authority
may reasonably require.
D. The Authority shall provide written notice to the Lessee
within thirty (30) calendar days of its approval or
disapproval of the proposed assignment or sublease. If
approved, Lessee shall submit a fully executed copy of such
agreement to the Authority within thirty (30) days prior to
the commencement of the assignment or sublease.
E. Notwithstanding the Authority's approval of subleases, no more
than forty-nine percent (49%) of the total space within the
aircraft maintenance hangar shall be under sublease at any one
time, subject to the provisions of Article X herein.
<PAGE>
F. If any transfer of Lessee's interest hereunder shall occur, whether or not prohibited by this
Article XI, the Authority may elect to collect the rental fees and other charges due pursuant
to Article IV hereof from any assignee, sublessee or other transferee of Lessee and in such
event shall apply the net amount collected to the rental fees and other charges payable by
Lessee hereunder, PROVIDED, HOWEVER, such action by the Authority shall not release Lessee
from this Lease or any of its obligations hereunder. If any transfer of interest prohibited
by this Article XI shall occur without authorization of the Authority and the Authority
collects rental fees and other charges from any assignee, sublessee or transferee of Lessee
and applies the net amount collected in the manner described in the preceding sentence, such
actions by the Authority shall not be deemed to be a waiver of the covenant contained in this
Article or constitute acceptance of such assignee, sublessee or other transferee by the
Authority.
<PAGE>
G. The Authority may elect in an assignment or transfer of this
Lease to permit the release of the Lessee from any and all of
its obligations hereunder and thereafter look solely to the
assignee to perform all obligations of this Lease. Such a
release of the Lessee by the Authority shall only be
considered if the Authority is satisfied with the financial
suitability of the assignee, the capability of the assignee to
perform all obligations of Lessee under the Lease, and the
absence of conflict with any other rights granted the assignee
or other parties on the Airport by the Authority.
ARTICLE XII - TERMINATION BY THE AUTHORITY
A. The Lessee shall be deemed to be in default hereunder upon the
happening of any of the following events and subsequent failure
of the Lessee to cure, or commence and diligently continue
thereafter reasonable efforts to cure, the default, condition or
event within thirty (30) calendar days after written notice by
the Authority to the Lessee and any Leasehold Mortgagee or other
financing party identified under this Lease: 1. The material
failure of the Lessee to perform, keep, or observe any of the
material
terms, requirements, and conditions which it is
obligated to perform, keep, or observe under this
Lease, including the payment of rental fees and other
charges due the Authority (excluding Project Rental)
and the Lessee's failure to enforce provisions of
tenant sublease agreements.
2. The conduct by the Lessee of business activities on the
Aircraft Maintenance Premises not authorized by this
Lease or approved in writing by the Authority.
3. The occurrence of any act by the Lessee or persons
acting through the Lessee which operates to deprive the
Lessee permanently of the rights, powers, and
privileges necessary for the proper conduct of its
rights and obligations under this Lease.
<PAGE>
4. The abandonment of the Aircraft Maintenance Premises
by the Lessee or Lessee's failure to pursue
completion of the aircraft maintenance facility
within the time requirements set forth in Article
VI.C.
5. Any event of insolvency of the Lessee, including, but
not limited to, an assignment for the benefit of
creditors, or the filing of a bankruptcy petition by
Lessee.
6. Termination by the Authority of the Lessee's Airport Use
Agreement and Premises Lease. B. If the Lessee is in default under
paragraph A. above, subject to the applicable provisions under
Article X, the Authority may exercise any of the following remedies that it, in its sole
discretion, shall elect:
1. The Authority may terminate this Lease in its entirety or as to any portion of the
rights and premises covered hereby. Upon termination
hereunder in its entirety by the Authority, all
rights, powers, and privileges of the Lessee under
this Lease shall cease, and the Lessee shall
immediately vacate any and all space occupied by it
under this Lease. A partial termination, if elected,
shall be reasonably limited to the part of this Lease
affected by the default.
2. If the Lease is terminated under paragraph A.4.
above, Lessee shall, at the option of the Authority,
and at Lessee's expense, demolish and remove any or
all improvements on the Aircraft Maintenance
Premises, including the aircraft maintenance hangar
building and other related improvements.
<PAGE>
3. Upon termination as provided in paragraph B. 1.
above, the Authority may by use of reasonable means
reenter and take possession of the Aircraft
Maintenance Premises occupied by the Lessee, by legal
process, and expel, oust, and remove any and all
parties who occupy any portion of the premises on the
Airport covered by this Lease, and any and all other
parties that may be found in or upon the Aircraft
Maintenance Premises.
4. The Authority may, contemporaneously with termination
hereunder, designate a replacement lessee to
purchase, and the Lessee shall sell, its leasehold
interest in the Aircraft Maintenance Premises at a
cash price (the "Leasehold Purchase Price") not to
exceed the amount outstanding under any Leasehold
Mortgages.
<PAGE>
The portion of the Leasehold Purchase Price attributable to
costs that have been financed out of the proceeds of the Bonds
shall be paid to or at the direction of the IDA. If the
Aircraft Maintenance Premises will be leased to another entity
that assumes the Lessee's obligation to pay the amount
outstanding on the Bonds, the Leasehold Purchase Price
attributable to costs that have been financed out of the
proceeds of the Bonds shall be zero. If the Authority does not
initially designate a replacement lessee to purchase the
Lessee's interest, the Lessee shall have the right, provided
that the Lessee maintains in good condition the Aircraft
Maintenance Premises for such period, within six (6) months
thereafter to sell or otherwise transfer its interest to a
third party ("Buyer") acceptable to the Authority on terms and
conditions which require that the Buyer assume all of the
obligations of the Lessee under this Lease, commencing on the
date of transfer of the Lessee's interest to the Buyer. The
Authority's approval of the Buyer, which shall not be
unreasonably withheld, shall be conditioned on the Lessee
first meeting all payment obligations to the Authority under
the terms of the Lease from the date of termination to the
date of transfer of the Lessee's interest to the Buyer. In the
event the Lessee is unable to sell or otherwise transfer its
interest within such period, the Authority shall use its best
efforts to find a purchaser and the Lessee shall be obligated
to sell its interest to any purchaser identified by the
Authority at the Leasehold Purchase Price.
C. Any action or forbearance of action taken by the Authority
hereunder shall not be deemed a waiver of any claim for
damages that the Authority may have against the Lessee or the
Lessee's assignees. The Authority shall also be entitled to
maintain an action at law or in equity against the Lessee or
Lessee's assignees for damages, specific performance, or other
remedies available under applicable law.
ARTICLE XIII - TERMINATION BY THE LESSEE
This Lease shall be subject to termination, in its entirety, by the
Lessee, upon the happening of any one or more of the following events and the
subsequent failure of the Authority to remove or correct the condition within
the sixty (60) calendar days after written notice to the Authority:
<PAGE>
A. Any act on the part of the Authority, the lessor of the
Authority, or any party claiming by, through, or under the
Authority, which prevents or substantially and directly
restricts the use of the Aircraft Maintenance Premises for a
period of at least 120 consecutive days.
B. Any acts of God, civil commotion, acts of the military power,
damage to runways, or other similar causes which operate to
prevent or substantially restrain use of the Airport for a
period of at least 120 consecutive days.
In no event shall the Lessee terminate this Lease without the prior
written consent of the leasehold mortgagee for so long as a leasehold mortgage
remains outstanding with respect to the Aircraft Maintenance Premises. In the
event this Lease is terminated for reasons set forth in this Article, the Lessee
shall have the same rights with respect to buyout of its leasehold interest in
the Aircraft Maintenance Premises granted in Article XII herein, and shall also
be entitled to maintain an action at law or in equity against the Authority for
damages, specific performance, or other remedies available under applicable law.
ARTICLE XIV - DESTRUCTION AND IMPROVEMENTS
<PAGE>
A. In the event that the Aircraft Maintenance Premises is damaged or destroyed, in whole or in part,
by fire, explosion, acts of God, or any other cause, the Lessee agrees, with due diligence, to
restore, repair, and rehabilitate any and all damage to the Aircraft Maintenance Premises as
nearly as possible to the value and character of the facilities existing immediately prior to
such damage or destruction. If the Aircraft Maintenance Premises is not tenantable or usable by
the Lessee for fifty percent (50%) or more of the building space within the Aircraft Maintenance
Premises, the term of this Lease shall be extended for the time required to repair or restore the
Aircraft Maintenance Premises to a condition existing prior to the occurrence of the damage. The
time of extension, if any, shall be computed from the date of destruction, fire, or damage to the
date that a certificate of occupancy is issued certifying that the damage involved has been
repaired and the facilities are ready for the use by the Lessee; PROVIDED, HOWEVER, any such
extension of the term of this Lease to repair damaged facilities on the Aircraft Maintenance
Premises shall not extend beyond June 6, 2037. If all or a portion of the Aircraft Maintenance
Premises is not tenantable during a period of restoration, the Authority shall make an equitable
adjustment to the ground rental and service cost fee due the Authority in proportion to the
percentage of the building space within the Aircraft Maintenance Premises that remains fit for
occupancy or use.
<PAGE>
B. The Lessee shall have the right to cancel and terminate this Lease during the last five (5) years
of the Operating Period, if the Aircraft Maintenance Premises is damaged or destroyed by fire,
explosion, acts of God, or any other cause beyond the control of the Lessee, to an extent in
excess of fifty percent (50%) as determined by an independent adjuster, of the then fully
insurable replacement value thereof, or to a lesser extent should the Parties hereto agree that
continued use and operation of the Aircraft Maintenance Premises is not feasible. In the event
this Lease is canceled or terminated as provided for under this paragraph B., the Lessee shall
pay all fees and other charges due the Authority, as provided for under Article IV herein, to the
date of cancellation or termination of this Lease and shall cause the distribution of insurance
proceeds in the following order: (i) first, to pay amounts outstanding for any Bonds and/or
leasehold mortgages, (ii) second, to remove debris and restore the grounds on the Aircraft
Maintenance Premises, (iii) third, to pay, in cash, the Authority an amount equal to the
Authority's interest in the replacement value of the Aircraft Maintenance Premises, and (iv) the
balance, if any, to the Lessee. The method of determining the Authority's interest in the
replacement value of the Aircraft Maintenance Premises shall be calculated as the expired or
amortized percentage of the Operating Period on the date the Lease is canceled or terminated
times the total amount of replacement insurance proceeds available prior to distribution. (e.g.,
The Lease is canceled or terminated on the first day of the twenty-sixth year of the Operating
Period and the replacement insurance proceeds total $15,000,000. Therefore the amount due the
Authority under this example, assuming a thirty (30) year Operating Period, would be
.833 x $15,000,000 = $12,500,000 assuming the sum under (i) and (ii) above is $2,500,000 or less).
<PAGE>
C. The insurance proceeds from the policies of insurance provided
by the Lessee shall be held in trust by the Leasehold
Mortgagee and used for the sole purpose of repairing or
replacing the damaged or destroyed Aircraft Maintenance
Premises, or distributed as provided in paragraph B. above
should the Lease be canceled or terminated and the Aircraft
Maintenance Premises not restored.
ARTICLE XV - INSURANCE AND INDEMNIFICATION
A. The Lessee shall continuously provide, maintain in force and
effect, and pay all premiums for the following insurance
coverage from an insurance company(s) possessing a rating of
B+10 or higher from the A.M. Best Company or an equivalent
rating. The Metropolitan Washington Airports Authority shall
be named as an additional insured on all policies, except
Worker's Compensation and, if required, Professional
Liability: 1. Property Insurance for the Aircraft Maintenance
Premises
<PAGE>
Insurance against loss or damage to all improvements
constructed on the Aircraft Maintenance Premises
(including all subsequent alterations, rebuilding,
replacements, changes and additions thereto made by
Lessee) by reason of fire, wind, smoke, vandalism,
malicious mischief, riot, civil commotion and hazards
and risks included with so-called "extended coverage
endorsements" or "all risk." Such policies shall name
the Lessee as the insured and each shall contain an
endorsement in favor of the Authority and the
Lessee's Leasehold Mortgagee(s) as additional
insureds in a form satisfactory to the Authority and
such Leasehold Mortgagee(s). The insurance shall be
issued in an aggregate amount which shall not be less
than the full replacement value (exclusive of paved
surfaces, excavation, basements, and foundations) of
all improvements erected on the Aircraft Maintenance
Premises. Each insurance policy shall be in such form
and content as is reasonably acceptable to the
Authority and to the Lessee's Leasehold Mortgagee(s).
Such policies may be in the form of blanket coverage.
The policy or policies of insurance shall provide
that all proceeds of such insurance shall be payable
to the Lessee or Leasehold Mortgagee, in trust, to be
used for the sole purpose of repairing or replacing
the damaged or destroyed improvements constructed and
installed on the Aircraft Maintenance Premises or
distributed as provided for under Article XIV herein.
2. Commercial General Liability Insurance
<PAGE>
Insurance identifying the Authority as an additional
insured, and protecting the Authority and the Lessee
against public liability in an amount of not less
than Ten Million Dollars ($10,000,000) combined
single limit (which shall include umbrella
coverages). Such policy or policies of general
liability shall include Premises-Operations
Liability, Contractual Liability, Personal Injury,
and Broad Form Property Damage to cover the entire
Aircraft Maintenance Premises and all activities of
the Lessee, its tenants, and all other parties
authorized by the Lessee to use or operate on the
Aircraft Maintenance Premises.
3. Comprehensive Automobile Liability Insurance
Insurance with a combined single limit of Ten Million
Dollars ($10,000,000) for bodily injury and property
damage for each accident (including garage liability,
all automotive equipment owned, operated, leased,
hired, and non-owned).
4. Worker's Compensation and Employer's Liability Insurance
Insurance required for the selected proponent to
comply with the laws of the State of Virginia with
All States Endorsement Employer's Liability of
$1,000,000 for each accident/disease.
B. The insurance protection required under this Lease shall be
written with insurance companies licensed and qualified to do
business in the State of Virginia. If in the Authority's
opinion the minimum levels of insurance herein required have
become inadequate during the term of this Lease, the Lessee
agrees to increase such minimum levels of insurance to the
reasonable amount requested by the Authority.
<PAGE>
C. Each policy or certificate issued by the insurer shall contain
an agreement by the insurer that the policy will not be
canceled without at least thirty (30) days advance written
notice of cancellation to the Authority and to the Lessee's
Leasehold Mortgagee(s) and in no event shall such policies be
canceled by the Lessee without the Authority's prior written
consent unless proper replacement policies are then issued and
available.
D. All insurance required to be provided and maintained may be
placed under the Lessee's so-called "blanket policies";
PROVIDED, HOWEVER, the insurer named in the blanket policies
must certify to the Authority and to the Lessee's Leasehold
Mortgagee(s) that the coverage required is separately
identified and is provided within the terms of the blanket
policy for the Aircraft Maintenance Premises.
E. At least ten (10) days before the expiration date of each
policy of insurance required by this Lease, the Lessee shall
pay the premiums for the renewal of each of such policy or
policies and within such period the Lessee shall deliver to
the Authority the renewal certificates of the fire and
extended risk endorsement policies, the general comprehensive
general liability policies, and comprehensive automobile
liability policies with an endorsement thereon marked "paid"
and/or a duplicate receipt evidencing advanced payment.
Certificates of insurance shall be sent to the Airport
Manager, Washington Dulles International Airport, P.O. Box
17045, Washington, DC 20041.
<PAGE>
F. Indemnification. Except as provided in Article XXIX herein, the Lessee shall assume all risks
---------------
incident to, or in connection with, the occupancy and use of the Aircraft Maintenance Premises
under this Lease, and Lessee shall be solely responsible for all accidents or injuries to persons
or property caused by the occupancy and use of the Aircraft Maintenance Premises. The Lessee shall
indemnify, defend, and save harmless the Authority, its authorized officers, employees, agents,
and representatives from any and all claims, suits, civil, criminal or administrative proceedings,
losses, damages, or attorney fees, of whatsoever kind or nature, arising directly or indirectly
out of or incident to the use and occupancy of the Aircraft Maintenance Premises and improvements
constructed thereon or resulting from the act or omission of the Lessee, its agents, contractors,
subcontractors, tenants, and employees, guests, and contractors of tenants, except to the extent
caused by acts or failures to act by the Authority or its agents, employees, contractors, or
licensees.
G. The Authority shall be responsible for performing any
mitigating measures required by law or regulation, if any,
because of the existence of possible wetlands within and/or
adjacent to the Aircraft Maintenance Premises and requiring
mitigation because of the construction of the aircraft
maintenance facility.
ARTICLE XVI - PERFORMANCE GUARANTEE AND BONDS
<PAGE>
The Lessee shall furnish to the Authority performance and payment
bonds. The bonds, at the option of the Lessee, may be in the form of a surety
bond, letter of credit, postal money order, certified cashier's check payable to
the Authority, or an irrevocable letter of credit. The bonds shall be sent to
the Airport Manager, Washington Dulles International Airport, P.O. Box 17045,
Washington, DC 20041. These bonds shall be in the amount indicated below and
conditioned on the Lessee's performance as follows:
A. Performance Guarantee
A performance guarantee in a penal sum of One Hundred
Seventy-Nine Thousand Five Hundred Sixty-Three Dollars
($179,563) conditioned on the full and faithful performance by
the Lessee of each and all of the covenants, agreements, and
understandings as set forth in this Lease. The performance
guarantee may be an annual guarantee but must be renewed
annually at least thirty (30) calendar days in advance of its
date of expiration. The performance guarantee amount shall be
adjusted annually so that it is in the amount equal to one
hundred percent (100%) of the annual ground rental and service
cost fee and fifty percent (50%) of the estimated utility
costs payable to the Authority. This guarantee shall be
submitted to the Authority within thirty (30) calendar days of
the commencement of the Operating Period.
B. Payment Bonds
<PAGE>
Payment bonds in the amount of one hundred percent (100%) of
the contract price, including the value of materials to be
incorporated in the work, for the aircraft maintenance
facility. The payment bonds shall be incurred by all major
trade subcontractors and the Lessee shall ensure that such
payment bonds collectively total one hundred percent (100%) of
the contract price of the aircraft maintenance facility. These
payment bonds are to assure payment to the construction
contractors supplying labor and materials. The Lessee shall be
required to promptly clear all liens filed against the
aircraft maintenance facility, its contractors,
subcontractors, material men, and workmen arising out of the
performance of the construction work, and shall indemnify the
Authority against all claims arising out of the performance of
all such construction work. These payment bonds shall be in
effect until the completion of construction and the beginning
of the Operating Period.
ARTICLE XVII - LATE CHARGES
A. Without waiving any other right of action available to the
Authority in the event of late payment of rental fees and
other charges due hereunder, late charges will be assessed for
all rental fees and charges for which payment is received by
the Authority after the due date. Late charges may consist of
interest, penalties, and administrative charges as indicated
in paragraphs B., C., and D. below.
B. The interest charge for late payment shall be calculated as
the product of the charges that are late and an interest rate
per annum which is four percent (4%) higher than the "prime
rate" as published in The Wall Street Journal, commencing on
the date that such charges were past due, provided the Lessee
shall have had at least thirty (30) days advance notice of any
rental fee or other charges due the Authority under this
Lease.
<PAGE>
C. The monthly penalty charges for late payment shall be
calculated as the product of the unpaid portion of accounts
more than ninety (90) calendar days past due and an interest
rate of six percent (6%) per annum (or as established
periodically).
D. The administrative charge of $12 (or as established
periodically) will be assessed for each month for every
account past due more than thirty (30) calendar days.
ARTICLE XVIII - AIRPORT RULES AND REGULATIONS
The Lessee, while exercising the rights granted under this Lease, shall
observe and obey all lawful rules and regulations of the Metropolitan Washington
Airports Authority not inconsistent with the rights granted the Lessee by this
Lease and applied in a nondiscriminatory manner to other lessees of comparable
Airport property.
ARTICLE XIX - COPARTNERSHIP
It is mutually understood and agreed that nothing in this Lease is
intended or shall be construed as in any way creating or establishing the
relationship of copartners between the Parties hereto, or as making the Lessee
an agent or representative of the Authority for any purpose or in any manner
whatsoever.
ARTICLE XX - PARTICIPATION IN LEASE
The Lessee agrees that no member of the Authority Board of Directors or
employees of the Authority shall be admitted to any share or part of this Lease
or to any benefit that may arise therefrom.
<PAGE>
ARTICLE XXI - TAXES
Lessee shall comply with all applicable taxation laws, rules, rulings,
and regulations imposed by any jurisdiction with authority to tax the Lessee's
income, receipts, sales, purchases, property and leasehold interest or other
interests arising from this Lease. Nothing herein shall be construed to deny or
limit the Lessee's right to contest in good faith the amount or validity of any
tax or assessment by appropriate means.
ARTICLE XXII - SIGNS
The Lessee shall not, without the prior written approval of the
Authority, not to be unreasonably withheld, erect, maintain, or display any
advertising, signs, posters, or similar devices at or on the Aircraft
Maintenance Premises; PROVIDED, HOWEVER, that on those interior portions of the
aircraft maintenance facility which are not visible from the outside, the Lessee
may install directional and identification signs necessary for the facility and
all such signs shall be exempt from the prior approval of the Authority.
ARTICLE XXIII - QUIET ENJOYMENT
The Authority agrees that the Lessee and its subtenants shall peaceably
have and enjoy the Aircraft Maintenance Premises and all rights and privileges
granted under this Lease without any interruption or disturbance from the
Authority as long as the Lessee pays all amounts due the Authority and performs
all other obligations required under this Lease.
<PAGE>
ARTICLE XXIV - RIGHT OF INSPECTION OF PREMISES
The Authority, its authorized representatives and agents, shall have
the right to view any and all of the Aircraft Maintenance Premises, at any
reasonable time during normal business hours for the purpose of inspecting or
performing any other act therein which may be necessary for the proper operation
of the Airport; PROVIDED, HOWEVER, that the Authority will exercise its best
efforts to not interfere with the Lessee's use of the Aircraft Maintenance
Premises.
ARTICLE XXV - SAVING PROVISION
If any provision of this Lease or the application of any provision of
this Lease to any person or circumstance shall be invalid or unenforceable to
any extent, the remainder of this Lease or the application of such provision to
persons or circumstances other than those to which it is invalid or
unenforceable, shall not be affected thereby and each provision of this Lease
shall be valid and be enforced to the fullest extent of the law.
ARTICLE XXVI - WAIVER OF PERFORMANCE
<PAGE>
The failure of either the Authority or the Lessee to insist, in any one
or more instances, upon a strict performance by the other of any of the
provisions, terms, covenants, reservations, conditions, or stipulations
contained in this Lease, shall not be considered a waiver or relinquishment
thereof, but the same shall continue and remain in full force and effect, and no
waiver by either Party of any provision, term, covenant, reservation, condition,
or stipulation hereunder shall be deemed to have been made in any instance
unless expressed in writing and agreed to by the Parties hereto.
ARTICLE XXVII - CERTIFICATION OF THE LESSEE'S STATUS
The Authority agrees to execute and deliver to the Lessee and/or any
other person or entity designated by the Lessee, from time to time, upon
reasonable written notice by the Lessee, which notice shall state that the
Lessee requires same in connection with a financing or other undertaking, a
statement in writing:
(i) certifying that this Lease is unmodified and in full
force and effect (or if there have been material
modifications, that the Lease is in full force and
effect as modified);
(ii) stating whether the Lessee is in default in the
performance of any of the terms, requirements, or
conditions contained in this Lease and if so,
specifying the nature of such default; and
(iii) addressing such other reasonable matters as Lessee or
any lender of Lessee may request.
ARTICLE XXVIII - NOTICES
Notice to the Authority, Lessee, and any other parties designated by
the Lessee provided for herein shall be sufficient if sent by certified mail,
postage prepaid, and
<PAGE>
addressed to the addresses set out below or to such other address as may be
designated by the party involved to the other parties in writing from time to
time:
If to the Authority, as follows:
Airport Manager
Washington Dulles International Airport
P.O. Box 17045
Washington, DC 20041
If to the Lessee, as follows:
Atlantic Coast Airlines
Corporate Counsel
515A Shaw Road
Sterling, VA 20164
With copies to:
If to any Leasehold Mortgagee(s), to such address as such mortgagee(s) may
notify the Authority in writing from time to time.
ARTICLE XXIX - ENVIRONMENTAL MATTERS
A. Hazardous Substances, Spills, and Releases.
<PAGE>
1. Lessee shall immediately notify the Authority upon becoming aware of: (1) any leak,
spill, release, discharge, or disposal at a reportable level or a level that could
reasonably be expected to pose a threat to human health or the environment
(collectively, a "Material Level") of a Hazardous Substance on, under, or adjacent to
the Aircraft Maintenance Premises or threat of or reasonable suspicion of any of the
same; and/or (2) any notice or communication from a governmental agency or any other
person, directed to Lessee or any other person (of which Lessee has knowledge),
relating to such Hazardous Substances thereon, thereunder, or adjacent thereto or any
violation of any federal, state, or local Environmental Laws, with respect to the
Aircraft Maintenance Premises or activities thereon; and (3) any other event relating
to Hazardous Substances or Environmental Laws, which event could reasonably be
expected to injure the Aircraft Maintenance Premises, reduce the value of the
Aircraft Maintenance Premises, or impair the Lessee's ability to comply with any of
its obligations under this Lease.
<PAGE>
2. In the event of a leak, spill, or release at a Material Level of a Hazardous
Substances on the Aircraft Maintenance Premises by the Lessee or the threat of or
reasonable suspicion of the same, Lessee shall (to the extent that the Lessee or the
Authority is so required under applicable law, including Environmental Laws)
immediately undertake all emergency response necessary to contain, clean-up, and
remove the Hazardous Substance and shall undertake within a reasonable time all
investigatory, remedial, and/or removal action necessary or appropriate to ensure
that any contamination by the Hazardous Substance is eliminated; provided, however,
-------- -------
that the Authority shall choose the waste disposal site and assume complete
responsibility for arranging for the disposal of any Hazardous Substance arising from
any Authority Environmental Responsibilities. The Authority shall have the right to
approve all investigatory, remedial, and removal procedures and the company(ies)
and/or individuals conducting said procedures; provided, however, that in the case of
-------- -------
an emergency, no such prior approval shall be required. In all other cases the
Authority's approval shall be deemed given three business days after the receipt of
the Lessee's proposed investigatory, remedial, or removal procedures. Within thirty
days following completion of such investigatory, remedial, and/or removal action,
Lessee shall provide the Authority with a certificate acceptable to the Authority,
stating that all such contamination has been eliminated as required by applicable
Environmental Laws. The Lessee shall be responsible for any costs incurred under
this Article XXIX, except that the Authority shall be responsible for any costs
incurred by the Lessee under this Article, which costs arise from: (i) a condition
on the Aircraft Maintenance Premises, existing on the date the Lessee took possession
thereof, whether or not such condition was uncovered in an environmental audit or
assessment and which condition is not caused by the Lessee or its employees,
contractors, or agents; or (ii) any contamination caused by the migration of
Hazardous Substances from any other property (not caused by the Lessee or any of its
tenants, or their employees or agents); or (iii) a leak, spill or release of a
Hazardous Substance on the Aircraft Maintenance Premises caused by any action or
inaction of the Authority, its employees, contractors, or agent (collectively, the
"Authority Environmental Responsibilities").
B. Environmental Indemnification - Lessee
<PAGE>
Lessee agrees to indemnify, save, and hold harmless the
Authority from and against all removal, remediation,
containment, and other costs (whenever incurred) caused by,
arising out of, or in connection with the handling, storage,
discharge, transportation, or disposal of Hazardous
Substances, which Hazardous Substances are on the Aircraft
Maintenance Premises and which handling, storage, discharge,
transportation or disposal occurs after the date of legal
possession of the Aircraft Maintenance Premises by the Lessee
and prior to the vacation of the Aircraft Maintenance Premises
by the Lessee; provided, however, this indemnity shall also
cover any costs (whenever incurred) caused by, arising out of,
or in connection with, the handling, storage, discharge,
transportation, or disposal of Hazardous Substances, which
Hazardous Substances are on the Aircraft Maintenance Premises,
resulting from the acts or omissions of Lessee, or any of its
tenants thereof, or their employees, representatives or
agents; provided, further, this indemnity shall not cover any
costs resulting from the Authority Environmental
Responsibilities. Costs shall include, but not be limited to:
(a) claims of third parties, including governmental agencies,
for damages, response costs, injunctions, or other relief; (b)
the cost, expense, or loss to the Authority of any injunctive
relief, including preliminary or temporary injunctive relief,
applicable to the Authority or the Aircraft Maintenance
Premises; (c) the expense, including fees of attorneys,
engineers, consultants, paralegals and experts, of reporting
to any agency of the State of Virginia or the United States as
required by applicable Environmental Laws and responding to
the existence of said Hazardous Substances; (d) any and all
expenses or obligations, including fees of attorneys'
engineers, consultants, and paralegals, incurred at, before,
and after any trial or appeal therefrom, or any administrative
proceeding or appeal therefrom whether or not taxable as
costs, including, without limitation, attorneys' and paralegal
fees, witness fees (expert and otherwise), deposition costs,
copying and telephone charges, and other expenses, all of
which shall be paid by Lessee promptly after the Authority
incurs the obligation to pay such amounts. Such damages,
costs, liabilities, and expenses shall include those claimed
to be owed by any regulating and administering agency. As
applied to this Article the Aircraft Maintenance Premises
shall be deemed to include the soil and water table thereof.
C. Environmental Indemnification - Authority
<PAGE>
The Authority agrees to indemnify, save, and hold harmless the
Lessee from and against all removal, remediation, containment,
and other costs arising in connection with the Authority
Environmental Responsibilities caused by, arising out of, or
in connection with the handling, storage, discharge,
transportation, or disposal of Hazardous Substances. Such
costs shall include but not be limited to: (a) claims of third
parties, including governmental agencies, for damage, response
costs, injunctions, or other relief; (b) the cost, expense, or
loss to the Lessee of the Aircraft Maintenance Premises; (c)
the expense, including fees of attorneys, engineers,
consultants, paralegals, and experts, of reporting to any
agency of the State of Virginia or the United States as
required by applicable Environmental Laws and responding to
the existence of said Hazardous Substances; (d) any and all
expenses or obligations, including fees of attorneys'
engineers, consultants, and paralegals, incurred at, before,
and after any trial or appeal therefrom or any administrative
proceeding or appeal therefrom, whether or not taxable as
costs, including, without limitation, attorneys' and paralegal
fees, witness fees (expert and otherwise), deposition costs,
copying and telephone charges, and other expenses, all of
which shall be paid by the Authority promptly after the Lessee
incurs the obligation to pay such amounts. Such damages,
costs, liabilities, and expenses shall include those claimed
to be owed by any regulating and administering agency. As used
in this Article, the Aircraft Maintenance Premises shall be
deemed to include the soil and water table thereof.
D. Definitions. For purposes of this Article XXIX the following
words and phrases shall have the following meanings:
"Environmental Law" shall mean any Federal, state, or local
law, rule, regulation, code, order, ordinance, statute, or
decision related to Hazardous Substances.
<PAGE>
"Hazardous Substances" shall mean (i) any substances defined
as hazardous materials, pollutants, contaminants, toxic
substances or related materials as now or hereinafter defined
in any applicable Federal, state, or local law, regulation,
ordinance, or directive, including, but not limited to, the
Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Sections 6901 et. seq.); the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
by SARA (42 U.S.C. Section 9601, et. seq.); the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801, et.
seq.); the Toxic Substances Control Act (15 U.S.C. Section
2601, et. seq.); the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Sections 9601, et. seq.); the Clean
Water Act (33 U.S.C. Section 7412 et. seq.); as any such acts
may be amended, modified, or supplemented; (ii) those
substances listed or otherwise identified in the regulations
adopted and publications issued, as may be amended, modified,
or supplemented, pursuant to any of the above-referenced
statutes; (iii) any friable asbestos, airborne asbestos, or
any substance the presence of which on the Aircraft
Maintenance Premises is prohibited by any Environmental Law of
any governmental authority or which may give rise to an
assessment of a governmental authority; and (v) any other
substance which by any Environmental Law of any governmental
authority requires special handling in its collection,
storage, treatment, or disposal.
ARTICLE XXX - FEDERAL REQUIREMENTS
A. Relationship to Federal Lease
This Lease shall be and remain subordinate to the provisions
of the lease between the United States Department of
Transportation and the Authority (the "Federal Lease"). The
Authority agrees to provide Lessee and any Leasehold Mortgagee
written advance notice of any amendments to the Federal Lease
that materially affect the terms of this Lease. At any time
after execution of this Lease, the United States Department of
Transportation, or its successor, shall have the right to
declare this Lease to be superior to the Federal Lease.
<PAGE>
B. Other Government Agreements
This Lease shall be and remain subordinate to the provisions
of any existing or future agreements between the Authority and
the United States government or other governmental authority,
relative to the operation or maintenance of the Airport, the
execution of which has been or will be required as a condition
to the granting of federal or other governmental funds for the
development of the Airport, to the extent that the provisions
of any such existing or future agreements are generally
required by the Untied States or other governmental authority
of other civil airports receiving such funds. The Authority
agrees to use its best efforts to notify Lessee and Leasehold
Mortgagee of any provision of which the Authority becomes
aware which would materially and adversely modify the material
terms of this Lease.
C. Federal Government's Emergency Clause
All provisions of this Lease shall be subordinate to the
rights of the United States of America to operate the Airport
or any portion thereof during time of war or declared national
emergency in accordance with established lawful procedures.
Such rights shall supersede any provision of this Lease that
is inconsistent with the operation of the Airport by the
United States of America during a time or war or national
emergency.
<PAGE>
D. Nondiscrimination
Lessee for itself, its personal representatives, successors in
interest, and assigns, as part of the consideration hereof,
does hereby agree as a covenant running with the land that (i)
no person on the grounds of race, color or national origin
shall be excluded from participation in, denied the benefits
of, or be otherwise subjected to discrimination in the use of
the Aircraft Maintenance Premises; (ii) in the construction of
any improvements on, over, or under the Aircraft Maintenance
Premises and the furnishing of services thereon, no person on
the grounds of race, color or national origin shall be
excluded from participation in, denied the benefits of, or be
otherwise subjected to discrimination.
E. Airport Certification
Lessee shall not operate the Aircraft Maintenance Premises in
a manner that prevents or impairs the Authority's ability to
be in, and maintain, compliance with FAA regulation 14 CFR
Part 139, "Certification and Operations: Land Airports Serving
Certain Air Carriers," and other requirements for obtaining
and maintaining, an Airport Operating Certificate from the
FAA.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Lease as of
the day and year shown below.
METROPOLITAN WASHINGTON AIRPORTS AUTHORITY
By
James A. Wilding
General Manager and
Chief Executive Officer
Date
ATLANTIC COAST AIRLINES
By
Title
Date
SECRETARY'S CERTIFICATE
I, , certify that I am the Secretary of the corporation named as the
Lessee herein; that who signed this Lease on behalf of the corporation, was then
of said corporation; that said Lease was duly signed for and on behalf of said
corporation by authority of its governing body and is within the scope of its
corporate powers.
(Corporate Seal)
(Secretary's Signature)
<PAGE>
COMMONWEALTH OF VIRGINIA)
) ss.:
COUNTY OF LOUDOUN )
I, , a notary public in and for the State and
---------------------------------------------------
County aforesaid, do certify that , whose name, as
------------------------------------------------------
of , is signed
to the writing above, bearing date on the day of , has
acknowledged the same before me in my County aforesaid.
Given under my hand and official seal this day of .
Notary Public
COMMONWEALTH OF VIRGINIA)
) ss.:
COUNTY OF LOUDOUN )
I, , a notary public in and for the Commonwealth and
County aforesaid, do certify that , whose name, as
, of METROPOLITAN WASHINGTON AIRPORTS AUTHORITY, is signed to
the writing above, bearing date on the day of
, has acknowledged the same before me in my County aforesaid.
Given under my hand and official seal this day of .
My term of office expires on the of .
Notary Public
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SCHEDULE
TO THE
MASTER AGREEMENT
dated as of July 11, 1997
between
BOMBARDIER INC. ("Party A")
and
ATLANTIC COAST AIRLINES ("Party B")
I. PART TERMINATION PROVISIONS
A. "Specified Entity" means in relation of Party A for the purposes of:
Section 5(a)(v) (Default under Specified
Transaction): Not applicable
Section 5(a)(vi) (Cross Default): Not applicable
Section 5(a)(vii) (Bankruptcy): Not applicable
Section 5(b)(iv) (Credit Event upon Merger):
Not applicable
and in relation to Party B for purposes of:
Section 5(a)(v) (Default under Specified
Transaction): Not applicable
Section 5(a)(vi) (Cross Default): Atlantic Coast Airlines, Inc.
Section 5(a)(vii) (Bankruptcy): Atlantic Coast Airlines, Inc.
Section 5(b)(iv) (Credit Event upon Merger):
Affiliates
A. "Specified Transaction" will have the meaning specified in Section 14 of this Agreement.
A. The "Cross Default" provisions of Section 5(a)(vi)
shall apply to Party A, Party B and the Specified Entities of
Party B.
"Specified Indebtedness" will have the meaning specified in
Section 14 of this Agreement; provided that with respect to
Party B only, "Specified Indebtedness" shall include, without
limitation, the Purchase Agreement No. RJ-0350 dated January
8, 1997 between Party A and Party B and any agreement entered
into between Party A and Party B in connection therewith.
"Threshold Amount" means
1. with respect to Party A, an amount equal to three
and one-half per cent (3 1/2%) of Party A's total
stockholders' equity (as specified from time to time
in its most recently audited annual financial
statements prepared in accordance with generally
accepted accounting principles), or its equivalent in
any other currency; and
1. with respect to Party B, the lesser of (A)
$1,000,000 or (B) an amount equal to three and
one-half per cent (3 1/2%) of Party B's total
stockholders' equity (as specified from time to time
in its most recently audited financial statements
prepared in accordance with generally accepted
accounting principles).
A. The "Credit Event Upon Merger" provisions of
Section 5(b)(iv) will only apply to Party B.
A. The "Automatic Early Termination" provisions of Section 6(a) will not apply to either party.
A. Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:
1. Market Quotation will apply.
2. Second Method (Full Two-Way Payment) will apply.
A. "Termination Currency" means the currency selected
by the non-Defaulting Party or the non-Affected Party, as the
case may be, or in circumstances where there are two Affected
Parties, United States Dollars.
I. PART TAX REPRESENTATIONS.
A. Payer Tax Representations. For purposes of Section 3(e) of this Agreement, Party A and Party B
each makes the following representation:
It is not required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, of
any Relevant Jurisdiction to make any deduction or withholding
for or on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii) or 6(e) of this
Agreement) to be made by it to the other party under this
Agreement. In making this representation, it may rely on (i)
the accuracy of any representations made by the other party
pursuant to Section 3(f) of this Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i) or
4(a)(iii) of this Agreement and the accuracy and effectiveness
of any document provided by the other party pursuant to
Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the
satisfaction of the agreement of the other party contained in
Section 4(d) of this Agreement, provided that it shall not be
a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or
document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
A. Payee Tax Representations. For purposes of Section 3(f) of this Agreement, Party A and Party B
each make the following representation:
It is fully eligible for the benefits of the "Business
Profits" provision, the "Interest" provision and the "Other
Income" provision of the Specified Treaty with respect to any
payment described in such provisions and received or to be
received by it in connection with this Agreement, and no such
payment is attributable to a trade or business carried on by
it through a permanent establishment in the jurisdiction of
the Payer.
"Specified Treaty" means, with respect to a Transaction, the
tax treaty applicable between the United States and Canada.
I. PART AGREEMENT TO DELIVER DOCUMENTS
For the purposes of Sections 4(a)(i) and (iii) of this Agreement, each party
agrees to deliver the following documents, as applicable:
A. Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner
reasonably satisfactory to the other party, and to execute,
arrange for any required certification of, and deliver to the
other party (or to such governmental or taxing authority as
the other party reasonably directs), any form or document that
may be required or reasonably requested in order to allow the
other party to make a payment under this Agreement without any
deduction or withholding for or on account of any Tax or with
such deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate, (i)
promptly upon the earlier of (A) reasonable demand by the
other party and (B) learning that the form or document is
required and (ii) prior to the expiration or obsolescence of
any previously delivered form.
A. Other documents to be delivered are:
Party required to deliver Form / Document / Date by which to be Covered by Section 3(d)
document Certificate delivered Representation
Party A and Party B Certified evidence of Upon execution of this Yes
the authority, Agreement and, in
incumbency and specimen connection with each
signature of each Confirmation, promptly
authorized person following the request of
executing this Agreement the other party
and any Confirmation
Party B Audited annual Upon request of Party A Yes
consolidated financial promptly following
statements, prepared in availability of such
accordance with statements
accounting principles
that are generally
accepted for
institutions of its type
in the jurisdiction of
its organization and
certified by independent
public accountants
Party B Unaudited interim Upon request of Party A Yes
consolidated financial promptly following
statements prepared in availability of such
accordance with statements
accounting principles
that are generally
accepted for
institutions of its type
in the jurisdiction of
its organization
I. PART MISCELLANEOUS.
<PAGE>
A. Addresses for Notices. For purposes of Section 12(a) of this Agreement:
Address for notices or communications to Party A:
Bombardier Inc.
800 boul, Rene-Levesque ouest
Montreal (Quebec)
H3B 1Y8
Attention: Vice President and Treasurer
Facsimile No.: (514) 861-7053
Telephone No. for Confirmation: (514) 861-9481
Telex No.: 055 62129
Answerback: BOMCORPOFF MTL
Addresses for notices or communications to Party B:
515A Shaw Road
Dulles, VA 20166
Attention: Director of Treasury Management
Facsimile No.: (703) 925-6299
Telephone No. for Confirmation: (703) 925-6017
A. Process Agent. For purposes of Section 13(c) of this Agreement:
1. Party A appoints as its Process Agent: Not Applicable.
1. Party B appoints as its Process Agent: Not Applicable.
A. Offices. Not applicable.
A. Multibranch Party. For the purposes of Section 10(c) of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
A. Calculation Agent. The Calculation Agent is Party A, unless otherwise specified in the
applicable Confirmation.
A. Credit Support Document:
With respect to Party A, the following shall constitute Credit Support Documents:
Not applicable
With respect to Party B, the following shall constitute Credit
Support Documents:
1. Guaranty dated as of July 11, 1997 by Atlantic Coast
Airlines, Inc.
A. Credit Support Provider.
Credit Support Provider means in relation to Party A:
Not applicable
Credit Support Provider means in relation to Party B:
Atlantic Coast Airlines, Inc.
A. Governing Law. This Agreement will be governed by and construed in accordance with the laws of
the State of New York (without reference to choice of law doctrine).
A. Netting of Payments. Section 2(c)(ii) of this
Agreement will apply to any Transaction from the date of this
Agreement (i.e., no netting) (other than with respect to the
payments of the premiums).
A. "Affiliate" will have the meaning specified in Section 14 of this Agreement.
I. PART OTHER PROVISIONS
<PAGE>
A. ISDA Definitions. The 1991 ISDA Definitions (the
"Definitions") and the 1992 ISDA FX and Currency Option
Definitions (the "FX Definitions" and, collectively with the
1991 Definitions, the "Definitions"), as published by the
International Swaps and Derivatives Association, Inc., shall
be deemed a part of this Agreement as if fully set forth
herein.
A. Inconsistency. Unless expressly provided
otherwise, in the event of any inconsistency between any of
the documents listed below, the document listed first will
prevail: (i) the Confirmation; (ii) the Schedule; (iii) the
printed form of ISDA Master Agreement; and (iv) the
Definitions, including: (A) the FX Definitions and (B) the
1991 Definitions.
A. Right of Set-Off. Any amount (the "Early
Termination Amount") payable to Party B by Party A under
Section 6(e), in circumstances where Party B is a Defaulting
Party will at the option of Party A (and without prior notice
to Party B), be reduced by its set-off against any amount(s)
(the "Other Agreement Amount") payable (whether at such time
or in the future or upon the occurrence of a contingency) by
Party B (irrespective of the currency, place of payment or
booking office of the obligation) under any other agreement(s)
between Party A and Party B or instrument(s) or undertaking(s)
issued or executed by one party to, or in favor of, the other
party (and the Other Agreement Amount will be discharged
promptly and in all respects to the extent it is so set-off).
Party A will give notice to Party B of any set-off effected
hereunder.
For this purpose, either the Early Termination Amount or the
Other Agreement Amount (or the relevant portion of such
amounts) may be converted by Party A into the currency in
which the other is denominated at the rate of exchange at
which such party would be able, acting in a reasonable manner
and in good faith, to purchase the relevant amount of such
currency.
If an obligation is unascertained, Party A may in good faith
estimate that obligation and set-off in respect of the
estimate, subject to the relevant party accounting to the
other when the obligation is ascertained.
Nothing in this Part 5(c) shall be effective to create a
charge or other security interest. This Part 5(c) shall be
without prejudice and in addition to any right of set-off,
combination of accounts, lien or other right to which any
party is at any time otherwise entitled (whether by operation
of law, contract or otherwise).
A. Deduction or Withholding for Tax. Neither Party A
nor Party B shall have an obligation to make payments to the
other under Section 2(d)(i)(4) of this Agreement to the extent
the obligation to make such payment arises as a result of a
Change in Tax Law.
A. Confirmations. Each Confirmation shall be in the
standard form attached hereto as Exhibit A. With respect to
each Transaction, Party A shall, on or promptly after the
Trade Date, send Party B a Confirmation which shall be
promptly acknowledged by Party B.
A. Illegality. The "Illegality" provisions of Section
5(b)(i) shall be expanded to include the obligation of either
party to comply with any directive, direction or similar order
of any applicable governmental agency or authority (whether or
not having the force of law) which specifically prohibits its
performance under this Agreement.
A. Additional Representations. Section 3(a) is hereby amended by deleting the word "and" at the
end of Section 3(a)(iv) and adding the following after Section 3(a)(v):
" (vi) Non-Reliance. It is acting for its own
account, and it has made its own independent
decisions to enter into that Transaction and as to
whether that Transaction is appropriate or proper for
it based upon its own judgment and upon advice from
such advisers as it has deemed necessary. It is not
relying on any communication (written or oral) of the
other party as investment advice or as a
recommendation to enter into that Transaction; it
being understood that information and explanations
related to the terms and conditions of a Transaction
shall not be considered investment advice or a
recommendation to enter into that Transaction. No
communication (written or oral) received from the
other party shall be deemed to be an assurance or
guarantee as to the expected results of that
Transaction.
(vii) Assessment and Understanding. It is
capable of assessing the merits of and understanding
(on its own behalf or through independent
professional advice), and understands and accepts,
the terms, conditions and risks of that Transaction.
It is also capable of assuming, and assumes, the
risks of that Transaction.
(viii) Status of Parties. The other party is
not acting as a fiduciary for or an adviser to it in
respect of that Transaction."
A. Equivalency Clause. For purposes of disclosure
pursuant to the Interest Act (Canada), the yearly rate of
interest to which any rate of interest payable under this
Agreement or any Confirmation, which is to be calculated on
any basis other than a full calendar year, is equivalent may
be determined by multiplying such rate by a fraction the
numerator of which is the number of days in the calendar year
in which the period for which interest at such rate is payable
ends and the denominator of which is the number of days
comprising such other basis.
A. Impossibility. The occurrence of an Impossibility
shall also be a Termination Event, as to which the Affected
Party shall be the party subject to an Impossibility. For
purposes of this Agreement, "Impossibility" shall mean the
occurrence of a natural or man-made disaster, armed conflict,
act of terrorism, riot, labour disruption or any other
circumstance beyond its control after the date on which a
Transaction is entered into which makes it impossible (other
than as a result of its own misconduct) for such a party:
1. to perform any absolute or
contingent obligation, to make a payment or delivery
or to receive a payment or delivery in respect of
such Transaction or to comply with any other material
provision of this Agreement relating to such
Transaction; or
1. to perform, or for any Credit
Support Provider of such party to perform any
contingent or other obligation which the party (or
such Credit Support Provider) has under any Credit
Support Document relating to such Transaction.
All terms and conditions of this Agreement applicable
to an Illegality shall be equally applicable to an
Impossibility and the definition of Termination Event shall be
amended to include Impossibility.
A. Consent to Recording. Each party consents to the recording of the telephone conversations of
relevant personnel of the parties in connection with this Agreement or any Transaction or potential Transaction.
A. Waiver of Jury Trial. To the fullest extent
permitted by law, each party irrevocably waives its right to
trial by jury in any legal proceeding instituted in connection
with this Agreement or any Transaction.
A. Severability. If any term, provision, covenant or
condition of this Agreement, or the application thereof to any
party or circumstance, shall be held to be invalid or
unenforceable (in whole or in part) for any reason, the
remaining terms, provisions, covenants and conditions shall
continue in full force and effect as if this Agreement had
been executed with the invalid or unenforceable portion
eliminated, so long as this Agreement as so modified continues
to express, without material change, the original intention of
the parties as to the subject matter of this Agreement, and
the deletion of such portion of this Agreement does not
substantially impair the respective benefits or expectations
of the parties to this Agreement.
A. Transfer. An exception to the Transfer provisions
of Section 7 is that consent to transfer shall not be required
for a transfer by Party B (with prior written notice to Party
A) to a United States market maker in transactions of the type
covered by this Agreement in connection with a transaction by
Party B intended to unwind a transaction herein.
BOMBARDIER INC. ATLANTIC COAST AIRLINES
By:____________________________ By:____________________________
Name: Name:
Title: Title:
By:____________________________
Name:
Title:
EXHIBIT A (Call Option)
FORM OF CONFIRMATION
[Letterhead of Bombardier Inc.]
[Date]
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia 20166
Attention: Director of Treasury Management
Fax No.: (703) 925-6299
Re: Bombardier Reference Number ______
Bond Option Transaction (Call)
Ladies and Gentlemen:
The purpose of this confirmation is to confirm the terms and conditions
of the Bond Option Transaction entered into between us, Bombardier Inc. ("Party
A") and you, Atlantic Coast Airlines ("Party B") on the Trade Date specified
below (the "Transaction").
This confirmation is a "Confirmation" as referred to in the Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions
(the "Definitions"), as published by the International Swaps and Derivatives
Association, Inc., formerly known as the International Swap Dealers Association
("ISDA"), are hereby incorporated into this Confirmation by reference. In the
event of any inconsistency between the Definitions and this Confirmation, this
Confirmation will govern. Capitalized terms not otherwise defined shall have the
meanings given to them in the Agreement (including the Definitions and other
documents incorporated therein by reference).
This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of July 11, 1997, as amended and supplemented
from time to time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation, except as expressly
modified below.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
1. General Terms:
Trade Date: [date]
Option Style: European
Option Type: Call
Seller: Atlantic Coast Airlines
Buyer: Bombardier Inc.
Reference Bonds: U.S. Treasury 6.625% due May 15, 2007
Number of Options: One per Expiration Date.
Bond Entitlement: For any Expiration Date, the amount set forth
for such date under the caption "Bond
Entitlement" on Schedule 1 attached hereto.
Partial Exercise: Not applicable
Option Strike Price: For any Expiration Date, the amount set forth
for such date under the caption "Option Strike
Price" on Schedule 1 attached hereto.
Premium: See Letter Agreement dated July __, 1997
between Party A and Party B.
Seller Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Exchange Business Day:~Any day that is a Seller Currency Business Day:
Business Day and is a trading day on the Canadian
Exchange other than a day on which trading such exchange is scheduled to close
prior to its regular weekday closing time and is a day on which U.S. Treasury
Markets are open for business in New York, New York.
Any day on which commercial banks are open for Local Business Day: business
(including dealings in foreign exchange and foreign currency deposits) in
Toronto/Montreal, Canada and New York, New York.
Any day on which commercial banks are open for Calculation Agent: business
(including dealings in foreign exchange and foreign currency deposits) in the
city specified in the address for notice provided by the recipient.
Bombardier Inc., whose determinations and 2. Procedure for Exercise:
calculations shall be binding in the absence of
manifest error.
Expiration Date:
Each of the dates set forth on Schedule 1 attached Automatic Exercise: hereto,
or if that date is not an Exchange Business Day, the first following day that is
an Exchange Business Day.
An Option will be deemed to be automatically In-the-Money: exercised on the
Expiration Date for such Option if such Option is In-the-Money, as determined by
the Calculation Agent.
An Option will be "In-the-Money" if the Settlement Reference Price: Amount
yields a positive amount.
For any Option, the price for the Bonds equal in an amount to the Bond
Entitlement as determined in good faith by the Calculation Agent on the
Expiration Date for such Option by obtaining the offered side price quoted by
"Cantor-Fitzgerald" on page 500 of Telerate at 11:00 a.m., provided that the bid
offer spread is at or within 3/32 in price. If the Reference Bond is not quoted
on p. 500 of Telerate, then Bloomberg, page PX7 [U.S. Bond 7-15 years] shall be
used as a replacement quotation.
3. Settlement Terms:
Settlement: Cash Settlement
Settlement Date: For any Option, one Currency Business Day
following the Expiration Date for such Option.
Settlement Amount: For any
Option, on the
Settlement Date for
such Option, Seller
shall pay to Buyer the
amount by which the
Bond Payment for such
Option exceeds the
Call Amount for such
Option.
Bond Payment: For any
Option, the product of
the Reference Price
for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Call Amounts: For any
Option, the product of
the Option Strike
Price for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Failure to Deliver: Failure by a party to deliver, when due, any
payment under this Option shall constitute an
Event of Default only, if on or before the
third Local Business Day after notice of the
failure is given to the party it does not
remedy such failure.
4. Account Details:
Account details of Buyer: National Bank of Canada
125 West 55th Street Account details of Seller:
New York, NY 10019-5366
ABA No. 026005487
Account No. 015370001
Crestar Bank
Alexandria, VA
ABA No. 202369358
Account No. 051000020
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us within two Business Days after your receipt hereof or
return it to us within two Business Days indicating revisions needed to
accurately reflect our agreement. If your reply is not received by us within
this time period, the terms stated in this Confirmation will constitute
conclusive and binding evidence of the terms of the Transaction to which this
Confirmation relates, absent manifest error.
Yours sincerely,
BOMBARDIER INC.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Confirmed as of the date first above written:
ATLANTIC COAST AIRLINES
By:__________________________
Name:
Title:
Schedule 1
<PAGE>
July 11, 1997
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia 20166
Attention: Director of Treasury Management
Fax No.: (703) 925-6299
Re: Bombardier Reference Number ACA-2
Bond Option Transaction (Call)
Ladies and Gentlemen:
The purpose of this confirmation is to confirm the terms and conditions
of the Bond Option Transaction entered into between us, Bombardier Inc. ("Party
A") and you, Atlantic Coast Airlines ("Party B") on the Trade Date specified
below (the "Transaction").
This confirmation is a "Confirmation" as referred to in the Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions
(the "Definitions"), as published by the International Swaps and Derivatives
Association, Inc., formerly known as the International Swap Dealers Association
("ISDA"), are hereby incorporated into this Confirmation by reference. In the
event of any inconsistency between the Definitions and this Confirmation, this
Confirmation will govern. Capitalized terms not otherwise defined shall have the
meanings given to them in the Agreement (including the Definitions and other
documents incorporated therein by reference).
This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of July 11, 1997, as amended and supplemented
from time to time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation, except as expressly
modified below.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
1. General Terms:
Trade Date: July 11, 1997
Option Style: European
<PAGE>
Option Type: Call
Seller: Atlantic Coast Airlines
Buyer: Bombardier Inc.
Reference Bonds: U.S. Treasury 6.625% due May 15, 2007
Number of Options: One per Expiration Date.
Bond Entitlement: For any Expiration Date, the amount set forth
for such date under the caption "Bond
Entitlement" on Schedule 1 attached hereto.
Partial Exercise: Not applicable
Option Strike Price: For any Expiration Date, the amount set forth
for such date under the caption "Option Strike
Price" on Schedule 1 attached hereto.
Premium: See Letter Agreement dated July 11, 1997
between Party A and Party B.
Seller Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Exchange Business Day: Any day that is a Seller Business Day and is a
trading day on the Canadian Exchange other than
a day on which trading such exchange is
scheduled to close prior to its regular weekday
closing time and is a day on which U.S.
Treasury Markets are open for business in New
York, New York.
Currency Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Local Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
the city specified in
the address for notice
provided by the
recipient.
Calculation Agent: Bombardier Inc., whose determinations and
calculations shall be binding in the absence of
manifest error.
2. Procedure for Exercise:
Expiration Date: Each of the dates set forth on Schedule 1
attached hereto, or if that date is not an
Exchange Business Day, the first following day
that is an Exchange Business Day.
Automatic Exercise: An Option will be deemed to be automatically
exercised on the Expiration Date for such
Option if such Option is In-the-Money, as
determined by the Calculation Agent.
In-the-Money: An Option will be "In-the-Money" if the
Settlement Amount yields a positive amount.
Reference Price: For any Option, the price for the Bonds equal
in an amount to the Bond Entitlement as
determined in good faith by the Calculation
Agent on the Expiration Date for such Option by
obtaining the offered side price quoted by
"Cantor-Fitzgerald" on page 500 of Telerate at
11:00 a.m., provided that the bid offer spread
is at or within 3/32 in price. If the
Reference Bond is not quoted on p. 500 of
Telerate, then Bloomberg, page PX7 [U.S. Bond
7-15 years] shall be used as a replacement
quotation.
3. Settlement Terms:
Settlement: Cash Settlement
Settlement Date: For any Option, one Currency Business Day
following the Expiration Date for such Option.
Settlement Amount: For any
Option, on the
Settlement Date for
such Option, Seller
shall pay to Buyer the
amount by which the
Bond Payment for such
Option exceeds the
Call Amount for such
Option.
Bond Payment: For any
Option, the product of
the Reference Price
for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Call Amounts: For any
Option, the product of
the Option Strike
Price for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Failure to Deliver: Failure by a party to deliver, when due, any
payment under this Option shall constitute an
Event of Default only, if on or before the
third Local Business Day after notice of the
failure is given to the party it does not
remedy such failure.
4. Account Details:
Account details of Buyer: National Bank of Canada
125 West 55th Street
New York, NY 10019-5366
ABA No. 026005487
Account No. 015370001
Account details of Seller: Crestar Bank
Alexandria, VA
ABA No. 202369358
Account No. 051000020
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us within two Business Days after your receipt hereof or
return it to us within two Business Days indicating revisions needed to
accurately reflect our agreement. If your reply is not received by us within
this time period, the terms stated in this Confirmation will constitute
conclusive and binding evidence of the terms of the Transaction to which this
Confirmation relates, absent manifest error.
Yours sincerely,
BOMBARDIER INC.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Confirmed as of the date
first above written:
ATLANTIC COAST AIRLINES
By:__________________________
Name:
Title:
<PAGE>
Terms of Call Option
Option Bond Entitlement Option Strike Price
March 16, 1998 $ 6,645,757 102 15/32
April 15, 1998 6,659,432 102 11/32
May 15, 1998 6,579,357 102 10/32
July 15, 1998 6,613,850 102 4/32
August 17, 1998 6,627,540 102 2/32
September 15, 1998 6,641,231 102 4/32
EXHIBIT A (Put Option)
FORM OF CONFIRMATION
[Letterhead of Bombardier Inc.]
[Date]
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia 20166
Attention: Director of Treasury Management
Fax No.: (703) 925-6299
Re: Bombardier Reference Number ______
Bond Option Transaction (Put)
Ladies and Gentlemen:
The purpose of this confirmation is to confirm the terms and conditions
of the Bond Option Transaction entered into between us, Bombardier Inc. ("Party
A") and you, Atlantic Coast Airlines ("Party B") on the Trade Date specified
below (the "Transaction").
This confirmation is a "Confirmation" as referred to in the Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions
(the "Definitions"), as published by the International Swaps and Derivatives
Association, Inc., formerly known as the International Swap Dealers Association
("ISDA"), are hereby incorporated into this Confirmation by reference. In the
event of any inconsistency between the Definitions and this Confirmation, this
Confirmation will govern. Capitalized terms not otherwise defined shall have the
meanings given to them in the Agreement (including the Definitions and other
documents incorporated therein by reference).
This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of July 11, 1997, as amended and supplemented
from time to time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation, except as expressly
modified below.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
1. General Terms:
Trade Date: [date]
Option Style: European
Option Type: Put
Seller: Bombardier Inc.
Buyer: Atlantic Coast Airlines
Reference Bonds: U.S. Treasury 6.625% due May 15, 2007
Number of Options: One per Expiration Date.
Bond Entitlement: For any Expiration Date, the amount set forth
for such date under the caption "Bond
Entitlement" on Schedule 1 attached hereto.
Partial Exercise: Not applicable
Option Strike Price: For any Expiration Date, the amount set forth
for such date under the caption "Option Strike
Price" on Schedule 1 attached hereto.
Premium: See Letter Agreement dated July __, 1997
between Party A and Party B.
Seller Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Exchange Business Day:~Any day that is a Seller Currency Business Day:
Business Day and is a trading day on the Canadian
Exchange other than a day on which trading such exchange is scheduled to close
prior to its regular weekday closing time and is a day on which U.S. Treasury
Markets are open for business in New York, New York.
Any day on which commercial banks are open for Local Business Day: business
(including dealings in foreign exchange and foreign currency deposits) in
Toronto/Montreal, Canada and New York, New York.
Any day on which commercial banks are open for Calculation Agent: business
(including dealings in foreign exchange and foreign currency deposits) in the
city specified in the address for notice provided by the recipient.
Bombardier Inc., whose determinations and 2. Procedure for Exercise:
calculations shall be binding in the absence of
manifest error.
Expiration Date:
Each of the dates set forth on Schedule 1 attached Automatic Exercise: hereto,
or if that date is not an Exchange Business Day, the first following day that is
an Exchange Business Day.
An Option will be deemed to be automatically In-the-Money: exercised on the
Expiration Date for such Option if such Option is In-the-Money, as determined by
the Calculation Agent.
An Option will be "In-the-Money" if the Settlement Reference Price: Amount
yields a positive amount.
For any Option, the price for the Bonds equal in an amount to the Bond
Entitlement as determined in good faith by the Calculation Agent on the
Expiration Date for such Option by obtaining the offered side price quoted by
"Cantor-Fitzgerald" on page 500 of Telerate at 11:00 a.m., provided that the bid
offer spread is at or within 3/32 in price. If the Reference Bond is not quoted
on page 500 of Telerate, then Bloomberg, page PX7 [U.S. Bond 7-15 years] shall
be used as a replacement quotation.
3. Settlement Terms:
Settlement: Cash Settlement
Settlement Date: For any Option, one Currency Business Day
following the Expiration Date for such Option.
Settlement Amount: For any Option, on the Settlement Date, Seller
shall pay to Buyer the amount by which the Put
Amount for such Option exceeds the Bond Payment
for such Option.
Bond Payment: For any
Option, the product of
the Reference Price
for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Put Amount: For any
Option, the product of
the Option Strike
Price for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Failure to Deliver: Failure by a party to deliver, when due, any
payment under this Option shall constitute an
Event of Default only, if on or before the
third Local Business Day after notice of the
failure is given to the party it does not
remedy such failure.
4. Account Details:
Account details of Seller: National Bank of Canada
125 West 55th Street
New York, NY 10019-5366 Account details of Buyer:
ABA No. 026005487
Account No. 015370001
Crestar Bank
Alexandria, VA
ABA No. 202369358
Account No. 051000020
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us within two Business Days after your receipt hereof or
return it to us within two Business Days indicating revisions needed to
accurately reflect our agreement. If your reply is not received by us within
this time period, the terms stated in this Confirmation will constitute
conclusive and binding evidence of the terms of the Transaction to which this
Confirmation relates, absent manifest error.
Yours sincerely,
BOMBARDIER INC.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Confirmed as of the date first above written:
ATLANTIC COAST AIRLINES
By:__________________________
Name:
Title:
<PAGE>
Schedule 1
Terms of Put Option
Option
Option Bond Entitlement Strike Price
<PAGE>
July 11, 1997
Atlantic Coast Airlines
515A Shaw Road
Dulles, Virginia 20166
Attention: Director of Treasury Management
Fax No.: (703) 925-6299
Re: Bombardier Reference Number ACA-1
Bond Option Transaction (Put)
Ladies and Gentlemen:
The purpose of this confirmation is to confirm the terms and conditions
of the Bond Option Transaction entered into between us, Bombardier Inc. ("Party
A") and you, Atlantic Coast Airlines ("Party B") on the Trade Date specified
below (the "Transaction").
This confirmation is a "Confirmation" as referred to in the Agreement specified
below.
The definitions and provisions contained in the 1991 ISDA Definitions
(the "Definitions"), as published by the International Swaps and Derivatives
Association, Inc., formerly known as the International Swap Dealers Association
("ISDA"), are hereby incorporated into this Confirmation by reference. In the
event of any inconsistency between the Definitions and this Confirmation, this
Confirmation will govern. Capitalized terms not otherwise defined shall have the
meanings given to them in the Agreement (including the Definitions and other
documents incorporated therein by reference).
This Confirmation supplements, forms part of, and is subject to, the
ISDA Master Agreement dated as of July 11, 1997, as amended and supplemented
from time to time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation, except as expressly
modified below.
The terms of the particular Transaction to which this Confirmation relates are
as follows:
1. General Terms:
Trade Date: July 11, 1997
Option Style: European
<PAGE>
Option Type: Put
Seller: Bombardier Inc.
Buyer: Atlantic Coast Airlines
Reference Bonds: U.S. Treasury 6.625% due May 15, 2007
Number of Options: One per Expiration Date.
Bond Entitlement: For any Expiration Date, the amount set forth
for such date under the caption "Bond
Entitlement" on Schedule 1 attached hereto.
Partial Exercise: Not applicable
Option Strike Price: For any Expiration Date, the amount set forth
for such date under the caption "Option Strike
Price" on Schedule 1 attached hereto.
Premium: See Letter Agreement dated July 11, 1997
between Party A and Party B.
Seller Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Exchange Business Day: Any day that is a Seller Business Day and is a
trading day on the Canadian Exchange other than
a day on which trading such exchange is
scheduled to close prior to its regular weekday
closing time and is a day on which U.S.
Treasury Markets are open for business in New
York, New York.
Currency Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
Toronto/Montreal,
Canada and New York,
New York.
Local Business Day: Any day
on which commercial
banks are open for
business (including
dealings in foreign
exchange and foreign
currency deposits) in
the city specified in
the address for notice
provided by the
recipient.
Calculation Agent: Bombardier Inc., whose determinations and
calculations shall be binding in the absence of
manifest error.
2. Procedure for Exercise:
Expiration Date: Each of the dates set forth on Schedule 1
attached hereto, or if that date is not an
Exchange Business Day, the first following day
that is an Exchange Business Day.
Automatic Exercise: An Option will be deemed to be automatically
exercised on the Expiration Date for such
Option if such Option is In-the-Money, as
determined by the Calculation Agent.
In-the-Money: An Option will be "In-the-Money" if the
Settlement Amount yields a positive amount.
Reference Price: For any Option, the price for the Bonds equal
in an amount to the Bond Entitlement as
determined in good faith by the Calculation
Agent on the Expiration Date for such Option by
obtaining the offered side price quoted by
"Cantor-Fitzgerald" on page 500 of Telerate at
11:00 a.m., provided that the bid offer spread
is at or within 3/32 in price. If the
Reference Bond is not quoted on page 500 of
Telerate, then Bloomberg, page PX7 [U.S. Bond
7-15 years] shall be used as a replacement
quotation.
3. Settlement Terms:
Settlement: Cash Settlement
Settlement Date: For any Option, one Currency Business Day
following the Expiration Date for such Option.
Settlement Amount: For any Option, on the Settlement Date, Seller
shall pay to Buyer the amount by which the Put
Amount for such Option exceeds the Bond Payment
for such Option.
Bond Payment: For any
Option, the product of
the Reference Price
for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Put Amount: For any
Option, the product of
the Option Strike
Price for such Option
multiplied by the Bond
Entitlement for such
Option multiplied by
the number of Options
exercised on the
Expiration Date for
such Option.
Failure to Deliver: Failure by a party to deliver, when due, any
payment under this Option shall constitute an
Event of Default only, if on or before the
third Local Business Day after notice of the
failure is given to the party it does not
remedy such failure.
4. Account Details:
Account details of Seller: National Bank of Canada
125 West 55th Street
New York, NY 10019-5366
ABA No. 026005487
Account No. 015370001
Account details of Buyer: Crestar Bank
Alexandria, VA
ABA No. 202369358
Account No. 051000020
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us within two Business Days after your receipt hereof or
return it to us within two Business Days indicating revisions needed to
accurately reflect our agreement. If your reply is not received by us within
this time period, the terms stated in this Confirmation will constitute
conclusive and binding evidence of the terms of the Transaction to which this
Confirmation relates, absent manifest error.
Yours sincerely,
BOMBARDIER INC.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
Confirmed as of the date first above written:
ATLANTIC COAST AIRLINES
By:__________________________
Name:
Title:
<PAGE>
Terms of Put Option
Option
Option Bond Entitlement Strike Price
March 16, 1998 $ 6,645,757 100 3/32
April 15, 1998 6,659,432 99 30/32
May 15, 1998 6,579,357 99 26/32
July 15, 1998 6,613,850 99 17/32
August 17, 1998 6,627,540 99 12/32
September 15, 1998 6,641,231 99 8/32
</TABLE>
<TABLE>
<S> <C>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Atlantic Coast Airlines, Inc.
We consent to the incorporation by reference in the registration statement nos.
333-15795 and 33-67492 on Form S-8 of our report dated January 28, 1998, except
as to note 17 which is as of March 4, 1998, relating to the consolidated balance
sheet of Atlantic Coast Airlines, Inc. and subsidiary (the "Company") as of
December 31, 1997 and the related consolidated statements of operations, cash
flows and changes in stockholders' equity for the year then ended, which report
appears in the December 31, 1997 Annual Report on Form 10-K of the Company.
/S/
--------------------------
KPMG Peat Marwick LLP
Washington, D.C.
March 23, 1998
</TABLE>
<TABLE>
<S> <C>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Atlantic Coast Airlines, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-15795 and 33-67492) of our report, dated January
24, 1997, except for Note 18, the date of which is May 29, 1997, relating to the
consolidated financial statements and schedule of Atlantic Coast Airlines, Inc.
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
/S/
----------------------------
BDO Seidman, LLP
Washington, D.C.
March 23, 1998
</TABLE>
