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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1999.
[_] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
Commission File No.: 0-26914
AirTran Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 58-2189551
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9955 AirTran Boulevard, Orlando, Florida 32827
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(Address of principal executive offices) (Zip code)
(407) 251-5600
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(Registrant's telephone number, including area code)
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 Exchange Act of 1934 during
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. [ ]
As of March 10, 2000, the aggregate market value of voting stock held by non-
affiliates of the Registrant, based on the closing sales price of such stock in
the NASDAQ Stock Market on March 10, 2000, was approximately $244,367,000. As
of March 10, 2000, the Registrant had 65,724,148 shares of Common Stock
outstanding.
Documents Incorporated by Reference
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Portions of the Proxy Statement, to be used in connection with the solicitation
of proxies to be voted at the Registrant's annual meeting of Stockholders to be
held on May 18, 2000 and to be filed with the Commission, are incorporated by
reference into Part III of this Report on Form 10-K.
Exhibit Index is located on pages 38-41
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PART I
ITEM 1. BUSINESS
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General
The Company operates a low fare scheduled airline serving short-haul markets
primarily in the eastern United States. The Company is the second-largest
"affordable fare" airline in the United States behind Southwest Airlines (in
terms of originating travel). The Company's operations are focused on its hub in
Atlanta, Georgia, the nation's busiest airport and the fourth largest travel
market (in terms of passengers) in the United States. As of December 31, 1999,
the Company operated eight Boeing 717-200 (B717) aircraft, 35 McDonnell Douglas
DC-9 aircraft (DC-9) and four Boeing 737-200 (B737) aircraft and offered more
than 274 flights per day, including more than 130 daily departures from Atlanta
to 29 other cities. Additional contractual service is offered between
Gulfport/Biloxi and Dallas/Fort Worth, Houston (Hobby), Fort Lauderdale, Tampa
and Orlando.
The Company commenced operations in 1993 as ValuJet Airlines, Inc. ("ValuJet")
with two DC-9 aircraft serving three cities from Atlanta with eight flights per
day. In 1995, ValuJet became a wholly-owned subsidiary of ValuJet, Inc. The
Company's operations were interrupted by the suspension of the Company's service
on June 17, 1996, resuming on September 30, 1996 with limited operations.
ValuJet changed its name to "AirTran Airlines, Inc." ("Airlines"), and ValuJet,
Inc. changed its name to "AirTran Holdings, Inc." ("Holdings") in connection
with the Company's acquisition of Airways Corporation and its subsidiary,
AirTran Airways, Inc. ("Airways"), in November 1997. As part of that
transaction, Airways became a wholly-owned subsidiary of the Company. From
November 1997 until April 1998, the Company operated under the FAA operating
certificates of both Airlines and Airways. Since April 1998, all of the
Company's airline operations have been conducted under the Airways operating
certificate. The Airlines operating certificate was extinguished in August 1998.
In August 1999, Airlines merged with and into Airways.
The principal executive offices of the Company are located at 9955 AirTran
Boulevard, Orlando, Florida 32827, and its telephone number is (407) 251-5600.
The Company maintains an Internet site at http://www.airtran.com. The reference
to the Company's web address does not constitute incorporation by reference of
the information contained at the site.
Strategy
The Company's strategy is to offer among the lowest fares in its markets and
generate traffic by stimulating demand with price-sensitive travelers. The
Company controls 22 gates at Hartsfield Atlanta International Airport. Atlanta
provides a large local traffic base and the hub is well positioned for
connecting traffic throughout the Southeast. Atlanta's geographic position
enhances the Company's connecting opportunities. To maintain profitability, the
Company intends to maintain an affordable fare structure and offer safe and
reliable travel to both price-sensitive business and fare-conscious leisure
travelers. The Company intends to pursue a modest growth strategy while
maintaining its low cost structure. The Company also generates revenue by
carrying cargo, primarily U.S. Mail, A.S.A.P. express package service and air
freight. The
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Company's pricing structure is intended to stimulate new demand for air travel
by leisure customers and business travelers who would have otherwise not
traveled or who would have utilized ground transportation. The Company's fare
structure generally dictates pricing in most markets it serves, providing
travelers with substantial savings not generally available in the absence of
service by the Company. In addition to advance purchase fares, the Company
maintains reasonably priced "walk-up" fares that are generally well below
similar fares offered by its competitors in comparable markets, as well as
business class prices at substantial discounts to competitors' offerings. The
Company's fare structure is possible as a result of its comparatively low cost
structure.
The Company's comparatively low cost structure is made possible through low
ownership costs of its DC-9 aircraft, more fuel-efficient and less maintenance
burdened B717 aircraft, lower labor costs, lower distribution costs due to high
percentage of Internet bookings and the Company's decision not to offer many
amenities offered by many major airlines (such as hot meals and airport clubs).
As a result of the acquisition of B717 aircraft, the Company's ownership cost
will increase, but the Company believes that it will be able to maintain its
comparatively low cost structure as a result of expected savings in maintenance
and aircraft fuel efficiency.
The Company's service is intended to satisfy not only the basic air
transportation needs of its targeted customers, price-sensitive business
travelers and fare-conscious leisure travelers, but to provide customers with a
travel experience worth repeating.
In 1998, the Company sought to enhance its product offerings with the
introduction of business class, assigned seating, travel agency distribution and
an innovative frequent flyer program. In 1999, the Company focused on unit
revenue improvement, customer satisfaction and retention, increased penetration
of the corporate market, enhanced programs for leisure traffic, and continued
growth of alternative distribution channels, such as the Internet. For the
fourth quarter of 1999, Internet sales provided approximately 16.7% of total
passenger revenue.
Geographic Market
The Company's markets served from Atlanta are located predominantly in the
eastern United States. These markets are attractive to the Company due to the
concentration of major population centers within relatively short distances from
Atlanta, historically high air fares and the potential for attracting a
significant number of leisure and business customers.
In the Company's city selection process, the Company considers the market
demographics, the support offered by the airport communities to be served, the
ability to stimulate air travel and competitive factors.
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Fares, Route System and Scheduling
The Company serves 29 markets from Atlanta, generally under 1,000 miles. The
Company serves major metropolitan markets, including New York, Newark, Boston,
Philadelphia, Washington, Chicago, Miami, Houston and Dallas, and leisure
markets in Florida. The routes served to and from Atlanta range in frequency
from two to fifteen trips per day. The schedules are designed to provide a
consistent product for business-oriented travelers and to facilitate connections
for passengers traveling through Atlanta.
The Company offers a range of fares based on advance purchases of 14 days, 7
days, 3 days and "walk-up" fares. The Company manages the availability of seats,
at each fare level, by day of week and by flight to maximize revenue on peak-
travel days. Most of the Company's fares are nonrefundable, but can be changed
prior to departure with a $50 service charge. The Company's fares are always
offered on a one-way basis. The Company's fares do not require a round trip
purchase or a specific day of week (e.g., Saturday night) stay. The Company's
fare offerings are in direct contrast to prevalent pricing policies in the
industry where there are typically many different price offerings and
restrictions for seats on any one flight.
The Company's published Atlanta fares for coach non-stop service range from $39
to $99 for one-way travel on a 14-day advance purchase basis and $79 to $239 for
one-way travel on a "walk-up" basis. The Company offers fare sales from time to
time in order to generate additional traffic. The Company utilizes the Internet
and other distribution channels to stimulate incremental demand.
The Company provides one-stop service between many of its markets on a
connecting basis through Atlanta. The Company faces competition from numerous
airlines with varying degrees of flight frequency and marketing approaches. In
addition, the Company competes with numerous nonstop flights to many of its
cities from alternate airports in the same metropolitan areas as served by the
Company (such as Washington's Ronald Reagan National Airport, Chicago's O'Hare
Airport and New York's Kennedy Airport).
The airline industry is highly competitive. The Company competes primarily with
Delta in the markets served by the Company from Atlanta. In most all of these
markets, Delta offers more frequency than the Company.
The identity of competing airlines and the number of the flights they may fly
changes from month to month. Competing airlines and their flight schedules are
subject to frequent change. The Company's competition includes carriers with
substantially greater financial resources and name recognition.
The Company's aircraft scheduling strategy is directly related to the perceived
needs of its target market segments. The Company's target customers are price-
sensitive business travelers and fare-conscious leisure travelers.
The Company operates with a limited number of support aircraft in order to
provide operating spares and to rotate aircraft into routine scheduled
maintenance.
Maintenance and Repairs
Since all of the Company's DC-9 and B737 aircraft are more than 20 years old,
they will generally require higher maintenance expense than newer aircraft. The
Company believes that its aircraft are mechanically reliable and that in the
long-term the estimated cost of maintenance
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to fly such aircraft will be within industry norms for these aircraft types and
ages. Amendments to Federal Aviation Administration ("FAA") regulations are
under consideration, which would require certain heavy maintenance checks and
other maintenance requirements for aircraft operating beyond certain operational
limits. The Company would be required to comply with such proposals, if adopted,
and with any other aging aircraft issues, regulations or Airworthiness
Directives that may be promulgated in the future. There can be no assurance that
the Company's maintenance expenses (including costs to comply with aging
aircraft requirements) will fall within industry norms.
Aircraft maintenance and repair consists of routine daily or "turn-around"
maintenance and major overhaul. Routine daily maintenance is performed at
Atlanta by the Company's employees or contract employees and by contractors at
the other cities served by the Company. Heavy maintenance and other work which
require hangar facilities are currently performed at outside maintenance
contractors. Other routine daily maintenance contractors are provided by other
airlines, which operate DC-9 aircraft or other maintenance companies approved by
the FAA, both of which have employees qualified in DC-9 aircraft maintenance.
The Company expects that its maintenance expenses will be significantly reduced
with the addition of the B717 aircraft. However, the B717 aircraft will require
greater inventories of spare parts and associated costs.
Fuel
Jet fuel is a significant expenditure for the Company. The Company estimates
that a ten percent increase in the December 31, 1999 fuel cost would increase
fuel expenses by approximately $10.8 million in the year 2000, net of fuel hedge
instruments outstanding at December 31, 1999. Jet fuel costs are subject to wide
fluctuations as a result of sudden disruptions in supply. Due to the effect of
world and economic events on the price and availability of oil, the future
availability and cost of jet fuel cannot be predicted with any degree of
certainty. Increases in fuel prices or a shortage of supply could have a
material adverse effect on the Company's operations and operating results.
The majority of the Company's aircraft are relatively fuel inefficient compared
to newer aircraft and industry averages. The primary reason for this
inefficiency is engine technology. The B717 aircraft are expected to be more
fuel-efficient and should make the Company relatively less susceptible to
adverse effects attributable to fuel price changes.
A significant increase in the price of jet fuel would result in a
disproportionately higher increase in the Company's average total costs than its
competitors using more fuel efficient aircraft, whose fuel costs represent a
smaller portion of total costs, and who have greater purchasing leverage because
of size. Subject to market conditions, the Company might seek to pass such a
cost increase to its customers through a fare increase. There can be no
assurance that any such fare increase, or surcharge, would not reduce the
competitive advantage the Company seeks by offering affordable fares.
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Distribution and Marketing
The Company's marketing efforts are vital to its success as it seeks to position
its product to stimulate new customer demand. The Company focuses on two primary
market segments: the price conscious business travellers and leisure travellers.
These are the market segments in which the consumers seek value and in which the
Company believes it offers the greatest opportunity for stimulating new demand.
The primary objectives of the Company's marketing activities are to develop an
innovative brand identity and personality that is visibly unique and easily
contrasted with its competitors. The Company communicates directly with its
existing customer base and attempts to reach potential customers through
extensive use of advertising as well as active public relations efforts. The
Company communicates regularly and frequently with existing and potential
customers through the use of advertisements in newspapers, on radio, on
television, on billboards, through direct mail, in movie theatres and through a
website on the Internet. These communications feature the Company's
destinations, everyday affordable fares, ease of use (including its simplified
fare structure, ticketless alternative and easy-to-use web site) and calls to
action (through travel agents, toll-free numbers or the website).
The Company distributes its product through various channels: (1) direct to the
consumer via phone; (2) direct to the consumer via Internet; (3) through travel
agents and the global distribution systems ("GDS"); (4) through travel agents
direct - both via phone and via Internet. Of the distribution channels, during
1999, 47.3% of passenger revenue was booked direct from the consumer via phone,
11.0% was booked from the consumer and travel agents via the Internet and 41.7%
was booked through travel agents' GDS. The Company pays customary 5% sales
commissions to travel agents. Information on its customers' needs, travel
patterns and demographics is collected, organized and stored by the Company's
automated reservation system and may be used at a future time for direct
marketing efforts.
Travel agents play an integral role distributing the Company's product. In
1997, 8% of the Company's product was distributed through travel agents. During
1999, the percentage of distribution through travel agents was 41.7%. In 1999,
the Company was awarded "Best Domestic Airline of 1999" by the Southeast Chapter
of the American Society of Travel Agents.
The Company's Internet site is a leader in the field of airline electronic
commerce. In 1999, 11% of the Company's bookings came through this important
distribution channel. In May 1999, Travel Agent magazine ranked the Company's
web site an "A" for the user friendliness of its online booking engine. The
magazine further reported that the Company's web site booking engine is "simple"
and "elegant". In October 1999, the Company created additional functionality
with its website by allowing travel agents and corporate accounts the ability to
book travel online.
To attract more business fliers, the Company launched Business Class in late
1997. Business Class consists of a premium cabin with 2 by 2 oversized seats
with seven inches more legroom and additional seatroom than the coach seat.
Targeted to the price-sensitive business flier,
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Business Class is currently available for $25 over full coach fare to Atlanta.
In addition, a standby program for upgrades is available at the departure gates.
In addition, the Company began assigning seats in 1997. Full fare passengers,
the Company's most profitable business customers who tend to book at the last
minute, are allowed to reserve seats at the time of booking. All other
customers may reserve seats one hour prior to departure. In effect, the
Company's most profitable customers choose the best seats first, but all
passengers have assigned seats prior to boarding.
Furthermore, in March 1998, the Company launched a self-administered frequent
flier program known as "A-Plus Rewards" under which customers may earn either
free roundtrip travel or Business Class upgrades. A customer may earn a free
roundtrip by flying as few as six paid roundtrips. Full fare Business Class
customers earn double credits which make a free roundtrip even easier to obtain.
In addition, free travel on other airlines may be earned by doubling the
required number of roundtrips needed for free travel. Free trips on other
airlines may be used only to/from Atlanta, apply only to cities not served by
the Company and are subject to other terms and conditions. Furthermore, free
upgrades to Business Class may be earned in lieu of free tickets.
The Company performs marketing, promotional and media relations in house. An
outside firm assists the Company in handling advertising and public relations.
The Company has partnered with The Hertz Corporation to operate a reservation
call and Internet booking solicitation agreement under which the Company's
customers are able to reserve a Hertz rental car at discounted rates when making
a reservation for the Company's flights. In addition, the Company partners with
American Express to send direct mail pieces to American Express Cardmembers who
regularly fly over the Company's route system. The American Express offer
allows customers (who charge their airfare on their American Express Card) to
earn a free ticket in A-Plus Rewards at an even faster pace.
Air travel in the Company's markets tends to be seasonal, with the highest
levels occurring during the winter months to Florida and the summer months to
the midwest and northeastern United States. Advertising and promotional
expenses may be greater in lower traffic periods, as well as when entering a new
market, in an attempt to stimulate air travel.
Computer Reservations
The Company is a participant in all of the leading travel agency GDSs, which
include Amadeus, Galileo, SABRE, SystemOne, and WorldSpan. These systems provide
flight schedules, pricing information and allow travel agents participating in
all of these systems to electronically process a flight reservation without
contacting the Company's reservations facility.
At the time of a sale/reservation, the Company provides its customers with a
confirmation number, similar to the systems used by hotels and car rental
agencies. At the airport, this information is available for customer check-in,
which helps to alleviate long lines and achieve a
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quicker turnaround of aircraft. After the flight has departed, the Company's
internal information system posts passenger revenue from the passenger manifest
information.
Employees
As of February 24, 2000, the Company employed approximately 4,000 employees and
3,200 full-time equivalents.
Training, both initial and recurrent, is required for most employees. The
average training period for all new employees is approximately one to three
weeks, depending on classification. Both pilot training and mechanic training
are provided by in-house training instructors and at times, may be provided by
professional training organizations.
FAA regulations require pilots to be certificated as commercial pilots, with
specific ratings for aircraft to be flown, and to be medically certified as
physically fit. Pilot certificates and medical certifications are subject to
periodic continuation requirements including recurrent training and recent
flying experience. Mechanics, quality-control inspectors and flight dispatchers
must be certificated and qualified for specific aircraft. Flight attendants must
have initial and periodic competency fitness training and qualification.
Training programs are subject to approval and monitoring by the FAA. Management
personnel directly involved in the supervision of flight operations, training,
maintenance and aircraft inspection must meet experience standards prescribed by
FAA regulations. All of these employees are subject to pre-employment, random
and post-accident drug testing.
The Company has entered into a collective bargaining agreement with its pilots
represented by the National Pilots Association ("NPA"). The contract includes
competitive wages to those of similar airlines and expires in March 2001.
The Company has entered into a collective bargaining agreement with its
mechanics represented by the International Brotherhood of Teamsters ("the
Teamsters"). The contract includes simplified work rules and pay increases.
The contract expires in August 2001.
The Company has entered into a collective bargaining agreement with its flight
attendants represented by the Association of Flight Attendants ("AFA"). The
contract includes a ten percent pay increase in year one and a four percent
increase each year thereafter expiring in October 2002.
The Company's dispatchers voted to be represented by the Transport Workers Union
("TWU") in April 1999. The TWU and the Company have yet to sign a contract, but
are in negotiations and expect to sign one in early 2000.
In February 2000, the Company's customer service, ramp and reservation agents
rejected the International Association of Machinists in a vote that received
less than 30% support. The
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Company is unable to predict whether any of its other employees will elect to be
represented by a labor union or other collective bargaining unit. The election
by the Company's employees for representation in such an organization could
result in employee compensation and working condition demands that may affect
operating performance or expenses.
The Company does not expect that the unionization of these employee groups will
have a material adverse effect on its operating costs or performance.
Airport Operations
Ground handling services typically can be placed in three categories - public
contact, under-wing and complete ground handling. Public contact services
involve meeting, greeting and serving the Company's customers at the check-in
counter, gate and baggage claim area. Under-wing ground handling services
include, but are not limited to, marshaling the aircraft into and out of the
gate, baggage and mail loading and unloading, as well as lavatory and water
servicing, deicing and certain services provided to the aircraft overnight.
Complete ground handling consists of public contact and under-wing services
combined.
The Company conducts its own ground handling services in 24 airports, including
Atlanta. At other airports, Company operations not conducted by the Company's
employees are contracted to other air carriers, ground handling companies or
fixed base operators. The Company has at least one employee at each of these
cities to oversee its operations.
Insurance
The Company carries customary levels of passenger liability insurance, aircraft
insurance for aircraft loss or damage and other business insurance. The Company
is exposed to potential catastrophic losses that may be incurred in the event of
an aircraft accident. Any such accident could involve not only repair or
replacement of a damaged aircraft and its consequent temporary or permanent loss
from service, but also significant potential claims of injured passengers and
others. The Company is required by the DOT to carry liability insurance on each
of its aircraft. The Company currently maintains liability insurance in the
amount of $850 million per occurrence. Although the Company currently believes
its insurance coverage is adequate, there can be no assurance that the amount of
such coverage will not be changed or that the Company will not be forced to bear
substantial losses from accidents. Substantial claims resulting from an
accident in excess of related insurance coverage or not covered by the Company's
insurance could have a material adverse effect on the Company. Moreover, any
aircraft accident, even if fully insured, could cause and has caused a public
perception that some of the Company's aircraft are less safe or reliable than
other aircraft, which could have and has had a material adverse effect on the
Company's business.
Seasonality and Cyclicality
The Company's operations are primarily dependent upon passenger travel demand
and, as such, may be subject to seasonal variations. Management believes that
the weakest travel periods will generally be during the months of January and
and September. Leisure travel generally increases during the summer months and
at holiday periods.
The airline industry is highly volatile. General economic conditions directly
affect the level of passenger travel. Leisure travel is highly discretionary and
varies depending on economic
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conditions. While business travel is not as discretionary, business travel
generally diminishes during unfavorable economic times, as businesses tend to
tighten cost controls.
Government Regulations
The airline industry is highly competitive, primarily due to the effects of the
Airline Deregulation Act of 1978, which has substantially eliminated government
authority to regulate domestic routes and fares. Deregulation has increased the
ability of airlines to compete with respect to destination, flight frequencies
and fares. Nevertheless, the airline industry remains highly regulated in other
aspects, as more fully described below.
DOT Oversight
Although regulation of domestic routes and fares was abolished by the Airline
Deregulation Act of 1978, the Department of Transportation ("DOT") retains the
authority to alter or amend any airline's certificate or to revoke such
certificate for intentional failure to comply with the terms and conditions of
the certificate. In addition, the DOT has jurisdiction over international
tariffs and pricing, international routes, computer reservation systems, and
economic and consumer protection matters such as advertising, denied boarding
compensation, smoking and codeshare arrangements and has the authority to impose
civil penalties for violation of the United States Transportation Code or DOT
regulations.
Aircraft Maintenance and Operations
The Company is subject to the jurisdiction of the FAA with respect to aircraft
maintenance and operations, including equipment, dispatch, communications,
training, flight personnel and other matters affecting air safety. The FAA has
the authority to issue new or additional regulations. To ensure compliance with
its regulations, the FAA conducts regular safety audits and requires all
airlines to obtain operating, airworthiness and other certificates, which are
subject to suspension or revocation for cause.
The FAA has issued several Airworthiness Directives ("ADs") mandating
modifications to the older aircraft maintenance programs. These ADs were issued
to ensure that the oldest portion of the nation's aircraft fleet remains
airworthy and require structural modifications to or inspections of those
aircraft. The Company believes that all of its aircraft are in compliance with
the aging aircraft mandates.
The Company cannot predict the cost of compliance with all present and future
rules and regulations and the effect of such compliance on the business of the
Company, particularly its expansion plans and aircraft acquisition program.
FAA Funding
In 1997, a law was enacted imposing new aviation ticket taxes as part of larger
tax legislation designed to balance the nation's budget, provide targeted tax
relief and fund air traffic control, other FAA programs and airport development.
As enacted, these new taxes will be imposed through September 30, 2007. Included
in the new law is a phase in of a modified federal air
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transportation excise tax structure with a system that includes: a domestic
excise tax starting at 9% which decreased to 7.5% in 1999; a domestic segment
tax starting at $1.00 and increasing to $3.00 by 2002; and an increase in taxes
imposed on international travel. Both the domestic segment tax and the
international tax are indexed for inflation. The legislation also includes a
7.5% excise tax on certain amounts paid to an air carrier for the right to
provide mileage and similar awards (e.g., purchase of frequent flyer miles by a
credit card company). As a result of competitive pressures, the Company and
other airlines have been limited in their ability to pass on the cost of these
taxes to passengers through fare increases.
Fuel Tax
In August 1993, the federal government increased taxes on fuel, including
aircraft fuel, by 4.3 cents per gallon. Total fuel taxes paid by the Company in
1999 were $9.4 million.
Passenger Facility Charges
During 1990, Congress enacted legislation to permit airport authorities, with
prior approval from the DOT, to impose passenger facility charges ("PFCs") as a
means of funding local airport projects. These charges, which are intended to be
collected by the airlines from their passengers, are limited to $3.00 per
enplanement and to no more than $12.00 per round trip. To date, the Company has
passed on the cost of the PFCs to its passengers.
Slot Restrictions
At New York City's John F. Kennedy Airport and LaGuardia Airport, Chicago's
O'Hare International Airport and Washington's Ronald Reagan National Airport,
which have been designated "High Density Airports" by the FAA, there are
restrictions on the number of aircraft that may land and take off during peak
hours. In the future, these take off and landing time slot restrictions and
other restrictions on the use of various airports and their facilities may
result in curtailment of services by, and increased operating costs for,
individual airlines, including the Company, particularly in light of the
increase in the number of airlines operating at such airports. In general, the
FAA rules relating to allocated slots at the High Density Airports contain
provisions requiring the relinquishment of slots for nonuse and permit carriers,
under certain circumstances, to sell, lease or trade their slots to other
carriers. The Company currently utilizes 12 slots at LaGuardia Airport.
Additional Security and Safety Measures
In 1996 and 1997 the President's Commission on Aviation Safety and Security
issued recommendations and the U.S. Congress and the FAA adopted increased
safety and security measures designed to increase airline passenger safety and
security and protect against terrorist acts. Such measures have resulted in
additional operating costs to the airline industry. Examples of increased safety
and security measures include the introduction of a domestic passenger manifest
requirement, increased passenger profiling, enhanced pre-board screening of
passengers and carry on baggage, positive bag match for profile selections,
continuous physical bag search at checkpoints, additional airport security
personnel, expanded criminal background checks for
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selected airport employees, significantly expanded use of bomb sniffing dogs,
certification of screening companies, aggressive testing of existing security
systems, expansion of aging aircraft inspections to include non structural
components, development of a new systems approach for air carriers and the FAA
to monitor and improve safety oversight and installation of new ground proximity
warning systems on all commercial aircraft. The Company cannot forecast what
additional security and safety requirements may be imposed in the future or the
costs or revenue impact that would be associated with complying with such
requirements.
Miscellaneous
All air carriers are subject to certain provisions of the Communications Act of
1934, as amended, because of their extensive use of radio and other
communication facilities, and are required to obtain an aeronautical radio
license from the Federal Communications Commission ("FCC"). To the extent the
Company is subject to FCC requirements, it has taken and will continue to take
all necessary steps to comply with those requirements.
The Company's operations may become subject to additional federal regulatory
requirements in the future under certain circumstances. The Company's labor
relations are covered under Title II of the Railway Labor Act of 1926, as
amended, and are subject to the jurisdiction of the National Mediation Board.
During a period of past fuel scarcity, air carrier access to jet fuel was
subject to allocation regulations promulgated by the Department of Energy. The
Company is also subject to state and local laws and regulations at locations
where it operates and the regulations of various local authorities that operate
the airports it serves.
All international service is subject to the regulatory requirements of the
appropriate authorities of the other country involved. The Company does not
currently provide any international service. To the extent the Company seeks to
provide international air transportation in the future, it will be required to
obtain additional authority from the DOT.
Environmental Regulations
The Airport Noise and Capacity Act of 1990 ("ANCA") generally recognizes the
rights of airport operators with noise problems to implement local noise
abatement programs so long as they do not interfere unreasonably with interstate
or foreign commerce or the national air transportation system. The ANCA
generally requires FAA approval of local noise restrictions on Stage 3 aircraft
first effective after October 1990. While the Company has had sufficient
scheduling flexibility to accommodate local noise restrictions imposed to date,
the Company's operations could be adversely affected if locally-imposed
regulations become more restrictive or widespread.
The Environmental Protection Agency ("EPA") regulates operations, including air
carrier operations, which affect the quality of air in the United States. The
Company believes it has made all necessary modifications to its fleet to meet
emission standards issued by the EPA.
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Risk Factors
The Company's Recent Operating Losses; Negative Net Worth
The Company recorded net losses of $99.4 million in 1999, $40.7 million in 1998,
and $96.7 million in 1997. The Company's earnings before fixed charges for each
of the three years ended December 31, 1999 were inadequate to cover fixed
charges. Continued losses by the Company or continued failure by the Company to
cover fixed charges in the future would likely have a material adverse effect on
the Company's financial condition. The recording of a non-cash fleet
disposition charge of $147.7 million in fourth quarter 1999 resulted in the
Company incurring a net loss for the 1999 year and having negative net worth at
December 31, 1999. The Company's consolidated debt, recent history of losses
and negative net worth may adversely affect the Company's ability to obtain
financing on terms satisfactory to the Company in the future.
Risks Due to the Company's Significant Amount of Debt
The entire principal amount of the Company's 10.25% Senior Notes ($150.0
million) and 10.5% Senior Secured Notes ($80.0 million) will become due on April
15, 2001. The Company does not expect to generate sufficient cash flow from
operations to repay all $230.0 million of such debt by its due date.
Accordingly, the Company will likely need to refinance all or a portion of the
outstanding debt through additional equity or debt or a combination thereof.
However, the Company may not be able to obtain such financing on acceptable
terms. In such event, the Company could be forced to default on its debt
obligations and, ultimately, seek protection under federal bankruptcy laws.
The ability of the Company to make scheduled payments of principal or interest
and the Company's ability to refinance its debt depend on its future performance
and financial results. Such results are subject to general economic, financial,
competitive, legislative, regulatory, and other factors that are, to some
extent, beyond the Company's control.
In 1999, the Company issued $178.9 million of enhanced equipment trust
certificates and will incur substantial additional debt (some of which may be
under capital leases) to finance the acquisition of the B717 aircraft. See
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
The amount of the Company's debt could have important consequences to investors,
including the following:
. a substantial portion of the Company's cash flow from operations must be
dedicated to debt service and will not be available for operations;
. the Company's ability to obtain additional financing for aircraft purchases,
capital expenditures, working capital, or general corporate purposes could be
limited;
. the Company's vulnerability to adverse economic and industry conditions is
greater than its larger and more financially secure competitors;
13
<PAGE>
. 24 of the Company's DC-9 aircraft are pledged as collateral to secure its
$80.0 million 10.5% Senior Secured Notes due 2001;
. eight B717 aircraft are pledged as collateral to secure other debt of the
Company with a principal balance of $178.9 million as of December 31, 1999;
. an additional one DC-9, three B737s and certain engines are pledged as
collateral to secure other debt of the Company with a principal balance of
$6.8 million as of December 31, 1999; and
. future B717 aircraft to be acquired by the Company will be pledged as
collateral to secure debt incurred by the Company.
The Company's Debt Covenants Could Limit How It Conducts Its Business
The Company's debt instruments contain covenants that, among other things,
restrict its ability to:
. incur additional indebtedness
. pay dividends and make other distributions
. prepay subordinated indebtedness
. make investments and other restricted payments
. create liens
. sell assets
. enter into certain mergers
. engage in certain transactions with affiliates
The Company's current and future financing arrangements contain and are expected
to continue to contain similar or more restrictive covenants. As a result of
these restrictions, the Company may be limited in how it conducts business, and
the Company may be unable to raise additional debt or equity financing to
operate during general economic or business downturns, to compete effectively,
or to take advantage of new business opportunities. This may affect the
Company's ability to generate revenues and make profits. Without sufficient
revenues and cash, the Company may not be able to pay interest and principal on
its indebtedness.
The Company's failure to comply with the covenants and restrictions contained in
its indentures and other financing agreements could lead to a default under the
terms of these agreements. If such a default occurs, the other parties to such
agreements could declare all amounts borrowed
14
<PAGE>
and all amounts due under other instruments that contain provisions for cross-
acceleration or cross-default due and payable. If that occurs, the Company
cannot assure investors it would be able to make payments on its debt, meet its
working capital and capital expenditure requirements, or be able to find
additional alternative financing. Even if the Company could obtain additional
alternative financing, it cannot assure investors such financing would be on
favorable or acceptable terms.
Fuel Costs
The cost of jet fuel is an important expense for the Company. Jet fuel costs
are subject to wide fluctuations as a result of sudden disruptions in supply,
such as the effect of the invasion of Kuwait by Iraq in August 1990. The
Company estimates that a ten percent increase in fuel cost at December 31, 1999
would increase fuel expenses by approximately $10.8 million in the year 2000,
net of fuel hedge instruments outstanding at December 31, 1999. Comparatively,
based on 1999 fuel usage, a 10% increase in fuel prices would have resulted in
an increase in fuel expense of approximately $2.8 million, net of hedging
instruments utilized during 1999. The change in market risk is the result of
the Company hedging a larger portion of its fuel consumption in 1999 than in
2000. Due to the effect of world and economic events on the price and
availability of oil, the future availability and cost of jet fuel cannot be
predicted with any degree of certainty. Increases in fuel prices or a shortage
of supply could have a materially adverse effect on the Company's operations and
operating results.
The Company's DC-9 and B737 aircraft are relatively fuel-inefficient compared to
newer aircraft and industry averages. The primary reason for this inefficiency
is engine technology. As a result, a significant increase in the price of jet
fuel would likely result in a disproportionately higher increase in the
Company's average total costs than its competitors using more fuel-efficient
aircraft and whose fuel costs represent a smaller portion of total costs. The
Company may seek to pass such increase to its customers through a fare increase.
There can be no assurance that any such fare increase would not reduce the
competitive price advantage the Company seeks by offering affordable fares.
In order to provide a measure of control over price and supply, effective March
1999, the Company commenced participation in a fuel-hedging program whereby the
Company manages the price risk of fuel by entering into fixed rate fuel swap
contracts. The fuel-hedging program is designed to mitigate, but not eliminate,
the adverse effect of increases in fuel prices. The Company's fuel hedging
contracts covered approximately 80% of the Company's estimated fuel requirements
for the last ten months of 1999 and will cover 11% of its estimated fuel
requirements for the first six months of 2000. There can be no assurance that
the Company's fuel hedging program will continue to cover any of its fuel
requirements in the future.
Market Dominance by Delta Air Lines, Inc.
The Atlanta market, which is the Company's principal hub, is currently dominated
by Delta Air Lines, Inc. ("Delta"). Delta offers more than 620 flights per day
from Atlanta, which represents more than 75% of all departures from Hartsfield
Atlanta International Airport. Based on departures, the Company operates
approximately 12% of all departures from Hartsfield. The
15
<PAGE>
Company's Atlanta-based strategy may not be successful in light of Delta's
Atlanta market dominance.
Competitors in the Low-Fare Market
Delta Express, a division of Delta, began offering low-cost, low-fare service in
several of the Company's markets in 1996. MetroJet, a division of US Airways,
began offering low-fare service in both Boston and Washington, D.C. (Dulles) in
1999. The Company does not presently compete directly with Delta Express or
Southwest Airlines on any routes, but competes with MetroJet on its Atlanta-
Washington, D.C. and Atlanta-Boston routes. The Company may face greater
competition from Delta Express, MetroJet, Southwest Airlines or other low fare
carriers in the future.
A Highly Competitive Industry
The airline industry is highly competitive, primarily due to the effects of the
Airline Deregulation Act of 1978, which has substantially eliminated government
authority to regulate domestic routes and fares. Deregulation has increased the
ability of airlines to compete with respect to destination, flight frequencies
and fares. The Company competes with airlines that serve the Company's current
and proposed routes and which are larger and have greater name recognition and
greater financial resources than the Company.
The Company may also face competition from any of the following:
. existing airlines that may begin serving markets which the Company currently
serves or may serve in the future;
. current competitors that may expand their existing service;
. new competitors that may form new airline companies and enter the low-fare
market; and
. companies that provide ground transportation.
Competitors with greater financial resources than the Company may price their
fares at or below the Company's fares or increase their service. Such
competition could prevent the Company from attaining a share of the passenger
traffic necessary to sustain profitable operations. The Company's ability to
meet price competition depends on its ability to operate at costs equal to or
lower than its competitors or potential competitors.
Industry Profitability
The airline industry is characterized by low gross profit margins and high fixed
costs. The expenses of each flight do not vary significantly with the number of
passengers carried and, therefore, a relatively small change in the number of
passengers, or in average fare or traffic mix (the ratio of typically high-
yielding business passengers to typically low-yielding leisure passengers),
could have a disproportionate effect on an airline's operating and financial
results.
16
<PAGE>
Accordingly, a minor shortfall from expected revenue levels could have a
material adverse effect on the Company's results of operations.
The industry has experienced and continues to experience substantial
restructuring as many established carriers have implemented varying strategies
in pursuit of profitability, including consolidation to expand operations and
increase market strength, establishing lower cost airlines within airlines, such
as Shuttle by United, Delta Express by Delta and MetroJet by U.S. Airways, and
by entering into global alliance arrangements. Because these restructurings
have only recently begun to appear in the marketplace or, in some cases, have
not yet been implemented, the Company is unable to predict what effect, if any,
these activities will have on its business, financial condition and results of
operations.
Significant Dependence on Atlanta Market
The Company's business strategy has focused and is expected to continue to focus
on adding flights to and from its Atlanta base of operations. A reduction in
the Company's share of the Atlanta market or reduced passenger traffic to or
from Atlanta could have a material adverse effect on the Company's financial
condition and results of operations. In addition, the Company's dependence on a
primary hub and on a route network operating largely on the East Coast makes it
more susceptible to adverse weather conditions along the East Coast than some of
its competitors that may be better able to spread weather-related risks over
larger route systems.
Aging Aircraft; Maintenance and Reliability
The Company's fleet consists predominantly of DC-9 aircraft manufactured between
1967 and 1976 and B737 aircraft manufactured between 1968 and 1985. Many
aircraft components must be replaced after specified numbers of flight hours or
take-off and landing cycles and new aviation technology may need to be
retrofitted. As a result, the cost in general to maintain aging aircraft will
exceed the cost to maintain newer aircraft.
Currently, the FAA is considering amendments to FAA regulations, which would
require certain heavy maintenance checks and other additional maintenance
requirements for aircraft operating beyond certain operational limits. It is
likely that these maintenance requirements will apply to the aircraft operated
by the Company, although it is uncertain whether the proposed amendments will
require any changes to the heavy maintenance procedures already used by the
Company. In addition, the Company will be required to comply with any other
future regulations or Airworthiness Directives issued with respect to aging
aircraft. As a result, the Company's costs of maintenance (including costs to
comply with aging aircraft requirements for its DC-9 and B737 aircraft) may
increase in the future.
The Company believes that its aircraft are mechanically reliable based on the
percentage of scheduled flights completed. However, the Company cannot assure
that its aircraft will continue to be sufficiently reliable over longer periods
of time. Furthermore, given the age of the Company's fleet, any public
perception that the Company's aircraft are less than completely reliable could
have a material adverse effect on the Company's business.
17
<PAGE>
Purchase Commitments
The Company is obligated to purchase 50 B717 aircraft from The Boeing Company
("Boeing"). As of December 31, 1999, the Company has taken delivery of eight of
these aircraft. See "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." There
can be no assurance that the Company will be able to obtain satisfactory
financing to allow it to fulfill its obligations under the contract. If the
Company defaults in its obligations, Boeing would have the right to terminate
the purchase agreement and to seek other remedies available to it. The Company
may not be able to utilize all the aircraft it has committed to purchase. If the
Company cannot use such aircraft, it may be required to sell or lease such
aircraft on terms which will depend upon market conditions at the time. There
can be no assurance that the Company will not suffer a financial loss from any
such sales or leases.
Risk of Loss
Any accident involving the Company's aircraft could involve not only repair or
replacement of a damaged aircraft and its consequent temporary or permanent loss
from service, but also significant potential claims of injured passengers and
others. Moreover, any aircraft accident, even if fully insured, could cause and
has caused a public perception that some of the Company's aircraft are less safe
or reliable than other aircraft, which could have and has had a negative effect
on the Company's business. The occurrence of one or more subsequent incidents or
accidents involving the Company's aircraft would likely have a substantial
adverse effect on the Company's public perception and future operations.
The Company is required by the DOT to carry liability insurance on each of its
aircraft. The Company currently maintains liability insurance in the amount of
$850 million per occurrence. Although the Company currently believes its
insurance coverage is adequate, the amount of such coverage may be changed in
the future or the Company may be forced to bear substantial losses from
accidents. Substantial claims resulting from an accident in excess of related
insurance coverage could have a material adverse impact on the Company.
Risks Due to Litigation
For a discussion of certain risks presented by litigation affecting the Company,
see "Item 3 - Legal Proceedings."
Dependence on Executive Officers
The Company is dependent on the services of Joseph B. Leonard, Robert L. Fornaro
and its other executive officers. The loss of services of these officers could
materially and adversely affect the business of the Company and its future
prospects. The Company does not, and does not presently intend to, maintain key
man life insurance on any of its officers.
18
<PAGE>
Beginning in 1999, the Company has a new senior management team. There can be
no assurance that the new management team will be effective in managing the
Company or will be able to successfully work with existing personnel.
Reliance on Others
The Company has entered into agreements with contractors, including other
airlines, to provide certain facilities and services required for its
operations, including aircraft maintenance, ground facilities, baggage handling
and personnel training. The Company will likely need to enter into similar
agreements in any new markets that it decides to serve. All of these agreements
are subject to termination after notice. The Company's reliance upon others to
provide essential services on behalf of the Company may result in relative
inability to control the efficiency, timeliness and quality of contract
services. Management expects that the Company will be required to rely on such
contractors for some time in the future.
Airport Access
The Company's markets are located primarily in the eastern United States.
Access to certain "slot" controlled airports (such as Washington's Reagan
National, New York's Kennedy and LaGuardia and Chicago's O'Hare) is limited, and
the Company may not be able to obtain or maintain access to such airports at an
acceptable cost. Any condition, which would deny or limit the Company's access
to the airports it serves or seeks to serve, may have a negative impact on the
Company's business.
Taxation Affecting Air Fares
Recent federal legislation has imposed taxes on domestic airline transportation
equal to a segment charge (currently $2.50 to be increased to $3.00 by 2002)
plus 7.5% of the ticket price. These taxes will likely have a greater effect on
leisure travelers. Since the Company relies to a large extent on leisure
travelers, such a tax increase may affect the Company to a greater extent than
competitors who rely more heavily on business travelers.
Employee Relations
For a discussion of certain risks presented by the possible unionization of
employee groups not currently represented by unions, see "Employees".
Regulatory Matters
In the last several years, the FAA has issued a number of maintenance directives
and other regulations relating to, among other things, retirement of older
aircraft, security measures, collision avoidance systems, airborne windshear
avoidance systems, noise abatement, commuter aircraft safety, and increased
inspections and maintenance procedures to be conducted on older aircraft. The
Company expects to continue incurring expenses for the purpose of complying with
the FAA's aging aircraft regulations. In addition, several airports have
recently sought to
19
<PAGE>
increase substantially the rates charged to airlines, and the ability of
airlines to contest such increases has been restricted by federal legislation,
DOT regulations, and judicial decisions.
Additional laws and regulations have been proposed from time to time that could
significantly increase the cost of airline operations by imposing additional
requirements or restrictions on operations. Laws and regulations have also been
considered that would prohibit or restrict the ownership and/or transfer of
airline routes or takeoff and landing slots. Also, the availability of
international routes to United States carriers is regulated by treaties and
related agreements between the United States and foreign governments that are
amendable. The Company cannot predict what laws and regulations may be adopted
or their impact, but there can be no assurance that laws or regulations
currently proposed or enacted in the future will not adversely affect the
Company.
Seasonal and Cyclical Nature of Airline Business
Due to the greater demand for air travel during the summer months, revenue in
the airline industry in the second and third quarters of the year is generally
significantly greater than revenue in the first quarter of the year and
moderately greater than revenue in the fourth quarter of the year for the
majority of air carriers. The Company's results of operations generally reflect
this seasonality, but have also been impacted by numerous other factors that are
not necessarily seasonal, including the extent and nature of competition from
other airlines, fare competition, changing levels of operations, fuel prices,
and general economic conditions.
The airline industry is highly volatile. General economic conditions directly
affect the level of passenger travel. Leisure travel is highly discretionary and
varies depending on economic conditions. While business travel is not as
discretionary, business travel generally diminishes during unfavorable economic
times, as businesses tend to tighten cost controls.
20
<PAGE>
ITEM 2. PROPERTY
--------
Operating Aircraft Fleet
Owned and leased aircraft operated by the Company as of December 31, 1999
included:
Average Average
No. of Operating Age
Aircraft Type Seats Owned Leases Total (Years)
- ------------- ------- ----- --------- ----- --------
B717 117 8 0 8 0.21
DC-9 106 28 7 35 29.10
B737 119 3 1 4 22.80
----- --------- -----
Total 39 8 47 23.63
For information concerning the estimated useful lives, residual values, lease
terms, operating rent expense and firm orders on additional aircraft, see Note 1
to the consolidated financial statements.
As of December 31, 1999, 36 of the Company's owned aircraft were encumbered
under debt agreements.
The Company took delivery of the first of 50 B717's beginning in September,
1999. These aircraft will be used to replace the B737's and DC-9's currently in
operation. The Company returned five B737's to lessors during 1999. The
Company expects to take delivery of eight B717 aircraft in 2000.
The delivery schedule for the Company's 42 B717's under firm contract is as
follows:
Aircraft Type 2000 2001 2002 2003
- ------------- ---- ---- ---- ----
B717 8 16 18 -
The first of the eight B717 aircraft to be delivered in 2000 was delivered in
January 2000.
A preliminary retirement schedule of the Company's aircraft is as follows:
Aircraft Type 2000 2001 2002 2003
- ------------- ---- ---- ---- ----
DC-9 - 10 15 10
B737 - 3 - 1
21
<PAGE>
The delivery and retirement schedules represent Management's best estimates as
of March 15, 2000. Consequently, actual deliveries and/or retirements may vary
from the above tables. See Item 7. Management's Discussion and Analysis -
Forward Looking statements.
Ground Facilities
The Company's principal executive offices are located two miles from the Orlando
International Airport in a leased facility consisting of approximately 34,000
square feet of office space. The facility houses the executive offices of the
Company as well as the Company's operations staff (including in-flight
operations and station operations), general administrative staff, computer
systems and personnel training facility. The lease agreement for this facility
expires in 2007 and may be extended an additional ten years through the exercise
of options in five-year increments.
The Company owns an aircraft hangar of approximately 70,000 square feet at the
Orlando International Airport, subject to a ground lease with the Greater
Orlando Aviation Authority. The ground lease agreement for this facility expires
in 2011 and may be extended an additional ten years through the exercise of
options in five-year increments. The hangar houses a portion of the Company's
maintenance staff, maintenance records and parts inventory.
The Company leases 19,739 square feet of office space in Atlanta for use as a
reservations center under a lease that expires September 30, 2004. The Company
also leases approximately 15,000 square feet of space in Atlanta for use as a
training center under a lease that expires August 31, 2004. The Company also
leases a 13,028 square feet reservations center in Savannah, Georgia, which
expires in January 2003.
The Company has signatory status on the lease of facilities at Hartsfield
Atlanta International Airport, which expires in 2010. The check-in-counters,
gates and airport office facilities at each of the other airports the Company
serves are leased from the appropriate airport authority or subleased from other
airlines. Such arrangements may include baggage handling, station operations,
cleaning and other services.
If such facilities at any additional cities to be served by the Company are not
available to the Company at acceptable rates, or if such facilities become no
longer available to the Company at acceptable rates, then the Company may choose
not to service such markets.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Of the numerous lawsuits that were filed against the Company seeking damages
attributable to those on Flight 592, the remaining two cases are being pursued
in state courts in Florida and Texas. The Company believes that the $750
million coverage available with respect to these claims will be sufficient to
cover all claims arising from the accident. As all claims are handled
independently by the Company's insurance carrier, the Company cannot reasonably
estimate the amount of liability that may finally exist. As a result, no
accruals for losses and the related claim for recovery from the Company's
insurance carrier have been reflected in the Company's financial statements.
There can be no assurance that the total amount of judgments and
22
<PAGE>
settlements will not exceed the amount of insurance available therefor or that
all damages awarded will be covered by insurance.
On October 1, 1999, the Company filed suit in the Superior Court of Gwinnett
County, Georgia, against United States Aviation Underwriters, Inc. and United
States Aviation Insurance Group for declaratory relief and damages based on
claims of breach of contract and tortious breach of covenant of good faith and
fair dealing for matters involving litigation related to Flight 592.
From time to time, the Company is engaged in other litigation arising in the
ordinary course of its business. The Company does not believe that any such
pending litigation will have a material adverse effect on its results of
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
-------------------------------------------------
None.
23
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ---------------------------------------------------------
STOCKHOLDER MATTERS
- -------------------
Market Information
The Company's Common Stock, $.001 par value, is traded on the NASDAQ Stock
Market under the symbol "AAIR". As of March 10, 2000, there were approximately
5,512 holders of record of the Company's Common Stock. The following table sets
forth the reported high and low sale prices for the Common Stock for each fiscal
quarter since January 1, 1998.
Fiscal year ended December 31, 1998 High Low
- ----------------------------------- ---- ---
Quarter Ending March 31, 1998 $8.06 $3.00
Quarter Ending June 30, 1998 $9.44 $6.76
Quarter Ending September 30, 1998 $8.12 $3.88
Quarter Ending December 31, 1998 $4.47 $2.13
Fiscal year ended December 31, 1999 High Low
- ----------------------------------- ---- ---
Quarter Ending March 31, 1999 $5.13 $2.75
Quarter Ending June 30, 1999 $6.00 $4.13
Quarter Ending September 30, 1999 $7.25 $4.94
Quarter Ending December 31, 1999 $6.06 $3.50
As of March 10, 2000, the closing price of the Common Stock was $3.94.
Dividends
No cash dividends have ever been declared by the Company on its Common Stock. In
addition, the Company's debt indentures restrict the Company's ability to pay
cash dividends. The Company intends to retain earnings to finance the
development and growth of its business. Accordingly, the Company does not
anticipate that any dividends will be declared on its Common Stock for the
foreseeable future. Future payments of cash dividends, if any, will depend on
the Company's financial condition, results of operations, business conditions,
capital requirements, restrictions contained in agreements, future prospects and
other factors deemed relevant by the Company's Board of Directors.
24
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The information required by this item is as follows:
<TABLE>
<CAPTION>
(in thousands except per share data)
1999 1998(b) 1997 1996 1995
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues $523,468 $439,307 $211,456 $219,636 $367,757
Net income (loss) (99,394) (40,738) (96,663) (41,469) 67,763
Net income (loss),
excluding special items 29,094 (a) (13,246) (c) (66,581) (d) (11,098) (e) 67,763
Basic earnings (loss)
per share (1.53) (0.63) (1.72) (0.76) 1.24
Diluted earnings (loss)
per share (1.53) (0.63) (1.72) (0.76) 1.13
Diluted earnings (loss) per share,
excluding special items 0.45 (a) (0.20) (c) (1.19) (d) (0.20) (e) 1.13
Total assets 467,014 376,406 433,864 417,187 346,741
Long-term debt including
current maturities 415,688 245,994 250,712 244,706 109,038
</TABLE>
Notes: All special items listed below are pre-tax.
(a) Excludes a $147.7 million impairment loss related to the accelerated
retirement of the DC-9 fleet as a result of the introduction of the B717
fleet and a gain of $19.6 million for a litigation settlement.
(b) See Note 1 to the consolidated financial statements.
(c) Excludes a $27.5 million impairment loss related to the acceleration of the
retirement of four owned B737 aircraft as a result of the elimination of
their original route system and continued operating losses upon their
redeployment to other routes.
(d) Excludes a $24.8 million charge related to the shutdown of the airline in
1996 and a $5.2 million charge for the renaming of the airline in connection
with the merger with Airways Corporation in November 1997.
(e) Excludes a $68.0 million charge related to the shutdown of the airline in
1996, a $3.9 million gain on the sale of property, a $13.0 million
arrangement fee for aircraft transfer and a $2.8 million gain on insurance
recovery.
25
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
Results of Operations
For the twelve months ended December 31, 1999, 1998 and 1997
The following is a table of selected operational statistics and financial data
for the twelve months ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues passengers 6,460,533 5,462,827 3,005,731
Revenue passengers miles /(1)/ (000's) 3,473,490 3,244,539 1,597,585
Available seat miles /(2)/ (000's) 5,467,556 5,442,234 3,017,892
Passenger load factor /(3)/ 63.5% 59.6% 52.9%
Break-even load factor /(4)/ 59.4% 61.5% 76.3%
Average yield per revenue
passenger mile /(5)/ 14.01(cents) 12.97(cents) 12.58(cents)
Passenger revenue per available
seat mile /(6)/ 8.90(cents) 7.73(cents) 6.66(cents)
Operating cost per available seat mile /(7)/ 8.19(cents) 7.91(cents) 9.38(cents)
Average stage length (miles) 528 546 468
Average cost of aircraft fuel per gallon 49.95(cents) 54.87(cents) 69.00(cents)
Average daily utilization /(8)/ (hours) 9:54 9:42 8:25
Number of aircraft in fleet at end of period 47 50 53
</TABLE>
(1) The number of scheduled revenue miles flown by passengers.
(2) The number of seats available for passengers multiplied by the number of
scheduled miles each seat is flown.
(3) The percentage of aircraft seating capacity that is utilized is calculated
by dividing revenue passenger miles by available seat miles.
(4) Excluding shutdown and other nonrecurring, rebranding and impairment
charges, the percentage of seats that must be occupied by revenue
passengers in order for the Company to break even on a pre-tax income
basis.
(5) The average amount one passenger pays to fly one mile.
(6) Passenger revenue divided by available seat miles.
(7) Operating expenses, excluding shutdown and other nonrecurring, rebranding
and impairment charges, divided by available seat miles.
(8) The average number of hours per day that an aircraft flown in revenue
service is operated.
26
<PAGE>
Operating expenses per Available Seat Mile: (excluding shutdown and other
nonrecurring, rebranding and impairment charges)
<TABLE>
<CAPTION>
For the twelve months
ended December 31,
1999 1998 1997
-------- --------- ---------
<S> <C> <C> <C>
Operating expenses
Salaries, wages and benefits 2.21(cents) 1.99(cents) 1.79(cents)
Aircraft fuel 1.25 1.32 1.62
Maintenance, materials and repairs 1.58 1.37 2.03
Commissions 0.68 0.64 0.33
Landing fees and other rents 0.49 0.43 0.60
Marketing and advertising 0.29 0.28 0.44
Aircraft rent 0.09 0.13 0.03
Depreciation 0.52 0.53 0.93
Other operating 1.08 1.22 1.61
---------- ---------- ----------
Total operating expenses 8.19(cents) 7.91(cents) 9.38(cents)
========== ========== ==========
</TABLE>
1999 Compared to 1998
Summary
Excluding the pre-tax impairment charge of $147.7 million and litigation
settlement gain of $19.6 million, we recorded net income of $29.1 million or 45
cents per share in 1999 versus a net loss, excluding a pre-tax impairment charge
of $27.5 million, of $13.2 million or 20 cents per share in 1998. We recorded a
net loss of $99.4 million for the year ended December 31, 1999 compared to a net
loss of $40.7 million for the year ended December 31, 1998.
Excluding the special items mentioned above, our operating income increased
$47.2 million to $56.1 million in 1999 from $8.9 million in 1998. Excluding
special items, our operating margin in 1999 was 11.1% versus an operating margin
of 2.0% in 1998.
Operating Revenues
Passenger revenues increased by 15.6% or $65.6 million in 1999 compared to 1998.
The growth in our passenger revenue stems from increasing traffic demand in both
the business and leisure market segments. Business class loads were up
significantly versus last year. Adjustments in pricing and inventory strategies
also led to gains in leisure traffic. Yield (the average amount a passenger
pays to fly one mile) increased by 8.0%, year over year, from 13.0 cents to 14.0
cents.
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Unit revenue increased 15.1%, from 7.7 cents to 8.9 cents in 1998 and 1999,
respectively - better improvements than any major airline in the industry.
Our traffic, or revenue passenger miles (RPMs), increased 7.1% or 229.0 million
on a 0.5% increase in capacity, or available seat miles (ASMs). For the year
ended December 31, 1999, load factor increased 3.9 points to 63.5% versus 59.6%
for the year ended December 31, 1998. However, we continue to experience strong
competition that could negatively impact future loads and yields.
Other revenue increased 121.8%, or $18.2 million, this year compared to last
year due to the $19.6 million gain from a litigation settlement.
Operating Expenses
Excluding the impairment charges in 1999 and 1998, operating expenses increased
$17.4 million or 4.0% year over year. Our operating cost per ASM, excluding
impairment charges, increased 3.5% to 8.19 cents from 7.91 cents a year ago.
Salaries, wages and benefits increased 11.3%, or $12.3 million, due to a 6.1%
increase in overall headcount and contractual wage increases for our union-
represented labor groups. Aircraft fuel expense decreased year over year by
$3.6 million, or 5.0%, due to a 9.0% decrease in the average fuel cost per
gallon offset by a 4.4% increase in fuel consumption. Maintenance increased
15.8% or $11.8 million, due to a volume increase of five check lines as a result
of completing our structural life improvement program, and six additional engine
overhauls. The timing of maintenance to be performed is determined by the
number of hours an aircraft and engine are flown. Commissions paid to travel
agents increased $2.4 million or 6.9% due to an increase in commissionable
sales, offset by a rate reduction from 10% to 8% during the second quarter of
1998 and a further reduction to 5% during the fourth quarter of 1999. Landing
fees and other rents increased $3.6 million compared to the year ended 1998 due
to increased departures. We operated 5.1% more departures in 1999 than 1998, at
96,858 and 92,141, respectively. Aircraft rent decreased $2.4 million in 1999
from 1998 due to the return of five leased B737 aircraft throughout the year.
Other operating expenses decreased by $7.3 million, or 11.0%, primarily due to
the decline of credit card chargebacks and communications costs.
In the fourth quarter of 1999, we decided to accelerate the retirement of our
owned DC-9 fleet to accommodate the introduction of the B717 fleet. In
connection with our decision to accelerate the retirement of these aircraft, we
performed an evaluation to determine, in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, whether future cash flows (undiscounted
and without interest charges) expected to result from the use and eventual
disposition of these aircraft would be less than the aggregate carrying amount
of these aircraft and related assets. As a result of the evaluation, we
determined that the estimated future cash flows expected to be generated by
these aircraft would be less than their carrying amount, and therefore these
aircraft are impaired as defined by SFAS No. 121. Consequently, the original
cost bases of these assets were reduced to reflect the fair market value at the
date the decision was made, resulting in a $147.7 million impairment charge. We
considered recent transactions and market trends involving similar aircraft in
determining the fair market value. See Note 10 to the consolidated financial
statements.
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Non-operating Expenses
Interest expense, net of interest income, increased 11.2% due to the November 3,
1999, issuance of $178.9 million of debt for financing ten B717 aircraft. See
Note 5 to the consolidated financial statements.
Income tax expense was $2.7 million and $0 in 1999 and 1998, respectively. The
1999 tax expense results from the utilization of a portion of our $141 million
of net operating loss ("NOL") carryforwards, existing at December 31, 1998,
offset in part by alternative minimum tax and the application to goodwill of the
tax benefit related to the realization of a portion of the Airways Corporation
NOL carryforwards. We have not recognized any benefit from the use beyond 1999
of NOL carryforwards because our evaluation of all the available evidence in
assessing the realizability of tax benefits of such loss carryforwards indicates
that the underlying assumptions of future profitable operations contain risks
that do not provide sufficient assurance to recognize such tax benefits
currently.
1998 Compared to 1997
Summary
Our results of operations for 1997 are not reflective of the results to be
expected in future periods. This comes as a result of reduced service levels
during the year of 1997, incremental costs incurred to reinitiate service to
certain markets and to reactivate aircraft taken out of service and the merger
of Airways Corporation into our Company in November 1997. Our financial results
include the operations of Airways Corporation only from and after November 17,
1997, the date of the Merger.
We recorded a net loss of $40.7 million and $96.7 million for the years ended
December 31, 1998 and 1997, respectively. Excluding the impairment charge of
$27.5 million, we recorded a net loss of $13.2 million, or 20 cents per share,
in 1998 versus a net loss of $66.6 million, excluding a charge of $30.1 million
related to rebranding and shutdown costs, or $1.19 per share, in 1997.
Excluding the special items previously mentioned, our operating income increased
$80.6 million, from an operating loss of $71.7 million in 1997 to operating
income of $8.9 million in 1998. Our operating margin in 1998 was 2.0% versus an
operating margin deficit of 33.9% in 1997.
Operating Revenues
Passenger revenues in 1998 were $420.9 million as compared to $200.9 million for
the year ending December 31, 1997. The 109.5% increase is principally due to an
81.8% increase in revenue passengers enplaned and a 103.1% increase in revenue
passenger miles. Our yield (the average amount that a passenger pays to fly one
mile) increased 3.2%, year over year, from 12.6 cents to 13.0 cents.
29
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Our RPMs increased 103.1%, or 1.6 billion, on an 80.3% increase in ASMs. For
the year ended December 31, 1998, load factor increased 6.7 points to 59.6%
versus 52.9% for the twelve months ended December 31, 1997.
Cargo revenue increased 55.0%, from $2.3 million in 1997 to $3.5 million in 1998
due to an 80.3% increase in capacity.
Other revenues increased 80.5%, or $6.7 million, in 1998 compared to 1997 due to
the 81.8% increase in revenue passengers enplaned.
Operating Expenses
Excluding the impairment charge in 1998 and rebranding and shutdown and other
nonrecurring charges in 1997, operating expenses increased $147.2 million or
52.0%. Our operating cost per ASM decreased 15.7% to 7.91 cents from 9.38 cents
in 1997. Labor costs increased from $54.1 million in 1997 to $108.5 million in
1998 primarily due to contractual wage increases for our union-represented labor
groups and the acquisition of Airways Corporation on November 17, 1997. Aircraft
fuel increased 47.4% primarily due to the increase in consumption related to
increased service levels, offset by a 21.7% decrease in price per gallon in 1998
from 69.0 cents per gallon 54.0 cents per gallon. Maintenance costs increased
21.7% due to additional check lines and engine overhauls principally resulting
from an increase in the number of operating aircraft from 44 at December 31,
1997 to 50 at December 31, 1998. Commissions expense increased 246.1% largely
due to the increase in passenger volume and the increase of travel agency
bookings through the Airline Reporting Corporation ("ARC"), which we joined in
September 1997. Landing fees and other rents increased 28.2%, from $18.2 million
in 1997 to $23.4 million in 1998, due to a 72% increase in number of departures.
Marketing and advertising increased 13.6% from $13.3 million in 1997 to $15.1
million in 1998. However, as a percentage of revenue, marketing and advertising
decreased 2.9 percentage points from 6.3% in 1997 to 3.4% in 1998, which is more
in line with industry standards. Aircraft rent increased from $0.9 million in
1997 to $7.2 million in 1998 due to a full year of B737 rent expense versus only
six weeks of aircraft rent expense recognized after the acquisition of Airways
Corporation in November 1997. Depreciation expense remained flat year over year.
Additional capital spending increased depreciation $12 million offset by a $12
million reduction due to revising the salvage values of our DC-9 equipment. See
Note 1 of the consolidated financial statements. Other operating expenses
increased 37.3%, or $18.0 million, in 1998 as compared to 1997, primarily as a
result of increases in passenger and aircraft servicing expenses.
In the fourth quarter of 1998, we decided to accelerate the retirement of four
owned Boeing B737 aircraft as a result of the elimination of their original
route system and continued operating losses upon their redeployment to other
routes. The B737s are intended to be replaced with B717 aircraft. In connection
with our decision to accelerate the retirement of these aircraft, which were
acquired in the acquisition of Airways Corporation, we performed an evaluation
to determine, in accordance with SFAS No. 121, whether future cash flows
(undiscounted and without interest charges) expected to result from the use and
eventual disposition of these aircraft would be less than the aggregate carrying
amount of these aircraft and related assets and an allocation of cost in excess
of net assets acquired resulting from the acquisition of Airways
30
<PAGE>
Corporation. SFAS No. 121 requires that when a group of assets being tested for
impairment was acquired as part of a business combination that was accounted for
using the purchase method of accounting, any cost in excess of net assets
acquired that arose as part of the transaction must be included as part of the
asset grouping. As a result of the evaluation, we determined that the estimated
future cash flows expected to be generated by these aircraft would be less than
their carrying amount and allocated cost in excess of net assets acquired, and
therefore these aircraft are impaired as defined by SFAS No. 121. Consequently,
the original cost bases of these assets were reduced to reflect the fair market
value at the date the decision was made, resulting in a $27.5 million impairment
loss. We considered recent transactions and market trends involving similar
aircraft in determining the fair market value. See Note 10 to our consolidated
financial statements.
During 1997, we incurred $30.1 million of costs attributable to rebranding the
airline and shutdown and other nonrecurring costs attributable to the continued
effects of the reduced schedule after the 1996 suspension of operations. No
such costs were incurred during 1998.
Non-operating Expenses
Interest expense, net, increased $4.5 million primarily due to the decrease in
interest income earned from excess cash as a result of cash and cash equivalents
decreasing from $86.0 million at December 31, 1997 to $10.9 million at December
31, 1998.
We have not recognized any benefit from the future use of operating loss
carryforwards because our evaluation of all the available evidence in assessing
the realizability of the tax benefits of such loss carryforwards indicates that
the underlying assumptions of future profitable operations contain risks that do
not provide sufficient assurance to recognize such tax benefits currently. Our
income tax benefit was $0 and $22.8 million in 1998 and 1997, respectively. The
benefit recorded in 1997 was the result of operating loss carryback claims.
Outlook for 2000
During 1999, we celebrated many accomplishments on our return to profitability.
The accomplishments include, but are not limited to:
. Four quarters of profitability (exclusive of impairment loss in fourth quarter
and litigation settlement gain)
. Significant improvement in cash balance
. Introduction and delivery of eight B717 aircraft
. Awarded 75% of Department of Defense contract awards in which we bid -
estimated to be worth nearly $9.0 million per year
. Significant Revenue per ASM growth compared to the industry
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We expect 2000 to be another good year for our airline. We will benefit from
the travel agent commission reduction from 8% to 5%, reduced maintenance costs
per block hour and reduced depreciation expense as a result of the impairment
loss. We are exposed to high jet fuel prices without the benefit of a
significant hedge. Higher interest expense is also a risk we will face in 2000.
We are incurring higher interest expense due to aircraft financing. In
addition, there can be no assurance that attractive financing will be available
when we seek to refinance our $230.0 million of debt due in April 2001.
Year 2000
In prior years, we discussed the nature and progress of our plans to become Year
2000 ready. In late 1999, we completed our remediation and testing of systems.
As a result of those planning and implementation efforts, we experienced no
significant disruptions in mission critical information technology and non-
information technology systems and believe those systems successfully responded
to the Year 2000 date change. We expensed approximately $800,000 during 1999 in
connection with remediating our systems. We are not aware of any material
problems resulting from Year 2000 issues, either with our internal systems, or
the products and services of third parties. We will continue to monitor our
mission critical computer applications and those of our suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
Liquidity and Capital Resources
We rely primarily on operating cash flows to provide working capital. We have
no lines of credit or other facilities. As of December 31, 1999, we had cash
and cash equivalents of $58.1 million compared to $10.9 million at December 31,
1998 and working capital deficit of $7.3 million compared to a working capital
deficit of $30.8 million at December 31, 1999 and 1998, respectively. We
generally must satisfy all of our working capital expenditure requirements from
cash provided by operating activities, from external capital sources or from the
sale of assets. Substantial portions of our assets have been pledged to secure
various issues of our outstanding indebtedness. To the extent that the pledged
assets are sold, the applicable financing agreements generally require the sales
proceeds to be applied to repay the corresponding indebtedness. To the extent
that our access to capital is constrained, we may not be able to make certain
capital expenditures or to continue to implement certain other aspects of our
strategic plan, and we may therefore be unable to achieve the full benefits
expected therefrom. Based on the favorable economic conditions of the U.S.
airline industry, we expect to be able to generate positive working capital
through our operations; however, we cannot predict whether the current favorable
economic trends and conditions will continue, or the effects of competition or
other factors, such as increased fuel prices, that are beyond our control.
As of December 31, 1999, cash and cash equivalents increased from December 31,
1998 by $47.2 million. Operating activities generated $75.7 million in cash.
Investing activities used cash of $197.7 million primarily related to the
acquisition of eight B717 aircraft and several DC-9 hush kits. Financing
activities generated cash of $169.2 million in connection with issuance of debt
for the acquisition of ten B717 aircraft offset by long-term debt payments.
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As of December 31, 1999, our operating fleet consisted of 35 DC-9 aircraft, four
B737 aircraft and eight B717 aircraft. We returned five leased B737 aircraft and
grounded six Stage 2 DC-9 and B737 aircraft during 1999.
We have contracted with Boeing for the purchase of 50 B717 aircraft for delivery
from 1999 to 2002 - of which eight had been delivered as of December 31, 1999.
During the third quarter of 1998, we reached an agreement with Boeing to defer
the remaining progress payments until the first delivery, which occurred in
September 1999. Progress payments resumed in September 1999 and we paid $6.6
million in progress payments through December 1999. There can be no assurance
that cash provided by Operations will be sufficient to meet the progress
payments for the B717s. If we exercise our option to acquire up to an
additional 50 B717 aircraft, additional payments could be required beginning in
2001. We expect to finance at least 85% of the cost of each of these aircraft.
We completed a private placement of $178.9 million, enhanced equipment trust
certificates (EETCs) on November 3, 1999. The proceeds will be used to purchase
the first ten B717 aircraft. The EETCs bear interest at 10.63% per annum and
are payable in semi-annual installments from April 17, 2000, through April 17,
2017. Although Boeing has agreed to provide financing support with respect to
the remaining aircraft to be acquired, we will be required to obtain the
financing from other sources. We believe that with the support to be provided
by Boeing, aircraft-related debt financing should be available when needed.
However, there is no assurance that we will be able to obtain sufficient
financing on attractive terms, if at all. If we are unable to secure acceptable
financing, we could be required to modify our aircraft acquisition plans or to
incur higher than anticipated financing costs, which could have a material
adverse effect on our results of operations and cash flows.
On November 5, 1999, we announced our decision to accelerate the retirement of
the DC-9 fleet to accommodate the introduction of the B717 fleet. The
accelerated retirement allows for a more moderate capacity growth and resulted
in a non-cash pretax fleet disposition charge of $147.7 million during the
fourth quarter of 1999.
As of December 31, 1999, our debt related to asset financing totaled $265.7
million, with respect to which aircraft and certain other equipment are pledged
as security. Included in such amount is $80.0 million of 10.50% Senior Secured
Notes due April 2001 under which interest is payable semi-annually and the
$178.9 million of 10.63% enhanced equipment trust certificates, of which a
portion of interest and principal is payable semi-annually. In addition, we
have $150.0 million of 10.25% Senior Notes outstanding. The principal balance
of the Senior Notes is due in April 2001 and interest is payable semi-annually.
The entire principal amount of the Senior Notes ($150.0 million) and Senior
Secured Notes ($80.0 million) will become due on April 15, 2001. We do not
expect to generate sufficient cash flow from operations to repay all $230.0
million of such debt by its due date. Accordingly, we will likely need to
refinance all or a portion of the outstanding debt through additional equity or
debt or a combination thereof. The ability to refinance our debt depends on our
future performance and financial results. Such results are subject to general
economic, financial, competitive, legislative, regulatory, and other factors
that are, to some extent, beyond our control. All of our debt has final
maturities ranging from 2000 to 2017 with scheduled debt payments as of December
31, 1999 as follows: 2000--$19.6 million, 2001--$232.2 million, 2002--$7.5
million, 2003--$4.6 million, 2004--$6.1 million and thereafter--$145.7 million.
33
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Certain debt bears interest at rates ranging from 5.85% to 11.67% per annum and
is repayable in consecutive monthly or quarterly installments over a four- to
seven-year period. One of these notes, with an aggregate unpaid principal
balance of approximately $1.2 million as of December 31, 1999, has a variable
rate of interest based on the London Interbank Offered Rate ("LIBOR") plus 1.50%
to 3.73%.
Due to the competitive nature of the airline industry, in the event of any
increase in the price of jet fuel, there can be no assurance that we would be
able to pass on increased fuel prices to our customers by increasing fares.
New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 is effective for periods beginning after June 15, 2000. We are
currently evaluating SFAS No. 133 and have not yet determined its impact on the
consolidated financial statements.
Forward-Looking Statements
The statements that are contained in this Report that are not historical facts
are "forward-looking statements" which can be identified by the use of forward-
looking terminology such as "expects", "intends", "believes", "will" or the
negative thereof or other variations thereon or comparable terminology.
We wish to caution the reader that the forward-looking statements contained in
this Report are only estimates or predictions and are not historical facts.
Such statements include, but are not limited to:
. Our performance in future periods;
. our ability to maintain profitability and to generate working capital from
operations;
. our ability to take delivery of and to finance aircraft;
. the adequacy of our Company's insurance coverage; and
. the results of pending litigation or investigations.
No assurance can be given that future results will be achieved and actual events
or results may differ materially as a result of risks facing our Company or
actual events differing from the assumptions underlying such statements. Such
risks and assumptions include, but are not limited to:
. consumer demand and acceptance of services offered by our Company;
34
<PAGE>
. our ability to achieve and maintain acceptable cost levels;
. fare levels and actions by competitors;
. regulatory matters, general economic conditions; commodity prices; and
. changing business strategy and results of litigation.
Additional information concerning factors that could cause actual results to
vary materially from the future results indicated, expressed or implied in such
forward-looking statements is contained elsewhere in our Form 10-K for the year
ended December 31, 1999.
All forward-looking statements made in connection with this Report are expressly
qualified in their entirety by these cautionary statements. Our Company
disclaims any obligation to update or correct any of its forward-looking
statements.
Business Strategy
Even though we currently have no plans to do so, we may change our business
strategy in the future and may not pursue some of the goals and initiatives
stated herein.
35
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Market Risk Sensitive Instruments and Positions
We are subject to certain market risks including interest rates and commodity
prices (i.e., aircraft fuel). The adverse effects of changes in these markets
pose a potential loss as discussed below. The sensitivity analyses do not
consider the effects that such adverse changes may have on overall economic
activity nor do they consider additional actions we may take to mitigate our
exposure to such changes. Actual results may differ. See the Notes to the
consolidated financial statements for a description of our Company's financial
policies and additional information.
Interest Rates
As of December 31, 1999 and 1998, the fair value of our long-term debt was
estimated to be $392.3 million and $175.3 million, respectively, based upon
discounted future cash flows using current incremental borrowing rates for
similar types of instruments or market prices. Market risk, estimated as the
potential increase in fair value resulting from a hypothetical one percent
decrease in interest rates, was approximately $8.0 million as of December 31,
1999, and approximately $4.2 million as of December 31, 1998.
Aircraft Fuel
Our results of operations are impacted by changes in the price of aircraft fuel.
Excluding the impairment charges, aircraft fuel accounted for 15.3% and 16.7% of
our operating expenses in 1999 and 1998, respectively. Based on our 2000
projected fuel consumption, a ten percent increase in the average price per
gallon of aircraft fuel at December 31, 1999 would increase fuel expense for the
next twelve months by approximately $10.8 million, net of hedging instruments
outstanding at December 31, 1999. Comparatively, based on 1999 fuel usage, a
10% increase in fuel prices would have resulted in an increase in fuel expense
of approximately $2.8 million, net of hedging instruments utilized during 1999.
The increase in market risk is primarily due to our fuel hedging contracts
covering significantly more fuel requirements in 1999 than in 2000. In 1999, we
entered into fixed rate swap contracts and jet fuel purchase commitments in
order to manage the price risk and utilization of fuel cost. At December 31,
1999, we had hedged approximately 11% of our projected fuel requirements for the
first six months of 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The response to this Item is submitted as a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by this Item is incorporated herein by reference to the
data under the heading "ELECTION OF DIRECTORS" in the Proxy Statement to be used
in connection with the solicitation of proxies for the Company's annual meeting
of Stockholders to be held May 18, 2000, which Proxy Statement is to be filed
with the Commission.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this Item is incorporated herein by reference to the
data under the heading "EXECUTIVE COMPENSATION" in the Proxy Statement to be
used in connection with the solicitation of proxies for the Company's annual
meeting of Stockholders to be held May 18, 2000, which Proxy Statement is to be
filed with the Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this Item is incorporated herein by reference to the
data under the heading "STOCK OWNERSHIP" in the Proxy Statement to be used in
connection with the solicitation of proxies for the Company's annual meeting of
Stockholders to be held May 18, 2000, which Proxy Statement is to be filed with
the Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this Item is incorporated herein by reference to the
data under the heading "CERTAIN TRANSACTIONS" in the Proxy Statement to be used
in connection with the solicitation of proxies for the Company's annual meeting
of Stockholders to be held May 18, 2000, which Proxy Statement is to be filed
with the Commission.
37
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) 1. The response to this portion of Item 14 is submitted as a separate
section of this report.
2. The response to this portion of Item 14 is submitted as a separate
section of this report.
3. Filing of Exhibits:
4.13 Second Supplemental Indenture dated April 23, 1999, among the
Company, its subsidiaries and The Bank of New York.
4.14 Third Supplemental Indenture dated December 30, 1999, among the
Company, its subsidiaries and The Bank of New York
10.21 Note Purchase Agreement dated as of November 3, 1999, among the
Company, AirTran Airways, Inc., State Street Bank and Trust Company
of Connecticut, National Association and First Security Bank, National
Association.
Exhibit 21 - Subsidiaries of the Registrant
Exhibit 23 - Consent of Independent Auditors
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
Form 8-K dated October 21, 1999 to report third quarter earnings.
(c) The following exhibits are filed herewith or incorporated by reference
as indicated. Exhibit numbers refer to Item 601 of Regulation S-K.
Exhibit No. And Description
- ---------------------------
3.1 Articles of Incorporation (1)
3.2 Bylaws (As amended on November 17, 1997) (10)
4.1 See the Articles of Incorporation filed as Exhibit 3.1 and Bylaws filed as
Exhibit 3.2
4.2 Agreement and Plan of Merger among the Company, ValuJet Airlines, Inc. and
VJET Acquisition, Inc. (1)
4.3 Plan of Reorganization and Agreement of Merger dated July 10, 1997,
between the Company and Airways Corporation (2)
4.4 Plan of Merger dated July 10, 1997, between the Company and Airways
Corporation (2)
4.5 Amendment to Plan of Reorganization and Agreement of Merger between the
Company and Airways Corporation (2)
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4.6 Amendment to Plan of Merger between the Company and Airways Corporation
(2)
4.7 Indenture dated as of April 17, 1996, among the Company, its subsidiaries
and Bank of Montreal Trust Company, as Trustee (3)
4.8 First Supplemental Indenture dated August 26, 1996, among the Company, its
subsidiaries, Bank of Montreal Trust Company and Fleet National Bank (11)
4.9 Second Supplemental Indenture dated August 5, 1997, among the Company, its
subsidiaries and State Street Bank and Trust (10)
4.10 Third Supplemental Indenture dated November 17, 1997, among the Company,
its subsidiaries and State Street Bank and Trust (11)
4.11 Indenture dated August 13, 1997, among the Company, its subsidiaries and
The Bank of New York, as Trustee (4)
4.12 First Supplemental Indenture dated November 17, 1997, among the Company,
its subsidiaries and The Bank of New York (11)
4.13 Second Supplemental Indenture dated April 23, 1999, among the Company, its
subsidiaries and The Bank of New York (Page 71)
4.14 Third Supplemental Indenture dated December 30, 1999, among the Company,
its subsidiaries and The Bank of New York (Page 75)
10.1 Incentive Stock Option Agreement dated June 1, 1993, between ValuJet
Airlines, Inc. and Lewis H. Jordan (5)(6)
10.2 1993 Incentive Stock Option Plan (5)(6)
10.3 1994 Stock Option Plan (5)(6)
10.5 1995 Employee Stock Purchase Plan (7)
10.6 Purchase Agreement between McDonnell Douglas Corporation and ValuJet
Airlines, Inc. dated December 6, 1995. The Commission has granted
confidential treatment with respect to certain portions of this Agreement
(8)
10.7 Agreement and Lease of Premises Central Passenger Terminal Complex
Hartsfield Atlanta International Airport (8)
10.8 1996 Stock Option Plan (6)(9)
10.9 Consulting Agreement dated November 17, 1997, between the Company and
Robert L. Priddy (6) (10)
10.10 Consulting Agreement dated November 17, 1997, between the Company and
Lewis H. Jordan (6) (10)
10.11 Airways Corporation 1995 Stock Option Plan (6)(12)
10.12 Airways Corporation 1995 Directors Stock Option Plan (6)(12)
10.13 Lease of headquarters in Orlando, Florida, dated November 14, 1995 (13)
10.14 Orlando International Lease and Use Agreement (14)
10.15 Orlando Tradeport Maintenance Hangar Lease Agreement by and between
Greater Orlando Aviation Authority and Page AvJet Corporation dated
December 11, 1989 (15)
10.16 Amendment No. 1 to Orlando Tradeport Maintenance Hangar Lease Agreement by
and between Greater Orlando Aviation Authority and Page AvJet Corporation
dated June 22, 1990 (15)
10.17 Agreement and Second Amendment to Orlando Tradeport Maintenance Hangar
Lease Agreement by and between Greater Orlando Aviation Authority and The
Company. dated January 25, 1996 (15)
10.18 Supplemental Agreement dated as of November 17, 1998, between the
Company and D. Joseph Corr (11)
10.19 Employment Agreement dated as of January 4, 1999, between the Company and
Joseph B. Leonard (11)
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<PAGE>
10.20 Loan Agreement dated as of January 25, 1999, among the Company, Lewis H.
Jordan, Robert L Priddy, Timothy P. Flynn and Maurice J. Gallagher, Jr.
(11)
10.21 Note Purchase Agreement dated as of November 3, 1999, among the Company,
AirTran Airways, Inc., State Street Bank and Trust Company of
Connecticut National Association and First Security Bank, National
Association. (Page 82)
21 Subsidiaries of the Registrant (Page 574)
23 Consent of Independent Auditors (Page 575)
27 Financial Data Schedule (Page 576)
- ---------------
(1) Incorporated by reference to the Company's Registration Statement on Form
S-4, registration number 33-95232, filed with the Commission on August 1,
1995 and amendments thereto.
(2) Incorporated by reference to the Company's Registration Statement Form
S-4, registration number 333-33837, filed with the Commission on August
18, 1997 and amendments thereto.
(3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996, Commission File No. 0-26914, filed
with the Commission on May 3, 1996.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-4, registration number 333-37487, filed with the Commission on October
9, 1997 and amendments thereto.
(5) Incorporated by reference to the Company's Registration Statement on Form
S-1, registration number 33-78856, filed with the Commission on May 12,
1994 and amendments thereto.
(6) Management contract or compensation plan or arrangement required to be
filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c) of
Form 10-K.
(7) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, Commission File No. 0-24164, filed
with the Commission on August 11, 1995.
(8) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, Commission File No. 0-24164, filed with
the Commission on March 29, 1996 and amendment thereto.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, Commission File No. 0-24164, filed with
the Commission on March 31, 1997.
(10) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, Commission File No. 0-26914, filed with
the Commission on March 27, 1998.
(11) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998, Commission File No. 0-26914, filed with
the Commission on
40
<PAGE>
March 31, 1999.
(12) Incorporated by reference to Airways Corporation's Registration Statement
on Form S-4, registration number 33-93104, filed with the Commission.
(13) Incorporated by reference to the Quarterly Report on Form 10-Q of Airways
Corporation (Commission File No. 0-26432) for the quarter ended December
31, 1995.
(14) Incorporated by reference to the Quarterly Report on Form 10-Q of Airways
Corporation (Commission File No. 0-26432) for the quarter ended December
31, 1996.
(15) Incorporated by reference to the Annual Report on Form 10-K of Airways
Corporation (Commission File No. 0-26432) for the year ended March 31,
1997.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
AIRTRAN HOLDINGS, INC.
By:
/s/ Joseph B. Leonard
---------------------
Joseph B. Leonard
Chairman, President and Chief Executive Officer
Date: March 22, 2000
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 and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C>
/s/ Joseph B. Leonard March 22, 2000
- ---------------------
Joseph B. Leonard
Chairman, President and Chief Executive Officer
/s/ Robert L. Fornaro March 22, 2000
- ---------------------
Robert L. Fornaro
President and Chief Financial Officer
/s/ David W. Lancelot March 22, 2000
- ---------------------
David W. Lancelot
Vice President and Controller (Chief Accounting Officer)
/s/ Don L. Chapman March 22, 2000
- ------------------
Don L. Chapman
Director
/s/ John K. Ellingboe March 22, 2000
- ---------------------
John K. Ellingboe
Director
/s/ Lewis H. Jordan March 22, 2000
- -------------------
Lewis H. Jordan
Director
/s/ Robert L. Priddy March 22, 2000
- --------------------
Robert L. Priddy
Director
</TABLE>
42
<PAGE>
<TABLE>
<S> <C>
/s/ Robert D. Swenson March 22, 2000
- ---------------------
Robert D. Swenson
Director
</TABLE>
43
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1999
AirTran Holdings, Inc.
Orlando, Florida
44
<PAGE>
The following consolidated financial statements of AirTran Holdings, Inc. are
included in Item 8:
CONTENTS
Consolidated statements of operations - Years ended
December 31, 1999, 1998, and 1997........................................ 47
Consolidated balance sheets - December 31, 1999 and 1998................. 48
Consolidated statements of stockholders' equity (deficit) - Years ended
December 31, 1999, 1998, and 1997........................................ 50
Consolidated statements of cash flows - Years ended
December 31, 1999, 1998, and 1997........................................ 51
Notes to consolidated financial statements - December 31, 1999........... 52
The following consolidated financial statements schedule of AirTran Holdings,
Inc. is included in Item 14(d):
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
45
<PAGE>
Report of Independent Auditors
The Stockholders and Board of Directors
AirTran Holdings, Inc.
We have audited the accompanying consolidated balance sheets of AirTran
Holdings, Inc. as of December 31, 1999 and 1998 and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the index at item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of AirTran
Holdings, Inc. at December 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Atlanta, Georgia
January 25, 2000
46
<PAGE>
AirTran Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating revenues:
Passenger $486,487 $420,901 $200,939
Cargo 3,888 3,488 2,250
Other 33,093 14,918 8,267
-------- -------- --------
Total operating revenues 523,468 439,307 211,456
Operating expenses:
Salaries, wages and benefits 120,737 108,461 54,133
Aircraft fuel 68,331 71,922 48,797
Maintenance, materials and repairs 86,374 74,577 61,270
Commissions 37,278 34,886 10,079
Landing fees and other rents 27,004 23,366 18,227
Marketing and advertising 15,643 15,112 13,299
Aircraft rent 4,869 7,241 946
Depreciation 28,533 28,591 28,148
Other operating 58,952 66,216 48,241
Impairment loss 147,735 27,492 -
Shutdown and other nonrecurring - - 24,839
Rebranding - - 5,243
-------- -------- --------
Total operating expenses 595,456 457,864 313,222
-------- -------- --------
Operating loss (71,988) (18,557) (101,766)
Interest (income) expense:
Interest income (3,183) (3,181) (6,659)
Interest expense 27,850 25,362 24,331
-------- -------- --------
Interest expense, net 24,667 22,181 17,672
-------- -------- --------
Loss before income taxes (96,655) (40,738) (119,438)
Income tax expense (benefit) 2,739 - (22,775)
-------- -------- ---------
Net loss $(99,394) $(40,738) $ (96,663)
======== ======== =========
Basic and diluted loss per share $ (1.53) $ (0.63) $ (1.72)
======== ======== =========
Weighted average shares outstanding
(basic and diluted) 65,097 64,641 56,068
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
47
<PAGE>
AirTran Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
Assets 1999 1998
- ------ -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 58,102 $ 10,882
Restricted cash 18,069 13,459
Accounts receivable, less allowance of $927 and
$1,325 at December 31, 1999 and 1998, respectively 7,599 7,784
Spare parts, materials and supplies, less allowance
for obsolescence of $2,260 and $4,259 at
December 31, 1999 and 1998, respectively 5,816 11,486
Prepaid expenses 14,058 9,346
-------- --------
Total current assets 103,644 52,957
Property and equipment:
Flight equipment 244,662 306,026
Less: Accumulated depreciation (4,973) (87,084)
-------- --------
239,689 218,942
Purchase deposits for flight equipment 22,562 36,518
Other property and equipment 24,914 23,491
Less: Accumulated depreciation (13,436) (10,542)
-------- --------
11,478 12,949
-------- --------
273,729 268,409
Other assets:
Intangibles resulting from business acquisition 38,862 42,727
Unexpended debt proceeds 39,232 -
Debt issuance costs 5,733 6,956
Other assets 5,814 5,357
-------- --------
Total assets $467,014 $376,406
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
48
<PAGE>
AirTran Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
Liabilities and Stockholders' Equity (Deficit) 1999 1998
- ---------------------------------------------- -------- --------
<S> <C> <C>
Current liabilities:
Accounts payable $ 10,410 $ 13,252
Accrued liabilities 57,456 44,508
Air traffic liability 23,491 17,022
Current portion of long-term debt 19,569 8,929
-------- --------
Total current liabilities 110,926 83,711
Long-term debt, less current portion 396,119 237,065
Stockholders' equity (deficit):
Preferred stock, $.01 par value per share, 5,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.001 par value per share, 1,000,000
shares authorized, and 65,698 and 64,898 shares
issued and outstanding at December 31, 1999 and
1998, respectively 66 65
Additional paid-in capital 150,589 146,857
Accumulated deficit (190,686) (91,292)
--------- --------
Total stockholders' equity (deficit) (40,031) 55,630
--------- --------
Total liabilities and stockholders' equity (deficit) $ 467,014 $376,406
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
49
<PAGE>
AirTran Holdings, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands)
<TABLE>
<CAPTION>
Common Stock
--------------
Retained Total
Additional Earnings Stockholders'
Paid-in (Accumulated Equity
Shares Amount Capital Deficit) (Deficit)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 54,876 $ 55 $ 77,235 $ 46,109 $123,399
Issuance of common stock for exercise of options 317 - 904 - 904
Issuance of common stock under stock purchase plan 24 - 143 - 143
Issuance of common stock and stock options to acquire business 9,095 9 66,655 - 66,664
Net loss - - - (96,663) (96,663)
----------------------------------------------------------------
Balance at December 31, 1997 64,312 64 144,937 (50,554) 94,447
Issuance of common stock for exercise of options 563 1 1,790 - 1,791
Issuance of common stock under stock purchase plan 23 - 130 - 130
Net loss - - - (40,738) (40,738)
----------------------------------------------------------------
Balance at December 31, 1998 64,898 65 146,857 (91,292) 55,630
Issuance of common stock for exercise of option 226 - 1,031 - 1,031
Issuance of common stock under stock purchase plan 51 - 202 - 202
Issuance of common stock in litigation settlement 523 1 2,499 - 2,500
Net loss - - - (99,394) (99,394)
----------------------------------------------------------------
Balance at December 31, 1999 65,698 $ 66 $150,589 $(190,686) $(40,031)
================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
50
<PAGE>
AirTran Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net loss $ (99,394) $(40,738) $ (96,663)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 30,432 31,525 32,376
Impairment loss 147,735 27,492 -
Provisions for uncollectible accounts 4,022 8,003 2,895
Deferred income taxes 2,387 - (13,221)
Changes in current operating assets and liabilities:
Restricted cash (4,610) (7,494) 4,480
Accounts receivable (3,837) (11,425) (1,420)
Spare parts, materials and supplies (1,657) (1,878) (94)
Prepaid expenses and deposits (5,169) 5,911 5,556
Accounts payable and accrued liabilities (636) (19,476) 28,879
Air traffic liability 6,469 2,106 153
Income tax payable - - 21,472
--------- -------- ---------
Net cash flows provided by (used for) operating activities 75,742 (5,974) (15,587)
Investing activities:
Purchases of property and equipment (187,667) (66,716) (30,349)
Refund of aircraft purchase deposits 4,374 - -
Cash paid for acquisition, net of cash acquired - - (364)
Preacquisition advance to Airways Corporation - - (11,681)
Restricted funds for aircraft purchases (39,232) - -
Proceeds from disposal of equipment 24,815 370 3,595
--------- -------- ---------
Net cash flows used for investing activities (197,710) (66,346) (38,799)
Financing activities;
Issuance of long-term debt 244,756 6,100 72,493
Payments of long-term debt (76,801) (10,844) (83,142)
Proceeds from sale of common stock 1,233 1,921 1,047
--------- --------- ---------
Net cash flows provided (used for) financing activities 169,188 (2,823) (9,602)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 47,220 (75,143) (63,988)
Cash and cash equivalents at beginning of period 10,882 86,025 150,013
--------- --------- ---------
Cash and cash equivalents at end of period $ 58,102 $ 10,882 $ 86,025
========= ========= =========
Supplemental disclosures of cash flow activities:
Cash paid for interest, net of amounts capitalized $ 23,911 $ 21,557 $ 22,776
========= ========= =========
Income taxes (refunded) paid $ 420 $ (9,686) $ (31,124)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
51
<PAGE>
AirTran Holdings, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reorganization and Principles of Consolidation
Pursuant to a Plan of Reorganization and Agreement of Merger, the Company
acquired Airways Corporation ("Airways") on November 17, 1997, through a merger
of Airways with and into the Company ("the Airways Merger"). In connection with
the Airways Merger, each outstanding share of Common Stock, $.01 par value per
share, of Airways was converted into and became the right to receive one share
of Common Stock, $.001 par value per share, of ValuJet, Inc. Therefore, the then
current shareholders of Airways became stockholders of AirTran Holdings, Inc.
(formerly ValuJet, Inc.) and AirTran Airways, Inc. ("AirTran Airways"), Airways'
wholly-owned subsidiary, became a wholly-owned subsidiary of AirTran Holdings,
Inc. On August 6, 1999, AirTran Airlines, Inc., a wholly-owned subsidiary of
the Company, was merged with and into AirTran Airways. See Note 2.
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Significant inter-company
accounts and transactions have been eliminated in consolidation.
Description of Business
The Company offers affordable scheduled air transportation and mail service,
serving short-haul markets primarily in the eastern United States.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results inevitably will differ from
those estimates, and such differences may be material to the consolidated
financial statements.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Restricted cash primarily
represents amounts escrowed relating to air traffic liability.
Accounts Receivable
Accounts receivable are due primarily from major credit card processors and
travel agents. These receivables are unsecured. The Company provides an
allowance for doubtful accounts equal to the estimated losses expected to be
incurred in the collection of accounts receivable.
52
<PAGE>
Spare Parts, Materials and Supplies
Spare parts, materials and supplies are stated at cost using the first-in,
first-out method (FIFO). These items are charged to expense when used.
Allowances for obsolescence are provided over the estimated useful life of the
related aircraft and engines for spare parts expected to be on hand at the date
aircraft are retired from service.
Property and Equipment
Property and equipment is stated on the basis of cost. Flight equipment is
depreciated to its salvage values using the straight-line method.
The B717 fleet has a salvage value of 10% and useful life of 25 years. In
conjunction with the 1999 impairment charge, the DC-9 fleet was written down to
its fair market value. Accordingly, the salvage values were revised to 38% -
52%, and the useful lives were revised to 1 - 3 years. In conjunction with the
1998 impairment charge, the B737 fleet was written down to its fair market
value, and the Company believes that the fair market value is indicative of its
salvage value. The useful lives of the B737 aircraft were revised to two years.
Aircraft parts are depreciated over the respective fleet life to a salvage value
of 5%.
Other property and equipment is depreciated over three to ten years.
The estimated salvage values and depreciable lives are periodically reviewed for
reasonableness and revised if necessary. At January 1, 1998, the Company
revised its salvage values and useful lives on its DC-9 fleet and related
equipment as outlined below:
1997 1998 1997 1998
Salvage Value Salvage Value Useful Life Useful Life
------------- ------------- ----------- -----------
Airframes 10% 40% 10-20 years 10-12 years
Engines 10% 10% 3 years 10-12 years
Aircraft parts 5-50% 5% 3 years fleet life
The revised salvage value of the Company's DC-9 fleet ranged from approximately
$434,000 to $2,614,000 per aircraft. The effect of this change for the year
ended December 31, 1998, was to increase income by approximately $12 million or
$0.19 per share. At the time, these estimates more accurately reflected
management's expectations of estimated fair values at the anticipated dates of
disposal.
53
<PAGE>
Measurement of Impairment
In accordance with Statement of Financial Accounting Standard No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of ("SFAS No. 121"), the Company records impairment losses on long-
lived assets used in operations when events or circumstances indicate that the
assets may be impaired and the undiscounted cash flows estimated to be generated
by those assets are less than the net book value of those assets.
Intangibles Resulting from Business Acquisition
Intangibles resulting from business acquisition consist of cost in excess of net
assets acquired and the trade name and are being amortized using the straight-
line method over 30 years. Accumulated amortization at December 31, 1999 and
1998 was approximately $3,704,000 and $2,227,000, respectively.
The carrying value of cost in excess of net assets acquired is reviewed for
impairment whenever events or changes in circumstances indicate that it may not
be recoverable. If such an event occurred, the Company would prepare projections
of future results of operations for the remaining amortization period. If such
projections indicated that the expected future net cash flows (undiscounted and
without interest) are less than the carrying amount of cost in excess of net
assets acquired, the Company would record an impairment loss in the period such
determination is made based on the fair value of the related business.
Capitalized Interest
Interest attributable to funds used to finance the acquisition of new aircraft
is capitalized as an additional cost of the related asset. Interest is
capitalized at the Company's weighted average interest rate on long-term debt
or, where applicable, the interest rate related to specific borrowings.
Capitalization of interest ceases when the asset is placed in service. In 1999,
1998 and 1997, approximately $6,736,000, $3,339,000 and $1,555,000 of interest
cost was capitalized, respectively.
Aircraft and Engine Maintenance
The Company accounts for airframe and engine overhaul costs using the direct-
expensing method. Overhauls are performed on a continuous basis and the cost of
overhauls and routine maintenance costs for airframe and engine maintenance are
charged to maintenance expense as incurred.
Advertising Costs
Advertising costs are charged to expense in the period the costs are incurred.
Advertising expense was approximately $14,799,000, $14,835,000 and $13,087,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
Revenue Recognition
Passenger and cargo revenue is recognized when transportation is provided.
Transportation purchased but not yet used is included in air traffic liability.
54
<PAGE>
Rebranding Expenses
Rebranding expenses represent costs incurred in 1997 in connection with the
Company's name change such as costs for advertising, new signs, uniforms and
conforming information systems.
Stock-Based Compensation
The Company grants stock options for a fixed number of shares to officers,
directors, key employees and consultants of the Company with an exercise price
equal to or below the fair value of the shares at the date of grant. The Company
accounts for stock option grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, and accordingly, recognizes
compensation expense only if the market price of the underlying stock exceeds
the exercise price of the stock option on the date of grant.
SFAS No. 123, Accounting for Stock-Based Compensation, provides an alternative
to APB Opinion No. 25 in accounting for stock-based compensation issued to
employees. However, the Company will continue to account for stock-based
compensation in accordance with APB Opinion No. 25.
Net Loss Per Share
Net loss per share (basic and diluted) was computed by dividing net loss by the
weighted average number of shares of common stock outstanding. Common stock
equivalents were anti-dilutive and therefore excluded from the computation of
weighted average shares used in computing diluted loss per share.
Impact of Recently Issued Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 is effective for periods beginning after June 15, 2000. The Company is
currently evaluating SFAS No. 133 and has not yet determined its impact on the
consolidated financial statements.
Reclassification
Operating expenses in the 1998 and 1997 financial statements have been
reclassified to the current presentation. This presentation complies with
current industry standards. Certain other prior year amounts have been
reclassified to conform with the current year financial statement presentation.
2. Acquisitions
On November 17, 1997, the Company acquired all of the outstanding shares of
common stock of Airways, which through its wholly-owned subsidiary, AirTran
Airways, Inc., operates a domestic commercial airline providing point-to-point
scheduled air transportation. The acquisition was recorded under the purchase
method of accounting, and accordingly, Airways' results of operations are
included in the accompanying consolidated financial statements from the date of
acquisition. The aggregate purchase
55
<PAGE>
price was approximately $68,374,000 compromised of the following; 9,094,937
shares of the Company's common stock valued at approximately $63,664,000;
732,700 options to purchase the Company's common stock valued at approximately
$3,000,000; 50,000 warrants to purchase the Company's common stock valued at
$210,000; and cash of approximately $1,500,000 for the expenses of the Airways
Merger and other costs. The purchase price has been allocated to the tangible
and intangible assets purchased and the liabilities assumed based on the
estimated fair market values at the date of acquisition. The allocation of the
purchase price was finalized in 1998 resulting in an $8,154,000 increase in
goodwill. The excess of cost over the fair value of the net assets acquired has
been recorded as goodwill and is being amortized on a straight-line basis over
30 years.
The non-cash investing activity for the acquisition is as follows:
Fair value of assets acquired $ 45,709
Intangibles resulting from business acquisition 58,029
Liabilities assumed (36,710)
Fair value of common stock and options issued (66,664)
--------
Net cash paid for acquisition $ 364
========
The following data represents the combined unaudited operating results of the
Company on a pro forma basis as if the acquisition of Airways had occurred at
the beginning of the period presented. The pro forma information does not
necessarily reflect the results of operations as they would have been had the
acquisition actually taken place at that time, nor are they indicative of the
results of future combined operations. Adjustments include amounts of
depreciation to reflect the fair market value and economic lives of property and
equipment and amortization of intangible assets. In addition, adjustments were
made to reflect the additional shares issued.
Unaudited Pro Forma
Year Ended December 31, 1997
(In thousands, except per share data)
Total operating revenues $ 303,669
Net loss (107,017)
Net loss per share:
basic and diluted (1.67)
3. Commitments and Contingencies
Of the numerous lawsuits that were filed against the Company seeking damages
attributable to those on Flight 592, there are two remaining cases proceeding in
state courts in Florida and Texas. As all claims are handled independently by
the Company's insurance carrier, the Company cannot reasonably estimate the
amount of liability that may finally exist. As a result, no accruals for losses
and the related claim for recovery from the Company's insurance carrier have
been reflected in the Company's financial
56
<PAGE>
statements. The Company believes that the $750 million coverage available with
respect to these claims will be sufficient to cover all claims arising from the
accident. However, there can be no assurance that the total amount of judgments
and settlements will not exceed the amount of insurance available therefor or
that all damages awarded will be covered by insurance.
In November 1997, the Company filed a suit against SabreTech and its parent
corporation seeking to hold them responsible for the accident involving Flight
592. On September 23, 1999, the Company settled its lawsuit against SabreTech
and its parent. The net proceeds of $19,640,000 from the settlement are
included in other revenue in the 1999 statement of operations.
Several stockholder class action suits were filed against the Company and
certain of its current and former executive officers and Directors. The suits
were subsequently consolidated into a single action. On December 31, 1998, the
Company entered into a Memorandum of Understanding to settle the consolidated
lawsuit. Although the Company denied that it violated any of its obligations
under the federal securities laws, it paid $2.5 million in cash and $2.5 million
in common stock in the settlement which was approved on October 28, 1999.
From time to time, the Company is engaged in other litigation arising in the
ordinary course of business. The Company does not believe that any such pending
litigation will have a materially adverse effect on its results of operations or
financial condition.
At December 31, 1999, the Company's contractual commitments consisted primarily
of scheduled aircraft acquisitions. The Company has entered into a contract with
The Boeing Company to purchase 50 new B717 aircraft, to be delivered from 1999
to 2002, with options to purchase another 50 B717 aircraft. Aggregate funding
needed for these and all other aircraft commitments was approximately $780
million at December 31, 1999.
Approximately $86 million of this amount is required to be paid in progress
payments due from 2000 to 2001. After progress payments, the balance of the
total purchase price must be paid or financed upon delivery of each aircraft.
While the major aircraft manufacturer is required to provide credit support for
a limited portion of third party financing, the Company will be required to
obtain financing from other sources relating to these deliveries. If the Company
exercises its option to acquire up to an additional 50 aircraft, additional
payments could be required beginning in 2001. In conjunction with these
contractual commitments, the Company has made non-refundable deposits of
approximately $22,562,000 at December 31, 1999.
57
<PAGE>
The following chart outlines the approximate future required deposits for
aircraft progress payments as of December 31, 1999 (in thousands):
2000 $56,211
2001 29,565
2002 -
-------
$85,776
=======
4. Fuel Price Risk Management
The Company entered into two fixed rate fuel swap contracts to protect against
increases in jet fuel prices. Under the swap agreements, the Company receives or
makes payments based on the difference between a fixed price and a variable
price for certain fuel commodities. The change in market value of such
agreements has a high correlation to the price changes of the fuel being hedged.
Gains or losses on the fuel hedging agreements are recognized as a component of
fuel expense when the underlying fuel being hedged is used. Gains and losses on
the fuel hedging agreements would be recognized immediately should the changes
in the market value of the agreements cease to have a high correlation to the
price changes of the fuel being hedged. At December 31, 1999, the Company had a
fuel hedging agreement with a broker-dealer on approximately 7.2 million gallons
of fuel products, which represents 11% of its expected fuel needs for the first
six months of 2000. The fair value of the Company's fuel hedging agreement at
December 31, 1999, representing the amount the Company would receive upon
termination of the agreement, totaled $1.1 million. If in the future, a fuel
swap agreement were terminated, any resulting gain or loss would be deferred and
amortized to fuel expense over the remaining life of the agreement. A default
by the broker-dealer to the swap agreement would expose the Company to potential
fuel price risk on the remaining fuel purchases in that the Company would be
required to purchase fuel at the current fuel price rather than at the swap
agreement exchange rate. The Company does not enter into fuel swap contracts
for trading purposes.
58
<PAGE>
5. Accrued Liabilities
December 31,
1999 1998
-------- --------
(In Thousands)
Accrued maintenance $24,278 $15,541
Accrued interest 9,447 5,508
Accrued salaries, wages and benefits 8,961 4,931
Deferred gain 6,300 -
Accrued federal excise taxes 2,176 3,042
Other 6,294 15,486
------- -------
$57,456 $44,508
======= =======
6. Long-Term Debt
December 31,
1999 1998
-------- --------
(In Thousands)
Aircraft notes payable through 2017, 10.63% weighted
average interest rate $178,850 $ -
Senior notes due April 2001, 10.25% interest rate 150,000 150,000
Senior secured notes due April 2001, 10.50% interest rate 80,000 80,000
Promissory notes for aircraft and other equipment payable
through 2002, 5.85% to 11.7% interest rates 6,838 15,994
-------- --------
415,688 245,994
Less current maturities (19,569) (8,929)
-------- --------
$396,119 $237,065
======== ========
The Company completed a private placement of $178,850,000 enhanced equipment
trust certificates (EETCs) on November 3, 1999. The proceeds have been and will
be used to purchase the first ten B717 aircraft, which will serve as collateral
for the EETCs. Unexpended proceeds from the EETCs issue, $39,232,000 at
December 31, 1999, are presented as a non-current asset in the balance sheet.
The promissory notes relate primarily to aircraft financing and bear interest at
rates ranging from 5.85% to 11.67% per annum, and principal and interest
payments are due in monthly or quarterly installments over four to seven year
terms on a mortgage-style amortization based on the delivery date of the
aircraft. One of these notes, with an aggregate unpaid principal balance of
approximately $1,200,000 at December 31, 1999, has a variable rate of interest
based on the London Interbank Offered Rate ("LIBOR") (5.82% at December 31,
1999) plus a range of 1.50% to 3.73%.
59
<PAGE>
Certain aircraft, engines, computer and telephone equipment with a book value
totaling approximately $218,028,000 serve as collateral on the Senior Secured
Notes, EETC's and promissory notes.
Future long-term debt principal payments at December 31, 1999 are as follows (in
thousands):
2000 $ 19,569
2001 232,158
2002 7,523
2003 4,643
2004 6,142
Thereafter 145,653
--------
$415,688
========
7. Leases
The Company leases seven DC-9's and one B737 under operating leases with terms
that expire in 2003. The Company has the option to renew the DC-9 lease for one
or more periods of not less than six months, with the renewal term to commence
upon the expiration of the original term. The Company also leases facilities
from local airport authorities or other carriers, as well as office space. These
leases are operating leases and have terms from one month to thirteen years.
Total rental expense charged to operations for aircraft, facilities and office
space for the years ended December 31, 1999, 1998 and 1997 was approximately
$21,705,000, $23,851,000 and $13,655,000, respectively.
The following schedule outlines the future minimum lease payments at December
31, 1999, under non-cancelable operating leases with initial terms in excess of
one year (in thousands):
2000 $ 18,059
2001 17,208
2002 15,609
2003 15,233
2004 8,700
Thereafter 45,623
--------
$120,432
========
8. Stock Option Plans
The 1993 Incentive Stock Option Plan (the "1993 Plan") provides up to 4,800,000
options to be granted to officers, directors and key employees to purchase
shares of
60
<PAGE>
common stock at prices not less than the fair value of the shares on the dates
of grant. With respect to individuals owning more than 10% of the voting power
of all classes of the Company's stock, the exercise price per share shall not be
less than 110% of the fair value of the shares on the date of grant.
The 1994 Stock Option Plan (the "1994 Plan") provides up to 4,000,000 incentive
stock options or non-qualified options to be granted to officers, directors, key
employees and consultants of the Company.
The 1996 Stock Option Plan (the "1996 Plan") provides up to 5,000,000 incentive
stock options or non-qualified options to be granted to officers, directors, key
employees and consultants of the Company.
In connection with the acquisition of Airways on November 17, 1997, the Company
assumed the Airways Corporation 1995 Stock Option Plan ("Airways Plan") and the
Airways Corporation 1995 Director Stock Option Plan ("Airways DSOP"). Under the
Airways Plan up to 1,150,000 incentive stock options or non-qualified options
may be granted to officers, directors, key employees or consultants of the
Company. Under the Airways DSOP, up to 150,000 non-qualified options may be
granted to Directors.
Vesting and term of all options is determined by the Board of Directors and may
vary by optionee; however, the term may be no longer than ten years from the
date of grant.
Pro forma information regarding net loss and loss per share is required by SFAS
No. 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1999,
1998 and 1997, respectively: risk-free interest rates of 5.0%, 5.4% and 5.7%; no
dividend yields; volatility factors of the expected market price of the
Company's common stock of 0.648, 0.710 and 0.570; and a weighted average
expected life of the options of 6 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period.
61
<PAGE>
The Company's pro forma information is as follows (in thousands, except per
share data):
1999 1998 1997
--------- -------- --------
Pro forma net loss $(102,173) $(42,279) $(97,876)
Basic and diluted pro forma
net loss per share (1.57) (0.65) (1.75)
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect is not fully reflected until 1999.
A summary of stock option activity under the aforementioned plans is as follows:
Weighted
Average
Shares Price Range Price
--------- ------------- ------
Balance at January 1, 1997 6,623,530 $0.17 - 23.19 $ 5.06
Granted 1,304,000 5.31 - 6.88 5.52
Assumed in Airways Merger 732,700 2.70 - 10.75 4.60
Exercised (317,480) 0.17 - 5.13 2.85
Canceled (226,320) 1.00 - 21.38 12.20
---------
Balance at December 31, 1997 8,116,430 0.17 - 23.19 4.84
Granted 235,000 5.50 - 8.13 7.67
Exercised (562,580) 0.17 - 5.69 2.81
Canceled (997,870) 0.17 - 21.38 7.16
---------
Balance at December 31, 1998 6,790,980 0.17 - 23.19 4.71
Granted 2,571,000 3.03 - 6.41 3.52
Exercised (226,420) 0.17 - 5.50 4.56
Canceled (495,040) 3.13 - 21.50 7.04
---------
Balance at December 31, 1999 8,640,520 $0.17 - 23.19 $4.16
=========
Exercisable at December 31, 1999 5,382,149 $0.17 - 23.19 $3.61
=========
62
<PAGE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.17 2,407,000 3.5 $ 0.17 2,407,000 $ 0.17
1.00-4.00 3,549,300 7.1 3.18 1,339,300 3.13
4.50-6.88 1,909,580 7.4 5.36 1,152,835 5.41
7.03-13.25 108,400 6.7 10.45 77,734 10.75
18.38-23.19 666,240 6.1 19.04 405,280 19.03
---------- ---------
$0.17-23.19 8,640,520 6.0 $ 4.14 5,382,149 $ 3.60
========== =========
</TABLE>
The weighted average fair value of options granted during 1999, 1998 and 1997,
with option prices equal to the market price on the date of grant, was $2.07,
$7.98 and $2.66, respectively. There were no options granted during 1999, 1998
and 1997 with option prices less than the market price of the stock on the date
of grant.
At December 31, 1999, the Company had reserved a total of 12,519,330 shares of
common stock for future issuance, upon exercise of stock options.
9. Income Taxes
The income tax provision (benefit) is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal $ 352 $ - $ (9,554)
State - - -
------ ------ --------
Total current 352 - (9,554)
Deferred:
Federal 2,010 - (13,321)
State 377 - -
------ ------ --------
Total deferred 2,387 - (13,321)
------ ------ --------
$2,739 $ - $(22,875)
====== ====== ========
</TABLE>
63
<PAGE>
A reconciliation of the provision for income taxes (benefit) to the federal
statutory rate is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---------- --------- ----------
<S> <C> <C> <C>
Tax at statutory rate $(33,829) $(14,258) $(41,803)
State taxes, net of federal
benefit (3,089) (606) (4,761)
Goodwill 517 7,705 89
Alternative minimum tax 909 - -
Benefit of preacquisition net
operating loss carryforwards 2,387 - -
Other (434) (110) (570)
Valuation reserve 36,278 7,269 24,270
-------- --------- --------
$ 2,739 $ - $(22,775)
======== ========= ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ - $ 28,370
Other - 342
--------- ----------
Total deferred tax liabilities - 28,712
Deferred tax assets:
Depreciation 21,740 -
Accrued liabilities 1,011 2,362
Nonqualified stock options 930 930
Federal operating loss carryforwards 37,938 49,470
State operating loss carryforwards 6,741 8,158
AMT credit carryforwards 3,526 2,617
Other 4,024 4,807
--------- ----------
Total deferred tax assets 75,910 68,344
Valuation allowance for deferred
tax assets (75,910) (39,632)
--------- ----------
Net deferred tax assets - 28,712
--------- ----------
Net deferred tax liabilities $ - $ -
========= ==========
</TABLE>
For financial reporting purposes, a valuation allowance has been recognized at
December 31, 1999 and 1998, to reduce the net deferred income tax assets to
zero. The Company has not recognized any benefit from the future use of
operating loss carryforwards because management's evaluation of all the
available evidence in assessing the realizability of the tax benefits of such
loss carryforwards indicates that the underlying
64
<PAGE>
assumptions of future profitable operations contain risks that do not provide
sufficient assurance to recognize such tax benefits currently.
At December 31, 1999, the Company had net operating loss carryforwards for
income tax purposes of approximately $108,394,000 that begin to expire in 2012.
In addition, the Company has Alternative Minimum Tax credit carryforwards for
income tax purposes of $3,526,000.
The amount of net operating loss carryforwards generated by Airways prior to the
Airways Merger is $23,098,000. The use of pre-acquisition operating loss
carryforwards is subject to limitations imposed by the Internal Revenue Code.
The Company does not anticipate that these limitations will affect utilization
of the carryforwards prior to expiration. For financial reporting purposes, a
valuation allowance of $4,730,000 was recognized at the date of the acquisition
to offset the deferred tax assets related to those carryforwards. This valuation
allowance was increased to $8,093,000 during 1998 in connection with a
reallocation of the purchase price. When realized, the tax benefit for those
items will be applied to reduce goodwill related to the acquisition of Airways.
During 1999, the Company utilized $6,282,000 of Airways' net operating loss
carryforwards and reduced goodwill by the $2,387,000 tax benefit of such
utilization.
10. Impairment Loss
In the fourth quarter of 1998, the Company decided to accelerate the retirement
of its four owned B737 aircraft as a result of the elimination of their original
route system and continued operating losses upon their redeployment to other
routes. The B737s, which were acquired in the Airways merger, will be replaced
with B717 aircraft. In the fourth quarter of 1999, the Company decided to
accelerate the retirement of its 42 DC-9 aircraft to accommodate the
introduction of its B717 fleet.
In connection with each of the decisions to accelerate the retirement of these
aircraft, the Company performed evaluations to determine, in accordance with
SFAS No. 121, whether future cash flows (undiscounted and without interest
charges) expected to result from the use and eventual disposition of these
aircraft would be less than the aggregate carrying amount of these aircraft and
related assets and, for the B737's, an allocation of cost in excess of net
assets acquired resulting from the Airways merger. SFAS No. 121 requires that
when a group of assets being tested for impairment was acquired as part of a
business combination that was accounted for using the purchase method of
accounting, any cost in excess of net assets acquired that arose as part of the
transaction must be included as part of the asset grouping. As a result of the
evaluations, management determined that the estimated future cash flows expected
to be generated by these aircraft would be less than their carrying amounts and,
for the B737's, allocated cost in excess of net assets acquired, and therefore
these aircraft are impaired as defined by SFAS No. 121. Consequently, the
original cost bases of these assets were reduced to reflect the fair market
value at the date the decisions were made, resulting in a $27,492,000 impairment
loss on the B737's in 1998 and a $147,735,000 impairment loss on the DC-9's in
1999. The Company considered recent transactions and market trends involving
similar aircraft in determining the fair market value.
65
<PAGE>
11. Shutdown And Other Nonrecurring Expenses
Shutdown and other nonrecurring expenses include costs associated with the loss
of Flight 592 and the resulting excess costs related to the reduced schedule in
1997. Such costs consist of expenses directly related to the accident and the
ensuing extensive FAA review of the Company's operations including legal fees,
payments to the FAA, inspection related costs and unusual maintenance in excess
of normal recurring maintenance. In addition, depreciation on grounded aircraft
is included in shutdown and other nonrecurring expenses.
Below is a detail of such costs for the year ended December 31, 1997 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Maintenance $15,380
Legal and other 6,318
Depreciation 3,141
-------
$24,839
=======
</TABLE>
12. Financial Instruments
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and accounts receivable. The Company maintains cash and cash equivalents with
various high credit-quality financial institutions or in short-duration high
quality debt securities. The Company periodically evaluates the relative credit
standing of those financial institutions that are considered in the Company's
investment strategy. Concentration of credit risk with respect to accounts
receivable is limited due to the large number of customers comprising the
Company's customer base.
The fair values of the Company's long-term debt are based on quoted market
prices, if available, or are estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements. The carrying amounts and estimated fair values of the
Company's long-term debt were $415,688,000 and $392,288,000, respectively, at
December 31, 1999 and $245,994,000 and $175,294,000, respectively, at December
31, 1998.
13. Employee Benefit Plans
Effective January 1, 1998, the Company consolidated its 401(k) Plans (the
"Plan"). All employees of AirTran Holdings, Inc., and AirTran Airways are
eligible to participate in the consolidated Plan, a defined contribution benefit
plan which qualifies under Section 401(k) of the Internal Revenue Code.
Participants may contribute up to 15% of their base salary to the Plan.
Contributions to the Plan by the Company are discretionary and amounted to
approximately $347,000 in 1999 and $288,000 in 1998. There were no
contributions made during 1997.
Under the 1995 Employee Stock Purchase Plan (the "Stock Plan"), employees who
complete twelve months of service are eligible to make quarterly purchases of
the
66
<PAGE>
Company's common stock at up to a 15% discount from the market value on the
offering date. The Board of Directors determines the discount rate before each
offering date. The Company is authorized to issue up to 4,000,000 shares of
common stock under this plan. During 1999, 1998 and 1997 the employees purchased
a total of 51,318, 23,023 and 24,190 shares, respectively, at an average price
of $3.94, $5.65 and $5.90 per share, respectively, which represented a 5%
discount from the market price on the offering dates.
14. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1999 and 1998 is as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------------
First Second Third Fourth
-------- -------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal 1999
Operating revenues $119,873 $140,015 $143,483 $ 120,097
Operating income (loss) 9,001 21,455 29,570 (132,014)
Net income (loss) 3,054 14,959 23,167 (140,574)
Basic earnings (loss) per share 5 (cent) 23 (cent) 36 (cent) (2.15)
Diluted earnings (loss) per share 5 (cent) 22 (cent) 34 (cent) (2.15)
Quarter
---------------------------------------------------------
First Second Third Fourth
-------- -------- --------- ----------
Fiscal 1998
Operating revenues $ 94,541 $123,988 $115,060 $ 105,718
Operating income (loss) (2,874) 14,421 (5,319) (24,785)
Net income (loss) (7,873) 8,559 (10,893) (30,531)
Basic and diluted income
(loss) per share (12)(cent) 13 (cent) (17)(cent) (47)(cent)
</TABLE>
The results of the fourth quarters of 1999 and 1998 include impairment charges
of $147,735,000 and $27,492,000, respectively, related to the DC-9 fleet and the
B737 fleet.
The results of the third quarter of 1999 include net proceeds of $19,640,000
from the settlement of a lawsuit against a third party maintenance provider.
Year-end adjustments resulted in increasing the loss before income taxes during
the fourth quarter of 1999 by approximately $5,250,000. Of this amount,
approximately $3,160,000 relates to the correction of revenue recorded in
earlier quarters during 1999 and approximately $2,090,000 relates to changes in
management's estimates and assumptions primarily related to accruals for
vacation and group health insurance.
At December 31, 1997, the Company had accrued the estimated costs to reactivate
certain aircraft. During the quarter ended June 30, 1998, the reactivation of
these aircraft was completed and the associated costs were finalized. The
remaining maintenance accrual
67
<PAGE>
was therefore revised based on this additional information and $3 million was
reversed into income, increasing income for the quarter ended June 30, 1998, by
approximately $0.05 per share on a diluted basis.
15. Supplemental Guarantor Financial Information
The Company's $150,000,000 of 10.25% Senior Notes issued during 1996 are fully
and unconditionally guaranteed on a joint and several basis by AirTran Airways,
a wholly-owned subsidiary of the Company, and by AirTran Airways' subsidiary
("Guarantors"). The $80,000,000 of 10.50% Senior Secured Notes issued by
AirTran Airlines, now AirTran Airways, during 1997 are fully and unconditionally
guaranteed on a joint and several basis by AirTran Holdings, Inc., and AirTran
Airways' subsidiary. AirTran Airways and its subsidiary conduct all of the
operations of the Company. All of the subsidiary Guarantors are wholly-owned or
indirect subsidiaries of the Company, and there are no direct or indirect
subsidiaries of the Company that are not Guarantors. Separate financial
statements of the subsidiary Guarantors are not presented because AirTran
Holdings, Inc. and all of its subsidiaries guarantee the Senior Notes and the
Senior Secured Notes on a full, unconditional, and joint and several basis.
Summarized consolidated financial information as of and for the year ended
December 31, 1999 is as follows (in thousands):
AirTran AirTran
Airways AirTran Holdings, Inc.
and Holdings, and
Subsidiary Inc. Eliminations Subsidiaries
---------- --------- ------------ --------------
Current assets $103,644 $ - $ - $103,644
Non-current assets 362,355 113,172 (112,157) 363,370
Current liabilities 107,723 3,203 - 110,926
Non-current liabilities 399,322 150,000 (153,203) 396,119
Operating revenues 523,468 - - 523,468
Operating loss (71,988) - - (71,988)
Loss before income taxes (96,655) - - (96,655)
Net loss (99,394) - - (99,394)
68
<PAGE>
Summarized consolidated financial information as of and for the year ended
December 31, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
AirTran AirTran
Airways AirTran Holdings, Inc.
and AirTran Holdings, and
Subsidiaries Airways Inc. Eliminations Subsidiaries
------------ --------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Current assets $ 52,957 $ - $ - $ - $ 52,957
Non-current assets 321,646 3,290 208,835 (210,322) 323,449
Current liabilities 83,798 - 3,203 (3,290) 83,711
Non-current liabilities 240,268 - 150,000 (153,203) 237,065
Operating revenues 439,307 - - - 439,307
Operating loss (18,557) - - - (18,557)
Loss before income
taxes (benefit) (39,922) (816) - - (40,738)
Net loss (39,922) (816) - - (40,738)
</TABLE>
69
<PAGE>
AirTran Holdings, Inc.
Schedule II - Valuation and Qualifying Accounts
(In Thousands)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS- DEDUCTIONS- BALANCE AT
PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
------------ ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for Doubtful Accounts 1,325 4,022 - 4,420 927
Provision for Obsolescence 4,259 1,406 - 3,405 2,260
------ ------ ------ ------ ------
Total 5,584 5,428 - 7,825 3,187
====== ====== ====== ====== ======
Year ended December 31, 1998
Allowance for Doubtful Accounts 1,354 8,003 - 8,032 1,325
Provision for Obsolescence 2,217 2,042 - - 4,259
------ ------ ------ ------ ------
Total 3,571 10,045 - 8,032 5,584
====== ====== ====== ====== ======
Year ended December 31, 1997
Allowance for Doubtful Accounts 838 2,895 - 2,379 1,354
Provision for Obsolescence 500 1,717 - - 2,217
------ ------ ------ ------ ------
Total 1,338 4,612 - 2,379 3,571
====== ====== ====== ====== ======
</TABLE>
70
<PAGE>
EXHIBIT 4.13
================================================================================
AIRTRAN AIRLINES, INC.,
as Issuer,
AIRTRAN HOLDINGS, INC. AND
THE SUBSIDIARY GUARANTORS SIGNATORIES HERETO,
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee and Collateral Trustee
__________________________
SECOND SUPPLEMENTAL INDENTURE
Dated as of April 23, 1999
to
INDENTURE
Dated as of August 13, 1997
__________________________
10 1/2% Senior Secured Notes due 2001
================================================================================
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
----------------------
April 23, 1999, by and among AirTran Airlines, Inc., a Nevada corporation (the
"Company"), AirTran Holdings, Inc., a Nevada corporation (the "Parent Company"),
- -------- --------------
the Subsidiary Guarantors parties hereto (the "Guarantors") and The Bank of New
----------
York, as trustee and collateral trustee (the "Trustee").
-------
RECITALS
WHEREAS, the Company, the Parent Company and the Guarantors have heretofore
executed and delivered to the Trustee an Indenture, dated as of August 13, 1997
(the "Indenture"), providing for the issuance of an aggregate principal amount
---------
of $80,000,000 of 10 1/2% Senior Secured Notes due 2001 (the "Notes"); and
-----
WHEREAS, certain of the Company=s Subsidiaries (i.e., ValuJet Capital
----
Corp., ValuJet Management Corp., ValuJet I, Ltd., ValuJet II, Ltd., ValuJet
Reservation Partners, L.P. and ValuJet Corporate Partners, L.P.) have been
liquidated into the Company as their parent entity and the Company has succeeded
to all of the rights and obligations of such Subsidiaries; and
WHEREAS, pursuant to Section 901 of the Indenture, the Company and the
Trustee may enter into one or more supplemental indentures without the consent
of any Holders to make certain changes to the Indenture; and
WHEREAS, the Indenture provides for the execution and delivery of a
supplement to the Indenture which shall particularly describe the Collateral
being specifically mortgaged to the Trustee for the benefit and security of the
Holders pursuant to the Indenture; and
WHEREAS, the Indenture relates to certain Airframes more particularly
described therein, which Indenture was recorded with the FAA on November 4, 1997
and given Conveyance No. GG011890; and
WHEREAS, it is the desire of the Trustee and the Company to add as
Collateral under the Indenture one (1) McDonnell Douglas DC-9-32 aircraft,
registration number N911VV and serial number 47285 (the "Replacement Aircraft")
--------------------
in replacement of and substitution for one (1) McDonnell Douglas DC-9-32
aircraft, registration number N925VV and serial number 47319 (the "Released
--------
Aircraft");
- --------
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Company, the Parent Company, the Guarantors and the Trustee mutually covenant
and agree for the equal and ratable benefit of the Holders of the Notes as
follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have the meanings assigned to them in the Indenture. For all purposes of this
Supplemental Indenture, except as otherwise herein expressly provided or unless
the context otherwise requires, the words "herein," "hereof" and "hereby" and
other words of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular section hereof.
2
<PAGE>
2. Substitute Security.
-------------------
(a) To secure the prompt payment of the principal amount of and
interest on, and all other amounts due with respect to, all Securities from time
to time outstanding under the Indenture and the performance and observance by
the Company of all the agreements, covenants and provisions contained in the
Indenture for the benefit and security of the Holders under the Indenture and
the prompt payment of any and all amounts from time to time owing under the
Indenture by the Company to the Trustee, the Company does hereby grant, sell,
assign, transfer, convey, pledge and confirm unto the Trustee, its successors
and assigns, for the benefit and security of the Holders and the Trustee, a
first priority security interest in all estate, right, title and interest of the
Company in and to the Replacement Aircraft together with all equipment and
accessories, parts and appurtenances pertaining or attached to the Replacement
Aircraft, whether now owned or hereafter acquired, and all warranties of any
manufacturer with respect thereto.
(b) As evidence of the releasing of all right, title and interest of
the Trustee in, to and under the Released Aircraft and Released Engines, the
Trustee shall execute a separate Partial Release and any other document
reasonably requested by the Company to evidence such release.
(c) The Company hereby acknowledges that the Replacement Aircraft
referred to in this Supplemental Indenture is owned by and has been delivered to
the Company and is included in the property of the Company subject to the pledge
and mortgage thereof under the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of Indenture.
--------------------------------------------------------------------
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Notes heretofore or hereafter
authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
5. Trustee Makes No Representation. The Trustee makes no representation
-------------------------------
as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for convenience
------------------
only and shall not affect the construction thereof.
[SIGNATURES ON NEXT PAGE]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
AIRTRAN AIRLINES, INC., the Company
By: /s/ Joseph B. Leonard
--------------------------------
Name: Joseph B. Leonard
Title: CEO
AIRTRAN HOLDINGS, INC., the Parent
Company
By: /s/ Joseph B. Leonard
--------------------------------
Name: Joseph B. Leonard
Title: CEO
AIRTRAN AIRWAYS, INC., as Guarantor
By: /s/ Joseph B. Leonard
--------------------------------
Name: Joseph B. Leonard
Title: CEO
VALUJET INVESTMENT CORP., as
Guarantor
By: /s/ Joseph B. Leonard
--------------------------------
Name: Joseph B. Leonard
Title: CEO
THE BANK OF NEW YORK, as Trustee and
Collateral Trustee
By:
----------------------------------
Name:
Title:
4
<PAGE>
================================================================================
AIRTRAN AIRWAYS, INC.
(successor by merger to
AIRTRAN AIRLINES, INC.,)
as Issuer,
AIRTRAN HOLDINGS, INC. AND
THE SUBSIDIARY GUARANTORS SIGNATORIES HERETO,
as Guarantors
and
THE BANK OF NEW YORK,
as Trustee and Collateral Trustee
__________________________
THIRD SUPPLEMENTAL INDENTURE
Dated as of December ___, 1999
to
INDENTURE
Dated as of August 13, 1997
__________________________
10 1/2% Senior Secured Notes due 2001
================================================================================
<PAGE>
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
-----------------------
December ___, 1999, by and among AirTran Airways, Inc., a Delaware corporation
as successor in interest by merger to AirTran Airlines, Inc. (the "Company"),
--------
AirTran Holdings, Inc., a Nevada corporation (the "Parent Company"), the
---------------
Subsidiary Guarantors parties hereto (the "Guarantors") and The Bank of New
-----------
York, as trustee and collateral trustee (the "Trustee").
--------
RECITALS
WHEREAS, the Company, the Parent Company and the Guarantors have heretofore
executed and delivered to the Trustee an Indenture, dated as of August 13, 1997
(the "Indenture"), providing for the issuance of an aggregate principal amount
----------
of $80,000,000 of 10 1/2% Senior Secured Notes due 2001 (the "Notes"); and
-----
WHEREAS, certain of the Company's Subsidiaries (i.e., ValuJet Capital
----
Corp., ValuJet Management Corp., ValuJet I, Ltd., ValuJet II, Ltd., ValuJet
Reservation Partners, L.P. and ValuJet Corporate Partners, L.P.) have been
liquidated into the Company as their parent entity and the Company has succeeded
to all of the rights and obligations of such Subsidiaries; and
WHEREAS, AirTran Airlines, Inc., the original obligor under the Indenture,
has merged with and into the Company which has succeeded to all of the rights
and obligations of AirTran Airlines, Inc.; and
WHEREAS, pursuant to Section 901 of the Indenture, the Company and the
Trustee may enter into one or more supplemental indentures without the consent
of any Holders to make certain changes to the Indenture; and
WHEREAS, the Indenture provides for the execution and delivery of a
supplement to the Indenture which shall particularly describe the Collateral
being specifically mortgaged to the Trustee for the benefit and security of the
Holders pursuant to the Indenture; and
WHEREAS, the Indenture relates to certain Airframes and Engines more
particularly described therein, which Indenture was recorded with the FAA on
November 4, 1997 and given Conveyance No. GG011890, as supplemented by First and
Second Supplemental Indentures to Indenture dated as of November 17, 1997 and
April 23, 1999, respectively, recorded together by the FAA on August 23, 1999 as
Conveyance Nos. HH023345 and HH023346, respectively; and
WHEREAS, it is the desire of the Trustee and the Company to add as
Collateral under the Indenture the Replacement Aircraft (defined on Schedule
"A") and the Replacement Engines (defined on Schedule "A") and to release the
Released Aircraft (defined on Schedule "A") and the Released Engines (defined on
Schedule "A");
2
<PAGE>
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Company, the Parent Company, the Guarantors and the Trustee mutually covenant
and agree for the equal and ratable benefit of the Holders of the Notes as
follows:
1. Definitions. Capitalized terms used herein without definition shall
-----------
have the meanings assigned to them in the Indenture. For all purposes of this
Supplemental Indenture, except as otherwise herein expressly provided or unless
the context otherwise requires, the words herein, hereof and hereby and other
words of similar import used in this Supplemental Indenture refer to this
Supplemental Indenture as a whole and not to any particular section hereof.
2. Substitute Security.
-------------------
(a) To secure the prompt payment of the principal amount of and
interest on, and all other amounts due with respect to, all Securities from time
to time outstanding under the Indenture and the performance and observance by
the Company of all the agreements, covenants and provisions contained in the
Indenture for the benefit and security of the Holders under the Indenture and
the prompt payment of any and all amounts from time to time owing under the
Indenture by the Company to the Trustee, the Company does hereby grant, sell,
assign, transfer, convey, pledge and confirm unto the Trustee, its successors
and assigns, for the benefit and security of the Holders and the Trustee, a
first priority security interest in all estate, right, title and interest of the
Company in and to the Replacement Aircraft and Replacement Engines (each such
Replacement Engine having 750 or more rated takeoff horsepower or the equivalent
thereof) together with all equipment and accessories, parts and appurtenances
pertaining or attached to the Replacement Aircraft and Replacement Engines,
whether now owned or hereafter acquired and all substitutions, modifications,
improvements, accessions and accumulations to the Replacement Aircraft and
Replacement Engines, and all warranties of any manufacturer with respect
thereto.
(b) The Trustee hereby releases all right, title, and interest in, to
and under the Released Aircraft and Released Engines.
(c) The Company hereby acknowledges that the Replacement Aircraft and
Replacement Engines referred to in this Supplemental Indenture is owned by and
has been delivered to the Company and is included in the property of the Company
subject to the pledge and mortgage thereof under the Indenture.
3. Ratification of Indenture; Supplemental Indentures Part of Indenture.
--------------------------------------------------------------------
Except as expressly amended hereby, the Indenture is in all respects ratified
and confirmed and all the terms, conditions and provisions thereof shall remain
in full force and effect. This Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Notes heretofore or hereafter
authenticated and delivered shall be bound hereby.
4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
3
<PAGE>
5. Trustee Makes No Representation. The Trustee makes no representation
-------------------------------
as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for convenience
------------------
only and shall not affect the construction thereof.
[remainder of page intentionally left blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
AIRTRAN AIRWAYS, INC., the Company
By:________________________________
Name:
Title:
AIRTRAN HOLDINGS, INC., the Parent
Company
By:________________________________
Name:
Title:
VALUJET INVESTMENT CORP., as
Guarantor
By:________________________________
Name:
Title:
THE BANK OF NEW YORK, as Trustee and
Collateral Trustee
By:________________________________
Name:
Title:
5
<PAGE>
SCHEDULE A
REPLACEMENT AIRCRAFT
---------------------
Manufacturer Model Serial No. Registration No.
- ------------ ------- ---------- ----------------
Douglas DC-9-32 47260 N819AT
Douglas DC-9-32 47323 N817AT
Douglas DC-9-32 47320 N818AT
REPLACEMENT ENGINES
-------------------
Manufacturer Model Serial No.
- ------------ ----- ----------
Pratt & Whitney JT8D-9A 674577
Pratt & Whitney JT8D-9A 654432
Pratt & Whitney JT8D-9A 657485
Pratt & Whitney JT8D-9A 666871
Pratt & Whitney JT8D-9A 654163
Pratt & Whitney JT8D-9A 666055
Pratt & Whitney JT8D-9A 665737
Pratt & Whitney JT8D-9A 665214
Pratt & Whitney JT8D-9A 666334
Pratt & Whitney JT8D-9A 665828
Pratt & Whitney JT8D-9A 657590
Pratt & Whitney JT8D-9A 665636
Pratt & Whitney JT8D-9A 665732
Pratt & Whitney JT8D-9A 665252
6
<PAGE>
RELEASED AIRCRAFT
------------------
Manufacturer Model Serial No. Registration No.
- ------------ ------- ---------- ----------------
Douglas DC-9-31 47202 N132NK
Douglas DC-9-32 47318 N813AT
Douglas DC-9-32 47285 N811AT
RELEASED ENGINES
----------------
Manufacturer Model Serial No.
- ------------ ------- ---------
Pratt & Whitney JT8D-9A 666674
Pratt & Whitney JT8D-9A 666967
Pratt & Whitney JT8D-9A 666957
Pratt & Whitney JT8D-9A 656953
Pratt & Whitney JT8D-9A 666836
Pratt & Whitney JT8D-9A 666949
Pratt & Whitney JT8D-9A 674615
Pratt & Whitney JT8D-9A 665194
Pratt & Whitney JT8D-9A 666135
Pratt & Whitney JT8D-9A 674429
Pratt & Whitney JT8D-9A 667002
Pratt & Whitney JT8D-9A 667166
Pratt & Whitney JT8D-9A 687728
Pratt & Whitney JT8D-9A 665942
7
<PAGE>
Exhibit 10.21
- ------------------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
Dated as of November 3, 1999
Among
AIRTRAN AIRWAYS, INC.
AIRTRAN HOLDINGS, INC.
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
as Pass Through Trustee under each of the
Pass Through Trust Agreements
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
as Subordination Agent
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Escrow Agent
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
as Paying Agent
- ------------------------------------------------------------------------------
<PAGE>
INDEX TO NOTE PURCHASE AGREEMENT
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Financing of New Aircraft.............................................................................3
SECTION 2. Conditions Precedent..................................................................................7
SECTION 3. Representations and Warranties........................................................................8
SECTION 4. Covenants............................................................................................11
SECTION 5. Notices..............................................................................................12
SECTION 6. Expenses.............................................................................................12
SECTION 7. Further Assurances...................................................................................13
SECTION 8. Miscellaneous........................................................................................13
SECTION 9. Holdings Guarantee...................................................................................15
SECTION 10. Governing Law.......................................................................................15
</TABLE>
Schedules
Schedule I New Aircraft and Scheduled Delivery Months
Schedule II Pass Through Trust Agreements
Schedule III Deposit Agreements
Schedule IV Escrow and Paying Agent Agreements
Schedule V Mandatory Document Terms
Schedule VI Mandatory Economic Terms
Schedule VII Aggregate Amortization Schedule
Schedule VIII Holdings Guarantee
<PAGE>
Annex
Annex A Definitions
Exhibits
--------
Exhibit A-1 Form of Leased Aircraft Participation Agreement
Exhibit A-2 Form of Lease
Exhibit A-3 Form of Leased Aircraft Indenture
Exhibit A-4 Form of Aircraft Purchase Agreement Assignment
Exhibit A-5 Form of Leased Aircraft Trust Agreement
Exhibit A-6 Form of Leased Aircraft Guarantee
Exhibit B Form of Delivery Notice
Exhibit C-1 Form of Owned Aircraft Participation Agreement
Exhibit C-2 Form of Owned Aircraft Indenture
Exhibit C-3 Form of Owned Aircraft Guarantee
<PAGE>
NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT, dated as of November 3, 1999,
among (i) AIRTRAN AIRWAYS, INC., a Delaware corporation (the "Company"), (ii)
AIRTRAN HOLDINGS, INC., a Nevada corporation ("Holdings"), (iii) STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
corporation, not in its individual capacity except as otherwise expressly
provided herein, but solely as trustee (in such capacity together with its
successors in such capacity, the "Pass Through Trustee") under each of the three
separate Pass Through Trust Agreements (as defined below), (iv) STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
corporation, as subordination agent and trustee (in such capacity together with
its successors in such capacity, the "Subordination Agent") under the
Intercreditor Agreement (as defined below), (v) FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, as Escrow Agent (in such capacity
together with its successors in such capacity, the "Escrow Agent") under each of
the Escrow and Paying Agent Agreements (as defined below) and (vi) STATE STREET
BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking
corporation, as Paying Agent (in such capacity together with its successors in
such capacity, the "Paying Agent") under each of the Escrow and Paying Agent
Agreements.
W I T N E S S E T H:
--------------------
WHEREAS, capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in Annex A hereto;
WHEREAS, the Company has obtained commitments from the
Manufacturer pursuant to the Aircraft Purchase Agreement for the delivery of the
ten Boeing 717-200 aircraft listed in Schedule I hereto (together with any
aircraft substituted therefor in accordance with the Aircraft Purchase Agreement
prior to the delivery thereof, the "New Aircraft"), and the Company wishes to
finance the New Aircraft pursuant to this Agreement;
WHEREAS, pursuant to each of the Pass Through Trust Agreements
set forth in Schedule II hereto, and concurrently with the execution and
delivery of this Agreement, separate grantor trusts (collectively, the "Pass
Through Trusts" and, individually, a "Pass Through Trust") have been created to
facilitate certain of the transactions contemplated hereby, including, without
limitation, the issuance and sale of pass through certificates pursuant thereto
(collectively, the "Certificates") to provide for a portion of the financing of
the New Aircraft;
WHEREAS, the Company has entered into twelve Purchase
Agreements dated as of November 3, 1999 (the "Class A Purchase Agreements") with
the purchasers (the "Class A Purchasers") named therein, which provide that the
Company will cause the Pass Through Trustee of the Class A Trust to issue and
sell Class A Certificates to the Class A Purchasers;
<PAGE>
WHEREAS, the Company has entered into a Class B Trust
Certificate Purchase Agreement dated as of November 3, 1999 (the "Class B
Purchase Agreement") with Kreditanstalt fur Wiederaufbau ("KfW") which provides
that the Company will cause the Pass Through Trustee of the Class B Trust to
issue and sell Class B Certificates to KfW;
WHEREAS, the Company has entered into a Class C Trust
Certificate Purchase Agreement, dated as of November 3, 1999 (the "Class C
Purchase Agreement") with The Boeing Company ("Boeing") which provides that the
Company will cause the Pass Through Trustee of the Class C Trust to issue and
sell Class C Certificates to Boeing;
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) the Escrow Agents and the Depositary entered into the Deposit
Agreements set forth in Schedule III hereto (the "Deposit Agreements") whereby
the applicable Escrow Agent agreed to direct the Class A Purchasers, KfW and
Boeing to make certain deposits referred to therein on the Issuance Date (the
"Initial Deposits") and to permit the applicable Pass Through Trustee to make
additional deposits from time to time thereafter (the Initial Deposits together
with such additional deposits are collectively referred to as the "Deposits")
and (ii) the Pass Through Trustees, the Class A Purchasers or KfW or Boeing (as
applicable), the Paying Agents and the Escrow Agents entered into the applicable
Escrow and Paying Agent Agreements set forth in Schedule IV hereto (the "Escrow
and Paying Agent Agreements") whereby, among other things, (a) the Class A
Purchasers, KfW and Boeing agreed to deliver an amount, in the aggregate, equal
to the amount of the Initial Deposits to the Depositary on behalf of the
applicable Escrow Agent and (b) the applicable Escrow Agent, upon the Depositary
receiving such amount, has agreed to deliver escrow receipts to be affixed to
each Certificate;
WHEREAS, prior to (or, in the case of the utilization of
bridge financing, after) the delivery of each New Aircraft from the
Manufacturer, the Company will determine whether to enter into a leveraged lease
transaction as lessee with respect to such New Aircraft (a "Leased Aircraft") or
to purchase as owner such New Aircraft (an "Owned Aircraft") and which series of
Equipment Notes will be issued with respect to such New Aircraft, and the
Company will give to the Pass Through Trustee a Delivery Notice (as defined
below) specifying its election;
WHEREAS, upon receipt of a Delivery Notice with respect to a
New Aircraft, subject to the terms and conditions of this Agreement, the
applicable Pass Through Trustees will enter into the applicable Financing
Agreements relating to such New Aircraft;
WHEREAS, upon the delivery of each New Aircraft or the
financing hereunder of a previously delivered New Aircraft, each applicable Pass
Through Trustee will fund its purchase of Equipment Notes with the proceeds of
one or more Deposits withdrawn by the applicable Escrow Agent under the related
Deposit Agreement bearing the same interest rate as the Certificates issued by
such Pass Through Trust (or in the case of New Aircraft financed on the date of
issuance of the Certificates, with a portion of the proceeds of such issuance);
and
2
<PAGE>
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) ABN AMRO Bank N.V., acting through its Chicago Branch (the
"Liquidity Provider"), has entered into three separate revolving credit
agreements (each such revolving credit agreement with a Liquidity Provider, a
"Liquidity Facility"), one each for the benefit of the Certificateholders of
each Pass Through Trust, with the Subordination Agent, as agent for the Pass
Through Trustee on behalf of each such Pass Through Trust and (ii) the Pass
Through Trustee, the Liquidity Provider and the Subordination Agent have entered
into the Intercreditor Agreement, dated as of the date hereof (the
"Intercreditor Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual agreements herein contained and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Financing of New Aircraft.(a) The Company confirms
that it has entered into the Aircraft Purchase Agreement with the Manufacturer
pursuant to which the Company has agreed to purchase (or has purchased), and the
Manufacturer has agreed to deliver (or has delivered), the New Aircraft in the
months specified in Schedule I hereto, all on and subject to terms and
conditions specified in the Aircraft Purchase Agreement. The Company agrees to
finance (or refinance) the New Aircraft in the manner provided herein, all on
and subject to the terms and conditions hereof and of the relevant Financing
Agreements.
(b) In furtherance of the foregoing, the Company agrees to
give the parties hereto, the Depositary and the Rating Agency not less than two
Business Days' prior written notice in the form of the notice set out in Exhibit
B hereto (a "Delivery Notice") of the scheduled delivery date (the "Scheduled
Delivery Date") (or, in the case of a substitute Delivery Notice under Section
1(e) or (f) hereof, one Business Day's prior notice) in respect of each New
Aircraft under the Aircraft Purchase Agreement, or in the case of the
utilization of bridge financing as contemplated by Section 1(f) hereof in
respect of any Aircraft, one Business Day's prior notice of the date of the
financing of such New Aircraft pursuant to the relevant Financing Agreements,
which notice shall:
(i) specify whether the Company has elected to treat such New Aircraft
as a Leased Aircraft or an Owned Aircraft;
(ii) specify the Scheduled Delivery Date of such New Aircraft (which
shall be a Business Day before the Cut-off Date and, except as provided in
Section 1(f) hereof, the date (the "Funding Date") on which the financing
therefor in the manner provided herein shall be consummated) or, in the case of
bridge-financed aircraft under Section 1(f) hereof, the Delivery Date and the
Funding Date of such New Aircraft;
(iii) instruct each Pass Through Trustee being requested to purchase
Equipment Notes pursuant to such Delivery Notice (the "Applicable Pass Through
Trustees") to execute and deliver to the relevant Escrow Agent a withdrawal
certificate in the form of Annex A to Exhibit B hereof so as to provide a Notice
of Purchase Withdrawal to the Depositary with respect
3
<PAGE>
to the Equipment Notes to be issued in connection with the financing of such New
Aircraft (except in the case of any such financing on the date of issuance of
the Certificates);
(iv) instruct each Applicable Pass Through Trustee to enter into the
Participation Agreement included in the Financing Agreements with respect to
such Aircraft in such form and at such a time on or before the Funding Date
specified in such Delivery Notice and to perform its obligations thereunder;
(v) specify the aggregate principal amount of each series of Equipment
Notes, if any, to be issued, and purchased by the Applicable Pass Through
Trustees, in connection with the financing of such New Aircraft scheduled to be
delivered on such Funding Date (which shall in all respects comply with the
Mandatory Economic Terms); and
(vi) if such New Aircraft is to be a Leased Aircraft, certify that the
related Owner Participant (A) is not an Affiliate of the Company or Holdings and
(B) based on the representations of such Owner Participant, is either (1) a
Qualified Owner Participant or (2) any other Person the obligations of which
under the Owner Participant Agreements (as defined in the applicable
Participation Agreement) are guaranteed by a Qualified Owner Participant.
Notwithstanding the foregoing, in the event the date of issuance of the
Certificates coincides with the Funding Date of any Aircraft to be financed
pursuant to the terms hereof, the Delivery Notice therefor may be delivered to
the parties hereto on such Funding Date.
(c) Upon receipt of a Delivery Notice, the Applicable Pass
Through Trustees shall, and shall cause the Subordination Agent to, enter into
and perform their obligations under the Participation Agreement and other
instructions specified in such Delivery Notice, provided that such Participation
Agreement and the other Lease Financing Agreements or Owner Financing Agreements
to be entered into pursuant to such Participation Agreement shall be in the
forms thereof annexed hereto in all material respects with such changes therein
as shall have been requested by the related Owner Participant (in the case of
Lease Financing Agreements), agreed to by the Company and, if modified in any
material respect (including, without limitation, modifications related to
"deferred equity" or other similar rent provisions), as to which Rating Agency
Confirmation shall have been obtained from the Rating Agency by the Company (to
be delivered by the Company to the Applicable Pass Through Trustees on or before
the relevant Funding Date, it being understood that if Rating Agency
Confirmation shall have been received with respect to any Lease Financing
Agreements and such Lease Financing Agreements are utilized for subsequent New
Aircraft (or Substitute Aircraft) without material modifications, no additional
Rating Agency Confirmation shall be required (it being further understood that
the Owner Financing Agreements shall be in the forms thereof annexed hereto
without any changes other than to complete any blanks)); provided, however, that
the relevant Financing Agreements as executed and delivered shall not vary the
Mandatory Economic Terms and shall contain the Mandatory Document Terms.
4
<PAGE>
(d) With respect to each New Aircraft, the Company shall cause
State Street (or such other Person that meets the eligibility requirements to
act as mortgagee under the Leased Aircraft Indenture or Owned Aircraft
Indenture) to execute as Loan Trustee the Financing Agreements relating to such
New Aircraft to which such Loan Trustee is intended to be a party, and the
Company shall concurrently therewith execute such Financing Agreements to which
the Company is intended to be a party and perform its respective obligations
thereunder. Upon the request of the Rating Agency or any Certificateholder, the
Company shall deliver or cause to be delivered to such Rating Agency or
Certificateholder a true and complete copy of each Financing Agreement relating
to the financing of each New Aircraft together with a true and complete set of
the closing documentation (including legal opinions) delivered to the related
Loan Trustee, Subordination Agent and Pass Through Trustee under the related
Participation Agreement.
(e) If after giving any Delivery Notice, there shall be a
delay in the delivery of the New Aircraft referred to therein, or if on the
Scheduled Delivery Date of such New Aircraft the financing thereof in the manner
contemplated hereby shall not be consummated for whatever reason, the Company
shall give the parties hereto prompt notice thereof. Concurrently with the
giving of such notice of postponement or subsequently, the Company shall give
the parties hereto a substitute Delivery Notice specifying the date to which the
delivery and/or related financing of such New Aircraft or of another New
Aircraft of the same type in lieu thereof shall have been re-scheduled (which
shall be a Business Day before the Cut-off Date on which the Escrow Agents shall
be entitled to withdraw one or more Deposits under each of the applicable
Deposit Agreements to enable each Applicable Pass Through Trustee to fund its
purchase of the related Equipment Notes). Upon receipt of any such notice of
postponement, each applicable Pass Through Trustee shall comply with its
obligations under Section 2.01 of each of the Pass Through Trust Agreements and
thereafter the financing of the relevant New Aircraft shall take place on the
re-scheduled Delivery Date therefor (all on and subject to the terms and
conditions of the relevant Financing Agreements) unless further postponed as
provided herein.
(f) Anything in this Section 1 to the contrary
notwithstanding, the Company shall have the right at any time on or before the
Scheduled Delivery Date of any New Aircraft, and subsequent to its giving a
Delivery Notice therefor, to postpone the Scheduled Delivery Date of such New
Aircraft so as to enable the Company to change its election to treat such New
Aircraft as a Leased Aircraft or an Owned Aircraft by written notice of such
postponement to the other parties hereto. The Company shall subsequently give
the parties hereto a substitute Delivery Notice complying with the provisions of
Section 1(b) hereof and specifying the new Funding Date for such postponed New
Aircraft (which shall be a Business Day occurring before the Cut-off Date and on
which the Escrow Agents shall be entitled to withdraw Deposits under each of the
applicable Deposit Agreements sufficient to enable each Applicable Pass Through
Trustee to fund its purchase of the related Equipment Notes). In addition, the
Company shall have the further right, anything in this Section 1 to the contrary
notwithstanding, to accept delivery of a New Aircraft under the applicable
Aircraft Purchase Agreement on the Delivery Date thereof by utilization of
bridge financing of such New Aircraft and thereafter give the
5
<PAGE>
parties hereto a Delivery Notice specifying a Funding Date not later than
April 1, 2000 and otherwise complying with the provisions of Section 1(b)
hereof. All other terms and conditions of this Note Purchase Agreement shall
apply to the financing of any such New Aircraft on the re-scheduled Funding Date
therefor except (i) the re-scheduled Funding Date shall be deemed the Scheduled
Delivery Date of such New Aircraft for all purposes of this Section 1, (ii) the
related Financing Agreements shall be amended to reflect the original delivery
of such New Aircraft to the Company, (iii) the related Financing Agreements
shall be amended to reflect the seller of such Aircraft, and the recipient of
payment of the purchase price therefor, as the Company and (iv) in the case of a
Leased Aircraft, the Aircraft Purchase Agreement Assignment shall be modified to
cover only an assignment of the relevant warranties.
(g) If the Scheduled Delivery Date for any New Aircraft is
delayed for any reason (including the casualty loss thereof) more than 30 days
beyond the last day of the month set forth opposite such New Aircraft under the
heading "Scheduled Delivery Month" in Schedule I hereto ("Scheduled Delivery
Month"), the Company may identify for delivery a substitute aircraft therefor
meeting the following conditions (a "Substitute Aircraft"): (i) a Substitute
Aircraft must be a Boeing 717-200 aircraft (together with BMW Rolls-Royce BR715
engines) manufactured after the date of this Agreement, (ii) one or more
Substitute Aircraft (together with engines) of the same types may be substituted
for one or more New Aircraft (together with engines) of the same types so long
as after giving effect thereto such substitution does not vary the Mandatory
Economic Terms and (iii) the Company shall be obligated to obtain Rating Agency
Confirmation in respect of the replacement of any New Aircraft by Substitute
Aircraft. Upon the satisfaction of the conditions set forth above with respect
to a Substitute Aircraft, the New Aircraft to be replaced shall cease to be
subject to this Agreement and all rights and obligations of the parties hereto
concerning such New Aircraft shall cease, and such Substitute Aircraft shall
become and thereafter be subject to the terms and conditions of this Agreement
to the same extent as such New Aircraft.
(h) The Company shall have no liability for the failure of the
Pass Through Trustees to purchase Equipment Notes with respect to any New
Aircraft or Substitute Aircraft, other than the Company's obligation, if any, to
pay the Deposit Make-Whole Premium pursuant to Section 4(a)(i) of this
Agreement.
(i) The parties agree that if, in connection with the delivery
of a New Aircraft or Substitute Aircraft, any Owner Participant who is to be a
party to any Lease Financing Agreement shall not be a "Citizen of the United
States" within the meaning of Section 40102(a)(15) of the Act, then the
applicable Lease Financing Agreements shall be modified, consistent with the
Mandatory Document Terms, to require such Owner Participant to enter into a
voting trust, voting powers or similar arrangement satisfactory to the Company
that (A) enables such New Aircraft or Substitute Aircraft to be registered in
the United States and (B) complies with the FAA regulations issued under the Act
applicable thereto.
(j) Anything herein to the contrary notwithstanding, (i) the
Company shall
6
<PAGE>
not have the right, and shall not be entitled, at any time to request the
issuance of Equipment Notes of any series to any Pass Through Trustee in an
aggregate principal amount in excess of the amount of the Deposits then
available for withdrawal by the Escrow Agent under and in accordance with the
provisions of the related Deposit Agreement and (ii) if any New Aircraft is not
delivered and financed by the Company under the Financing Agreements in the
applicable Scheduled Delivery Month, then the Company shall ensure that the
aggregate amortization schedule of the Equipment Notes will correspond as
closely as reasonably practicable to the aggregate amortization schedule set
forth in Schedule VII hereto.
(k) Notwithstanding the foregoing provisions of this Section
1, the Company shall have the right, with respect to any Owned Aircraft, to
enter into the transaction described in Section 8.3 of the relevant Owned
Aircraft Participation Agreement, subject to the restrictions set forth therein,
and the Company further agrees to comply with the provisions of Sections 1(c)
and 2 hereof in connection with such transaction.
SECTION 2. Conditions Precedent. The obligation of the Pass
Through Trustees to enter into, and to cause the Subordination Agent to enter
into, any Participation Agreement as directed pursuant to a Delivery Notice and
to perform its obligations under such Participation Agreement is subject to
satisfaction of the following conditions:
(a) no Triggering Event shall have occurred;
(b) the Company shall have delivered a certificate to each
such Pass Through Trustee and each Liquidity Provider stating that (i) such
Participation Agreement and the other Financing Agreements to be entered into
pursuant to such Participation Agreement do not vary the Mandatory Economic
Terms and contain the Mandatory Document Terms and (ii) any substantive
modification of such Financing Agreements from the forms of Financing Agreements
attached to this Agreement do not materially and adversely affect the
Certificateholders, and such certification shall be true and correct; and
(c) after such Participation Agreement has been entered into,
no less than four New Aircraft (or, if the Company has taken delivery on less
than four New Aircraft, all of the New Aircraft) will be Owned Aircraft.
Anything herein to the contrary notwithstanding, the
obligation of each Pass Through Trustee to purchase Equipment Notes shall
terminate on the Cut-off Date.
7
<PAGE>
SECTION 3. Representations and Warranties.(a) The Company
represents and warrants that:
(i) the Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is a "citizen of the United
States" and an "air carrier" as each such term is defined in Section 40102 of
the Act, and has the full corporate power, authority and legal right under the
laws of the State of Delaware to execute and deliver this Agreement and each
Financing Agreement to which it will be a party and to carry out the obligations
of the Company under this Agreement and each Financing Agreement to which it
will be a party;
(ii) the execution and delivery by the Company of this Agreement and
the performance by the Company of its obligations under this Agreement have been
duly authorized by all necessary corporate action on the part of the Company and
will not violate its Certificate of Incorporation or by-laws or the provisions
of any indenture, mortgage, contract or other agreement to which it is a party
or by which it is bound; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, whether considered in a
proceeding at law or in equity.
(b) Holdings represents and warrants that:
(i) Holdings is duly incorporated, validly existing and in good
standing under the laws of the State of Nevada and has the full corporate power,
authority and legal right under the laws of the State of Nevada to execute and
deliver this Agreement and each Financing Agreement to which it will be a party
and to carry out the obligations of Holdings under this Agreement and each
Financing Agreement to which it will be a party;
(ii) the execution and delivery by Holdings of this Agreement and the
performance by Holdings of its obligations under this Agreement have been duly
authorized by all necessary corporate action on the part of Holdings and will
not violate its Certificate of Incorporation or by-laws or the provisions of any
indenture, mortgage, contract or other agreement to which it is a party or by
which it is bound; and
(iii) this Agreement constitutes the legal, valid and binding
obligation of Holdings, enforceable against it in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity, whether considered in a
proceeding at law or in equity.
(c) State Street represents and warrants that:
8
<PAGE>
(i) State Street is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and is
a "citizen of the United States" as defined in Section 40102 of the Act, and has
the full power, authority and legal right under the laws of the State of
Connecticut and the United States pertaining to its banking, trust and fiduciary
powers to execute and deliver this Agreement and each Financing Agreement to
which it will be a party and to carry out the obligations of State Street, in
its capacity as Subordination Agent, Pass Through Trustee or Paying Agent, as
the case may be, under this Agreement and each Financing Agreement to which it
will be a party;
(ii) the execution and delivery by State Street, in its capacity as
Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be,
of this Agreement and the performance by State Street, in its capacity as
Subordination Agent, Pass Through Trustee or Paying Agent, as the case may be,
of its obligations under this Agreement have been duly authorized by all
necessary action on the part of State Street, in its capacity as Subordination
Agent, Pass Through Trustee or Paying Agent, as the case may be, and will not
violate its articles of association or by-laws or the provisions of any
indenture, mortgage, contract or other agreement to which it is a party or by
which it is bound; and
(iii) this Agreement constitutes the legal, valid and binding
obligations of State Street, in its capacity as Subordination Agent, Pass
Through Trustee or Paying Agent, as the case may be, enforceable against it in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity, whether
considered in a proceeding at law or in equity.
(d) The Pass Through Trustee hereby confirms to each of the
other parties hereto that its representations and warranties set forth in
Section 7.15 of each Pass Through Trust Agreement are true and correct as of the
date hereof.
(e) The Subordination Agent represents and warrants that:
(i) the Subordination Agent is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States, and has the full power, authority and legal right under the laws of the
State of Connecticut and the United States pertaining to its banking, trust and
fiduciary powers to execute and deliver this Agreement and each Financing
Agreement to which it is or will be a party and to perform its obligations under
this Agreement and each Financing Agreement to which it is or will be a party;
(ii) this Agreement has been duly authorized, executed and delivered by
the Subordination Agent; this Agreement constitutes the legal, valid and binding
obligations of the Subordination Agent enforceable against it in accordance with
its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity, whether considered
9
<PAGE>
in a proceeding at law or in equity;
(iii) none of the execution, delivery and performance by the
Subordination Agent of this Agreement contravenes any law, rule or regulation of
the State of Connecticut or any United States governmental authority or agency
regulating the Subordination Agent's banking, trust or fiduciary powers or any
judgment or order applicable to or binding on the Subordination Agent and do not
contravene the Subordination Agent's articles of association or by-laws or
result in any breach of, or constitute a default under, any agreement or
instrument to which the Subordination Agent is a party or by which it or any of
its properties may be bound;
(iv) neither the execution and delivery by the Subordination Agent of
this Agreement nor the consummation by the Subordination Agent of any of the
transactions contemplated hereby requires the consent or approval of, the giving
of notice to, the registration with, or the taking of any other action with
respect to, any Connecticut governmental authority or agency or any federal
governmental authority or agency regulating the Subordination Agent's banking,
trust or fiduciary powers;
(v) there are no Taxes payable by the Subordination Agent imposed by
the State of Connecticut or any political subdivision or taxing authority
thereof in connection with the execution, delivery and performance by the
Subordination Agent of this Agreement (other than franchise or other taxes based
on or measured by any fees or compensation received by the Subordination Agent
for services rendered in connection with the transactions contemplated by the
Intercreditor Agreement or any of the Liquidity Facilities), and there are no
Taxes payable by the Subordination Agent imposed by the State of Connecticut or
any political subdivision thereof in connection with the acquisition, possession
or ownership by the Subordination Agent of any of the Equipment Notes (other
than franchise or other taxes based on or measured by any fees or compensation
received by the Subordination Agent for services rendered in connection with the
transactions contemplated by the Intercreditor Agreement or any of the Liquidity
Facilities); and
(vi) there are no pending or threatened actions or proceedings against
the Subordination Agent before any court or administrative agency which
individually or in the aggregate, if determined adversely to it, would
materially adversely affect the ability of the Subordination Agent to perform
its obligations under this Agreement.
(f) The Escrow Agent represents and warrants that:
(i) the Escrow Agent is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and
has the full power, authority and legal right under the laws of the United
States pertaining to its banking, trust and fiduciary powers to execute and
deliver this Agreement, each Deposit Agreement and each Escrow and Paying Agent
Agreement (collectively, the "Escrow Agent Agreements") and to carry out the
obligations of the Escrow Agent under each of the Escrow Agent Agreements;
10
<PAGE>
(ii) the execution and delivery by the Escrow Agent of each of the
Escrow Agent Agreements and the performance by the Escrow Agent of its
obligations hereunder and thereunder have been duly authorized by all necessary
action on the part of the Escrow Agent and will not violate its articles of
association or by-laws or the provisions of any indenture, mortgage, contract or
other agreement to which it is a party or by which it is bound; and
(iii) each of the Escrow Agent Agreements constitutes the legal, valid
and binding obligations of the Escrow Agent enforceable against it in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity, whether considered in a
proceeding at law or in equity.
(g) The Paying Agent represents and warrants that:
(i) the Paying Agent is a national banking association duly organized,
validly existing and in good standing under the laws of the United States and
has the full power, authority and legal right under the laws of the United
States pertaining to its banking, trust and fiduciary powers to execute and
deliver this Agreement and the Escrow and Paying Agent Agreement (collectively,
the "Paying Agent Agreements") and to carry out the obligations of the Paying
Agent under each of the Paying Agent Agreements;
(ii) the execution and delivery by the Paying Agent of each of the
Paying Agent Agreements and the performance by the Paying Agent of its
obligations hereunder and thereunder have been duly authorized by all necessary
action on the part of the Paying Agent and will not violate its articles of
association or by-laws or the provisions of any indenture, mortgage, contract or
other agreement to which it is a party or by which it is bound; and
(iii) each of the Paying Agent Agreements constitutes the legal, valid
and binding obligations of the Paying Agent enforceable against it in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity, whether considered in a
proceeding at law or in equity.
SECTION 4. Covenants.(a) The Company covenants with each of
the other parties hereto that:
(i) on the date that the Depositary is obligated to pay the amount of
the Final Withdrawal to the Paying Agent pursuant to a Deposit Agreement
relating to any Trust, the Company shall pay to the Pass Through Trustee of such
Trust no later than 12:30 p.m. (New York time) an amount equal to the Deposit
Make-Whole Premium, if any, required to be paid in respect of such Final
Withdrawal amount;
(ii) subject to Section 4(a)(iv) of this Agreement, the Company shall
at all times maintain its corporate existence and shall not wind up, liquidate
or dissolve or take any action, or
11
<PAGE>
fail to take any action, that would have the effect of any of the foregoing;
(iii) the Company shall at all times remain a U.S. Air Carrier (as
defined in the Financing Agreements) and shall at all times be otherwise
certificated and registered to the extent necessary to entitle (i) in the case
of Leased Aircraft, the Owner Trustee (and the Loan Trustee as assignee of the
Owner Trustee's rights under each Lease) to the rights afforded to lessors of
aircraft equipment under Section 1110 and (ii) in the case of Owned Aircraft,
the Loan Trustee to the rights afforded to secured parties of aircraft equipment
under Section 1110;
(iv) Section 13.2.1 of the form of Lease attached hereto as Exhibit A-2
is hereby incorporated by reference herein; and
(v) on the Delivery Period Termination Date, the Company shall deliver
a certificate to each Pass Through Trustee specifying the Delivery Period
Termination Date and stating that, on such date, the Participation Agreements
and the other Financing Agreements theretofore entered into do not vary the
Mandatory Economic Terms.
(b) State Street, in its individual capacity, covenants with
each of the other parties to this Agreement that it will, immediately upon
obtaining knowledge of any facts that would cast doubt upon its continuing
status as a "citizen of the United States" as defined in Section 40102 of the
Act and promptly upon public disclosure of negotiations in respect of any
transaction which would or might adversely affect such status, notify in writing
all parties hereto of all relevant matters in connection therewith. Upon State
Street giving any such notice, State Street shall, subject to Section 8.02 of
any Indenture then entered into, resign as Loan Trustee in respect of such
Indenture.
SECTION 5. Notices. Unless otherwise specifically provided
herein, all notices required or permitted by the terms of this Agreement shall
be in English and in writing, and any such notice shall become effective upon
being delivered personally or, if promptly confirmed by mail, when dispatched by
facsimile or other written telecommunication, addressed to such party hereto at
its address or facsimile number set forth below the signature of such party at
the foot of this Agreement.
SECTION 6. Expenses. (a) The Company agrees to pay to the
Subordination Agent when due an amount or amounts equal to the fees payable to
the Liquidity Provider under Section 2.03 of each Liquidity Facility and the
related Fee Letter (as defined in the Intercreditor Agreement) multiplied by a
fraction the numerator of which shall be the then outstanding aggregate amount
of the Deposits under the Deposit Agreements and the denominator of which shall
be the sum of (x) the then outstanding aggregate principal amount of the Series
A Equipment Notes, Series B Equipment Notes and Series C Equipment Notes issued
under all of the Indentures and (y) the then outstanding aggregate amount of the
Deposits under the Deposit Agreements.
12
<PAGE>
(b) So long as no Equipment Notes have been issued in respect
of any New Aircraft, the Company agrees to pay (i) to the Subordination Agent
when due (A) the amount equal to interest on any Downgrade Advance (other than
any Applied Downgrade Advance) payable under Section 3.07 of each Liquidity
Facility, (B) the amount equal to interest on any Non-Extension Advance (other
than any Applied Non-Extension Advance) payable under Section 3.07 of each
Liquidity Facility and (C) any other amounts owed to the Liquidity Provider by
the Subordination Agent as borrower under each Liquidity Facility (other than
amounts due as repayment of advances thereunder or as interest on such advances,
except to the extent payable pursuant to clause (A) or (B)), (ii) all
compensation and reimbursement of expenses, disbursements and advances payable
by the Company under the Pass Through Trust Agreements, (iii) all compensation
and reimbursement of expenses and disbursements payable to the Subordination
Agent under the Intercreditor Agreement except with respect to any income or
franchise taxes incurred by the Subordination Agent in connection with the
transactions contemplated by the Intercreditor Agreement and (iv) in the event
the Company requests any amendment to any Operative Agreement, all reasonable
fees and expenses (including, without limitation, fees and disbursements of
counsel) of the Escrow Agent and/or the Paying Agent in connection therewith.
For purposes of this Section 6(b), the terms "Applied Downgrade Advance",
"Applied Non-Extension Advance", "Downgrade Advance", "Investment Earnings" and
"Non-Extension Advance" shall have the meanings specified in each Liquidity
Facility.
SECTION 7. Further Assurances. Each party hereto shall duly
execute, acknowledge and deliver, or shall cause to be executed, acknowledged
and delivered, all such further agreements, instruments, certificates or
documents, and shall do and cause to be done such further acts and things, in
any case, as any other party hereto shall reasonably request in connection with
its administration of, or to carry out more effectually the purposes of, or to
better assure and confirm unto it the rights and benefits to be provided under,
this Agreement.
SECTION 8. Miscellaneous.(a) Provided that the transactions
contemplated hereby have been consummated, and except as otherwise provided for
herein, the representations, warranties and agreements herein of the Company,
Holdings, the Subordination Agent, the Escrow Agent, the Paying Agent and the
Pass Through Trustee, and the Company's, Holdings's, the Subordination Agent's,
the Escrow Agent's, the Paying Agent's and the Pass Through Trustee's
obligations under any and all thereof, shall survive the expiration or other
termination of this Agreement and the other agreements referred to herein.
(b) This Agreement may be executed in any number of
counterparts (and each of the parties hereto shall not be required to execute
the same counterpart). Each counterpart of this Agreement, including a signature
page executed by each of the parties hereto, shall be an original counterpart of
this Agreement, but all of such counterparts together shall constitute one
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified orally, but only by an
instrument in writing signed by the party against which the enforcement of the
termination, amendment, supplement, waiver or
13
<PAGE>
modification is sought. The index preceding this Agreement and the headings of
the various Sections of this Agreement are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof.
The terms of this Agreement shall be binding upon, and shall inure to the
benefit of, the Company and its successors and permitted assigns, the Holdings
and its successors, the Pass Through Trustee and its successors as Pass Through
Trustee (and any additional trustee appointed) under any of the Pass Through
Trust Agreements, the Escrow Agent and its successors as Escrow Agent under the
Escrow and Paying Agent Agreements, the Paying Agent and its successors as
Paying Agent under the Escrow and Paying Agent Agreement and the Subordination
Agent and its successors as Subordination Agent under the Intercreditor
Agreement.
(c) This Agreement is not intended to, and shall not, provide
any Person not a party hereto (other than the Certificateholders and each of the
beneficiaries of Section 6 hereof) with any rights of any nature whatsoever
against any of the parties hereto, and no Person not a party hereto (other than
the Certificateholders and each of the beneficiaries of Section 6 hereof) shall
have any right, power or privilege in respect of, or have any benefit or
interest arising out of, this Agreement.
14
<PAGE>
SECTION 9. Holdings Guarantee. Holdings absolutely,
irrevocably and unconditionally guarantees the Company's obligations hereunder
on the terms set forth in Schedule VIII (the "Guarantee"), the provisions of
which are incorporated herein by reference as if fully set forth herein.
SECTION 10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THIS
AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
AIRTRAN AIRWAYS, INC.
By /s/
-----------------------------------
Name:
Title:
Address:
9955 AirTran Boulevard
Orlando, Florida 32827
Attention: Treasurer
Facsimile: (407) 251-5567
AIRTRAN HOLDINGS, INC.
By /s/
-----------------------------------
Name:
Title:
Address:
9955 AirTran Boulevard
Orlando, Florida 32827
Attention: Treasurer
Facsimile: (407) 251-5567
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION
not in its individual capacity,
except as otherwise provided
herein, but solely as Pass
Through Trustee
By /s/
-----------------------------------
Name:
Title:
Address:
225 Asylum Street
Goodwin Square
Hartford, Connecticut 06103
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Attention: Corporate Trust Administration
Facsimile: (860) 244-1889
With a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette, 6th Floor
Boston, MA 02111
Attention: Corporate Trust Department
Facsimile: (617) 664-1461
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION
not in its individual capacity, except as otherwise
provided herein, but solely as Subordination Agent
By /s/
---------------------------------------
Name:
Title:
Address:
225 Asylum Street
Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Facsimile: (860) 244-1889
With a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette, 6th Floor
Boston, MA 02111
Attention: Corporate Trust Department
Facsimile: (617) 664-1461
FIRST SECURITY BANK,
NATIONAL ASSOCIATION
as Escrow Agent
By /s/
---------------------------------------
Name:
Title:
Address:
79 South Main Street
Salt Lake City, Utah 84111
</TABLE>
<PAGE>
Attention: Corporate Trust Department,
3rd Floor
Facsimile: (801) 246-5053
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION as Paying Agent
By /s/
-----------------------------------------
Name:
Title:
Address:
225 Asylum Street
Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Facsimile: (860) 244-1889
With a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette, 6th Floor
Boston, MA 02111
Attention: Corporate Trust Department
Facsimile: (617) 664-1461
<PAGE>
SCHEDULE I to
Note Purchase Agreement
NEW AIRCRAFT AND SCHEDULED DELIVERY MONTHS
<TABLE>
<CAPTION>
Expected Registration Manufacturer's Serial Scheduled Delivery Month
New Aircraft Type Number Number
------------------- --------------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
Boeing 717-200 N942AT 55005 September 1999
Boeing 717-200 N943AT 55006 September 1999
Boeing 717-200 N944AT 55007 October 1999
Boeing 717-200 N945AT 55008 October 1999
Boeing 717-200 N940AT 55004 November 1999
Boeing 717-200 N946AT 55009 November 1999
Boeing 717-200 N947AT 55010 December 1999
Boeing 717-200 N948AT 55011 December 1999
Boeing 717-200 N949AT 55003 January 1999
Boeing 717-200 N950AT 55012 March 2000
Boeing 717-200 N951AT 55013 May 2000
</TABLE>
<PAGE>
SCHEDULE II to
Note Purchase Agreement
PASS THROUGH TRUST AGREEMENTS
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of AirTran Pass Through Trust, Series
1999-1A.
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of AirTran Pass Through Trust, Series
1999-1B.
Pass Through Trust Agreement dated as of the Issuance Date between the Company
and the Pass Through Trustee in respect of AirTran Pass Through Trust, Series
1999-1C.
<PAGE>
SCHEDULE III to
Note Purchase Agreement
DEPOSIT AGREEMENTS
Deposit Agreement (Class A) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
Deposit Agreement (Class B) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
Deposit Agreement (Class C) dated as of the Issuance Date between the Depositary
and the Escrow Agent.
<PAGE>
SCHEDULE IV to
Note Purchase Agreement
ESCROW AND PAYING AGENT AGREEMENTS
Escrow and Paying Agent Agreement (Class A) dated as of the Issuance Date among
the Escrow Agent, the Class A Purchasers, the Pass Through Trustee for the Class
A Trust and the Paying Agent.
Escrow and Paying Agent Agreement (Class B) dated as of the Issuance Date among
the Escrow Agent, Kreditanstalt fur Wiederaufbau, the Pass Through Trustee for
the Class B Trust and the Paying Agent.
Escrow and Paying Agent Agreement (Class C) dated as of the Issuance Date among
the Escrow Agent, The Boeing Company, the Pass Through Trustee for the Class C
Trust and the Paying Agent.
<PAGE>
SCHEDULE V to
Note Purchase Agreement
-----------------------
MANDATORY DOCUMENT TERMS
The terms "Indenture Form," "Lease Form" and "Participation Agreement Form"
shall have the respective meanings specified in Schedule VI to the Note Purchase
Agreement.
1. May not modify in any material adverse respect the Granting
Clause of the Trust Indenture Form so as to deprive the Note Holders of a first
priority security interest in and mortgage lien on the Aircraft, the Lease, all
of the Owner Trustee's rights in the Aircraft Purchase Agreement and the
Aircraft Purchase Agreement Assignment or to eliminate any of the obligations
secured thereby or otherwise modify in any material adverse respect as regards
the interests of the Note Holders, the Subordination Agent, the Liquidity
Provider or the Mortgagee the provisions of Article II, III or IV, or Section
5.02, 5.06, 9.01(b), 10.04, 10.11 or 10.12 of the Trust Indenture Form.
2. May not modify in any material adverse respect as regards
the interests of the Note Holders, the Subordination Agent, the Liquidity
Provider or the Mortgagee the provisions of Section 3.2.1(e), 3.3(c), 4.7, the
final sentence of 7.1.1, 10.3.1(d)(2), 13.3, 16, 18.3 or 18.7 of the Lease Form
or otherwise modify the terms of the Lease Form so as to deprive the Mortgagee
of rights expressly granted to the "Mortgagee" therein.
3. May not modify in any material adverse respect as regards
the interests of the Note Holders, the Subordination Agent, the Liquidity
Provider or the Mortgagee the provisions of Section 5.1.9, 5.1.10, 5.1.11,
5.1.12, 7.5, 12, 15.8(a) or 15.9 of the Participation Agreement Form or of the
provisions of Section 5.1.2(t) or 10.1.1(a)(4) of the Participation Agreement
Form so as to eliminate the requirement to deliver to the Loan Participant or
the Mortgagee, as the case may be, 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 7.6.11(a)(13) of the Participation
Agreement Form as regards the rights of the Mortgagee thereunder or otherwise
modify the terms of the Participation Agreement Form to deprive the Trustees,
the Subordination Agent, the Liquidity Provider or the Mortgagee 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 Note Holders, the Subordination Agent, the Liquidity
Provider or the Mortgagee, the definition of "Make Whole Amount" in Annex A to
the Participation Agreement Form.
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 Note
Holders, the Subordination Agent, the Liquidity Provider, the Mortgagee or the
Certificateholders.
<PAGE>
SCHEDULE VI to
Note Purchase Agreement
-----------------------
MANDATORY ECONOMIC TERMS
Equipment Notes
- ---------------
Obligor: AirTran Airways Inc., or an Owner Trust
- --------
Holdings: AirTran Holdings, Inc.
- ---------
Maximum Principal Amount:
The maximum principal amount of all the Equipment Notes issued with respect to a
New Aircraft shall not exceed the maximum principal amount of Equipment Notes
indicated for each such Aircraft set forth in the table below under the column
"Maximum Principal Amount of Equipment Notes":
<TABLE>
<CAPTION>
MAXIMUM PRINCIPAL AMOUNT OF
MANUFACTURER'S SERIAL NUMBER EQUIPMENT NOTES APPRAISED VALUE
<S> <C> <C> <C>
55004 $ 17,856,430 $ 26,396,667
55005 17,856,430 26,396,667
55006 17,856,430 26,460,000
55007 17,856,430 26,460,000
55008 17,856,430 26,493,333
55009 17,856,430 26,493,333
55010 17,927,856 26,526,667
55011 17,927,856 26,526,667
55003 17,927,856 26,723,333
55012 17,927,856 26,790,000
</TABLE>
The original aggregate principal amount of all Equipment Notes for all New
Aircraft shall not exceed the aggregate face amount of all Certificates issued
on the Issuance Date. The original aggregate principal amount of all Equipment
Notes of any series shall not exceed the original aggregate face amount of all
Certificates of the related Class issued on the Issuance Date.
Initial Loan to Aircraft Value with respect to a New Aircraft with (i) the
principal amount of the series of Equipment Notes that rank senior aggregated
for purposes of the calculation and (ii) the value of any Aircraft for these
purposes equal to the Assumed Appraised Value for such Aircraft, shall not
exceed the percentages set forth in the following table:
<PAGE>
SERIES A SERIES B SERIES C
EQUIPMENT EQUIPMENT EQUIPMENT
AIRCRAFT TYPE NOTES NOTES NOTES
------------- ---------- --------- ----------
Boeing 717-200 40.2% 52.0% 68.0%
In this Schedule VI:
"Assumed Appraisal Value" means the value set forth above under the column
"Appraised Value"; and
"Depreciation Assumption" means an assumption that the value of each New
Aircraft depreciates by approximately 3% of the initial appraised value per year
for the first fifteen years after the year of delivery of such New Aircraft, by
approximately 4% of the initial appraised value per year for the next five years
and by approximately 5% per year thereafter.
The Loan to Aircraft Value for each series of Equipment Notes issued in respect
of each New Aircraft (computed (i) after aggregating the principal amount of the
series of Equipment Notes that rank senior and (ii) as of the date of the
issuance thereof on the basis of the Assumed Appraised Value of such Aircraft
and the Depreciation Assumption will not exceed as of any Regular Distribution
Date thereafter (assuming no default in the payment of the Equipment Notes) the
Initial Loan to Aircraft Value for such series of Equipment Notes set forth in
the preceding table.
As of the Delivery Period Termination Date and each Regular Distribution Date
thereafter the Loan to Aircraft Value for each Class of Certificates (computed
(i) after aggregating the principal amount of the class of Certificates that
rank equally or senior and (ii) as of any such date on the basis of the Assumed
Appraisal Value of all Aircraft that have been delivered and the Depreciation
Assumption) will not exceed (assuming no default in payment of the Equipment
Notes and after giving effect to scheduled payments) the percentages set forth
in the following table:
CLASS A CLASS B CLASS C
AIRCRAFT TYPE CERTIFICATES CERTIFICATES CERTIFICATES
------------- ------------ ------------- -------------
Boeing 717-200 39.6% 50.0% 67.4%
2
<PAGE>
Initial Average Life (in years) as of the Funding Date for any Aircraft (from
- -----------------------------------------------------------------------------
the Issuance Date):
- -------------------
Series A: not more than 11.5 years
Series B: not more than 10.0 years
Series C: not more than 7.0 years
Average Life (in years)
- -----------------------
As of the Delivery Period Termination Date, the average life of the
Class A Certificates, the Class B Certificates and the Class C
Certificates shall not be more than, respectively, 11.5 years, 9.4
years, and 7.0 years from the Issuance Date (computed without regard to
the acceleration of any Equipment Notes and after giving effect to any
special distribution on the Certificates thereafter required in respect
of unused Deposits).
Final Maturity Date
- -------------------
There shall be a payment of principal scheduled on at least one Series
A Equipment Note on April 1, 2017, and no Series A Equipment Note shall
mature after such date.
There shall be a payment of principal scheduled on at least one Series
B Equipment Note on October 1, 2014, and no Series B Equipment Note
shall mature after such date.
There shall be a payment of principal scheduled on at least one Series
C Equipment Note on April 1, 2017, and no Series C Equipment Note shall
mature after such date.
Debt Rate (computed on the basis of a 360-day year consisting of twelve 30-day
- ------------------------------------------------------------------------------
months, payable semi-annually in arrears):
- ------------------------------------------
Series A: 10.41 %
Series B: 10.81%
Series C: 11.42%
Payment Due Rate: Debt Rate plus 2% per annum
Payment Dates: April 1 and October 1
Make-Whole Premiums: As provided in Article II
- -------------------- of the form of Trust Indenture
marked as Exhibit A-3 of the Note
Purchase Agreement or the Owned
Aircraft Indenture marked as Exhibit
C-2 of the Note Purchase Agreement
(the "Indenture Form")
Redemption and Purchase: As provided in Article II of the
- ------------------------ Indenture Form
3
<PAGE>
Lease
- -----
Term: The Base Lease Term shall expire by
its terms on or after final maturity
date of the latest maturity date of
the related Equipment Notes
Lease Payment Dates: April 1 and October 1
and (to the extent elected by the
Company) upon the commencement of
the Lease and on any other date
occurring after the latest maturity
date of the Equipment Notes issued
in connection with the related New
Aircraft.
Minimum Rent: Basic Rent due and payable on
each Payment Date (together with
any advances or payments by Lessee
on such Payment Date in respect of,
or any payments by an Owner
Participant, of deferred equity
amounts) shall be at least
sufficient to pay in full, on the
date on which such installment of
Basic Rent, advance, other payment
or deferred equity is due (assuming
timely payment of the related
Equipment Notes prior to such
date), the aggregate principal
amount of scheduled installments
due on the related Equipment Notes
outstanding on such Payment Date,
together with accrued and unpaid
interest thereon.
If an Owner Participant is required
to make a deferred equity payment to
be used by an Owner Trustee to pay
principal of, and interest on, the
Equipment Notes and the Owner
Participant fails to make the
payment, Lessee will be required to
provide the Owner Trustee with funds
sufficient to make the payment.
Supplemental Rent: Sufficient to cover the sums
described in clauses (1) through
(6) of such term as defined in
Annex A to the form of Lease (the
"Lease Form") marked as Exhibit A of
the Note Purchase Agreement
Stipulated Loss Value: At all times equal to or greater
than the then outstanding principal
amount of the related Equipment
Notes together with accrued interest
thereon and any Section 467 or other
adjustment reducing the payment from
Stipulated Loss Value.
Termination Value: At all times equal to or greater
than the then outstanding principal
amount of the related Equipment
Notes together with accrued interest
thereon and any Section 467 or other
adjustment reducing the payment from
Termination Value.
4
<PAGE>
EBO Price (if there is an
early purchase option): At all times equal to or greater
than the then outstanding principal
amount of the related Equipment
Notes together with accrued interest
thereon and any Section 467 or other
adjustment reducing the payment from
EBO Price.
All-risk hull insurance: Not less than Stipulated Loss Value,
subject to Lessee's right to
self-insure on terms no more
favorable to Lessee in any material
respect than those set forth in
Section G of Annex D to the Lease
Form.
Minimum Liability As set forth in Schedule 1 to the
Insurance Amount: Lease Form.
Past-Due Rate: As set forth in Schedule 1 to the
Lease Form.
SLV Rate: As set forth in Schedule 1 Lease
Form.
Participation Agreement
- -----------------------
Mortgagee, Subordination Agent, Liquidity Provider, Pass Through Trustees,
Escrow Agents and Note Holders indemnified against Expenses and Taxes to the
extent set forth in Section 9 of the form of the Participation Agreement (the
"Participation Form") marked as Exhibit A-1 to the Note Purchase Agreement
5
<PAGE>
SCHEDULE VII to
Note Purchase Agreement
-----------------------
AGGREGATE AMORTIZATION SCHEDULE
- --------------------------------------------------------------------------------
PAYMENT DATE CLASS A CLASS B CLASS C
CERTIFICATES CERTIFICATES CERTIFICATES
- --------------------------------------------------------------------------------
1-Apr-00 4,668,776.28 1,311,916.91 1,785,317.37
- --------------------------------------------------------------------------------
1-Oct-00 3,545,805.90 996,364.44 1,364,118.93
- --------------------------------------------------------------------------------
1-Apr-01 461,057.52 129,556.25 0
- --------------------------------------------------------------------------------
1-Oct-01 451,411.80 126,845.82 184,963.57
- --------------------------------------------------------------------------------
1-Apr-02 3,147,918.48 884,558.87 985,852.39
- --------------------------------------------------------------------------------
1-Oct-02 391,821.64 794,357.28 1,075,633.49
- --------------------------------------------------------------------------------
1-Apr-03 2,751,743.54 88,978.31 0
- --------------------------------------------------------------------------------
1-Oct-03 325,728.90 91,529.18 1,384,658.44
- --------------------------------------------------------------------------------
1-Apr-04 2,393,391.84 672,538.39 543,991.21
- --------------------------------------------------------------------------------
1-Oct-04 283,277.82 674,880.01 1,573,610.05
- --------------------------------------------------------------------------------
1-Apr-05 2,382,366.84 74,160.89 689,824.13
- --------------------------------------------------------------------------------
1-Oct-05 264,650.82 603,734.75 7,163,038.46
- --------------------------------------------------------------------------------
1-Apr-06 2,126,937.96 68,296.99 833,833.83
- --------------------------------------------------------------------------------
1-Oct-06 634,262.20 620,847.38 7,605,695.75
- --------------------------------------------------------------------------------
1-Apr-07 1,817,110.64 67,983.53 966,496.60
- --------------------------------------------------------------------------------
1-Oct-07 240,899.82 674,591.42 10,017,872.46
- --------------------------------------------------------------------------------
1-Apr-08 2,424,619.68 74,414.27 1,083,749.87
- --------------------------------------------------------------------------------
1-Oct-08 2,513,807.78 720,888.10 842,205.71
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
1-Apr-09 336,481.90 80,037.65 1,105,678.63
- --------------------------------------------------------------------------------
1-Oct-09 2,723,815.50 1,537,193.90 99,123.30
- --------------------------------------------------------------------------------
1-Apr-10 301,843.50 431,173.29 800,000.00
- --------------------------------------------------------------------------------
1-Oct-10 2,880,787.14 4,966,669.49 0
- --------------------------------------------------------------------------------
1-Apr-11 319,270.98 932,806.28 800,000.00
- --------------------------------------------------------------------------------
1-Oct-11 3,697,508.88 8,578,909.04 0
- --------------------------------------------------------------------------------
1-Apr-12 442,099.44 720,930.89 800,000.00
- --------------------------------------------------------------------------------
1-Oct-12 4,443,189.69 3,431,181.17 0
- --------------------------------------------------------------------------------
1-Apr-13 1,514,799.61 0 800,000.00
- --------------------------------------------------------------------------------
1-Oct-13 15,578,491.80 0 0
- --------------------------------------------------------------------------------
1-Apr-14 1,353,617.54 0 800,000.00
- --------------------------------------------------------------------------------
1-Oct-14 11,755,821.43 196,655.5 0
- --------------------------------------------------------------------------------
1-Apr-15 1,435,438.63 0 0
- --------------------------------------------------------------------------------
1-Oct-15 22,132,001.41 0 124,335.81
- --------------------------------------------------------------------------------
1-Apr-16 1,305,757.46 0 0
- --------------------------------------------------------------------------------
1-Oct-16 3,321,485.63 0 0
- --------------------------------------------------------------------------------
1-Apr-17 800,000.00 0 700,000.00
- --------------------------------------------------------------------------------
1-Oct-17 0 0 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL 105,168,000.00 29,552,000.00 44,130,000.00
- ------------------=======================---====================---=============
2
<PAGE>
SCHEDULE VIII to
Note Purchase Agreement
-----------------------
HOLDINGS GUARANTEE
1. GUARANTEE OF OBLIGATIONS.
(a) GUARANTEE. Holdings acknowledges that it is a party to the
Guaranteed Document, and hereby irrevocably and unconditionally guarantees to
the Guaranteed Parties, as primary obligor and not merely as surety, without
offset, abatement, deferment, or deduction, (1) Company's payment of all its
payment obligations under the Guaranteed Document when due (the "Financial
Obligations"), and (2) Company's performance and observance of all its other
obligations under the Guaranteed Document as and when due (the "Nonfinancial
Obligations") (the Financial Obligations and Nonfinancial Obligations being the
"Obligations").
If Company fails to pay any Financial Obligation when it becomes due
and payable, Holdings will promptly and fully pay all Financial Obligations then
due and payable.
If Company fails to perform or observe any Nonfinancial Obligation for
any reason when it is required to be performed or observed, Holdings will
promptly and fully perform such Nonfinancial Obligation or cause such
Nonfinancial Obligation to be performed or observed.
(b) ABSOLUTE GUARANTEE. Holdings's obligations under this Guarantee
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 Company or Holdings, by any illegality, unenforceability, or invalidity
of the Obligations or the Guaranteed Document, by any other guarantee or other
obligations, or by any other circumstance or condition (whether or not Holdings
or Company shall have any knowledge or notice thereof), including: (1) any
termination, amendment, modification, or other change in, or supplement to, the
Guaranteed Document or any other agreement, or any furnishing or acceptance of
additional security, or release of any security, for the obligations of Company
under the Guaranteed Document, or the failure of any security or any failure to
perfect any interest in any collateral given by Company under the Guaranteed
Document; (2) any failure, omission, or delay on the part of any Person to
conform or comply with any term of the Guaranteed Document or any other
agreement, (3) any waiver of the payment, performance, or observance of any of
the obligations, conditions, covenants, or agreements contained in the
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 the Guaranteed Document, or any exercise or
nonexercise of any right or remedy under the Guaranteed Document or any
obligation or liability of Company or any Guaranteed Party, or any exercise or
nonexercise of any right, remedy, power, or privilege under or in respect of the
Guaranteed Document or any such obligation or liability; (4)
<PAGE>
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 the 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 Company, Holdings, 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 Document 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
Company'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 Document or any other agreement; (9) any defect in the title,
compliance with specifications, condition, design, operation, or fitness for use
of the New 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 Company or Holdings into or with
any other corporation, or any sale, lease, or other transfer of any of the
assets of Company or Holdings to any other Person or any change in the ownership
of Holdings or in the control of any such owner; (11) to the extent permitted by
law, any release or discharge, by operation of law, of Holdings from the
performance or observance of any obligation, covenant, or agreement contained in
this Guarantee; and (12) any other condition or circumstance which might
otherwise constitute a legal or equitable discharge, release, or defense of a
surety or Holdings, or which might otherwise limit recourse against Holdings,
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 Government
Entity having authority thereover which would exempt, modify, or delay the due
or punctual payment and performance of the obligations of Holdings hereunder
(the obligations of Holdings hereunder not being dischargeable except by payment
or performance). No failure or delay in exercising any right under this
Guarantee 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 Guarantee or the
Guaranteed Document.
(c) GUARANTEE OF PAYMENT AND PERFORMANCE. This Guarantee is a guarantee
of payment and performance and not merely of collection, and Holdings waives any
right to require that any action against Company or any other Person or any
collateral or security be taken or exhausted before action is taken against
Holdings. No Guaranteed Party shall be required (1) to file suit or to proceed
to obtain or assert a claim against Company for the Obligations, (2) to make any
effort at collection of the Obligations from Company, (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 Company or any other
Holdings or any other Person liable for the Obligations, or any part thereof,
either before or as a condition to enforcing Holdings's liability under this
Guarantee or
2
<PAGE>
to require Holdings to pay or perform the Obligations at any time thereafter.
(d) WAIVER. Except as otherwise expressly provided in this Guarantee,
Holdings hereby waives diligence, presentment, demand, protest, and notice of
any kind whatsoever with respect to this Guarantee or the Obligations, including
(1) notice of acceptance of this Guarantee, 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 the
Guaranteed Document or other agreement; (3) any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge, release, or
defense of a Holdings or surety or which might otherwise limit recourse against
Holdings.
(e) TERMINATION. Holdings's obligations under this (S) 1 shall
terminate (subject to reinstatement under (S) 3) when the Obligations have been
irrevocably paid and performed in full.
2. RIGHTS LIMITED TO GUARANTEED PARTIES. This Guarantee 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.
3. BANKRUPTCY, ETC. 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 Company), such Obligations shall, for purposes
of this Guarantee, to the extent rescinded or returned, be deemed to have
continued in existence, notwithstanding such application by the Guaranteed
Party, and this Guarantee 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 the Guaranteed Document exists at any time, and such declaration
of default is prevented by the pendency against Company or any other Person of a
case or proceeding under a bankruptcy or insolvency law, then for purposes of
this Guarantee and Holdings'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 Holdings 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. Holdings hereby irrevocably and unconditionally waives
any and all rights it may have or obtain, by reason of the performance of the
terms and provisions of this Guarantee, to be subrogated to the rights and
privileges of any Guaranteed Party against any collateral security or guarantee
or right of offset held by any Guaranteed Party for the payment of the
Obligations pursuant to Guaranteed Document or otherwise. If Holdings makes a
payment to a Guaranteed Party under this Guarantee, Holdings shall be subrogated
to that Guaranteed Party's claims against Company or any other Person relating
to that payment. Any such subrogation right and any contractual, common law,
statutory, or other rights of reimbursement, contribution, exoneration, or
indemnification (or any similar rights) from or against Company which may arise
in connection with this Guarantee shall be subject and subordinate to the
Guaranteed Parties' rights
3
<PAGE>
under the Guaranteed Document until all of the Obligations that are due and
payable have been paid in full, and until such time, Holdings agrees not to
claim or enforce any such right in whole or in part against Company. No payment
or performance hereunder by Holdings shall give rise to any claim of Holdings
against any of the Guaranteed Parties; provided, that this sentence shall not
prevent Holdings from being subrogated to any claim available to Company.
5. ASSIGNMENT. Any Guaranteed Party may at any time sell, assign,
transfer, or otherwise dispose of its interest in all or any part of this
Guarantee, the Guaranteed Document, 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. Holdings shall not assign any of its
rights or obligations hereunder, including any claim arising by subrogation.
6. PAYMENTS. All payments by Holdings hereunder shall be made in the
United States in U.S. dollars and in immediately available funds, and otherwise
as provided in the Guaranteed Document. All payments hereunder shall be made
free and clear of, and without deduction or withholding for or on account of,
any Taxes to the extent that any such Taxes would reduce the amount that the
Guaranteed Party receiving the payment otherwise would have received had Company
made such payment. If any Taxes must be deducted or withheld from any payment
hereunder, Holdings shall increase the amount paid so that the Guaranteed Party
receiving the payment receives the full amount of the payment provided for in
this Guarantee on an after-tax basis.
7. REPRESENTATIONS, WARRANTIES, AND COVENANTS. In addition to the
representations and warranties in Section 3(b) of the Note Purchase Agreement,
Holdings hereby represents, warrants, and covenants to the Guaranteed Parties as
follows:
(a) VALIDITY OF GUARANTEE. Holdings's obligations under this Guarantee
rank, and until discharged in full will continue to rank, in right of payment
and security, equally and ratably in all respects with all Holdings's present
and future unsecured and unsubordinated indebtedness for borrowed money.
(b) LITIGATION. There are no pending or, to Holdings'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 Holdings's financial condition or ability to
perform its obligations under this Guarantee.
(c) FINANCIAL STATEMENTS. All financial statements of Holdings that
Holdings or its agents delivered to any Guaranteed Party before the date of this
Guarantee 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 Holdings's financial condition since the latest
date of such financial statements.
(d) TAX ASSESSMENTS. Holdings does not know of any proposed tax
assessment against
4
<PAGE>
it and all Holdings's tax liabilities are adequately provided for.
(e) CORPORATE EXISTENCE; MERGER, SALE, ETC. Holdings will do or cause
to be done all things necessary to preserve and keep in full force and effect
(1) its corporate existence, provided, that nothing in this paragraph (e) shall
prevent Holdings from merging into, consolidating with, or selling all or
substantially all of its assets to Company if the conditions of the
Participation Agreements are met, and (2) its qualifications to do business in
such jurisdictions as may be necessary for it to carry out the transactions
contemplated by this Guarantee.
(f) MERGER, SALE, ETC. Holdings shall not consolidate with or merge
into any other Person, or sell, convey, lease, or otherwise transfer all or
substantially all of its assets as an entirety (whether in one transaction or a
series of transactions) to any Person, unless:
(1) the Person formed by such consolidation or surviving such
merger, or the Person who acquires by sale, conveyance, transfer, or
lease all or substantially all of the Company's assets as an entirety
(the "Successor") is a U.S. Citizen;
(2) the Successor executes and delivers to the Guaranteed
Parties an agreement, in form and substance reasonably satisfactory to
the Guaranteed Parties, containing an assumption by the Successor of
the due and punctual performance and observance of Holdings's
obligations under this Guarantee;
(3) such transaction shall not materially impair the
Successor's ability to perform its obligations under this Guarantee,
and this Guarantee shall remain in full force and effect (unless
Holdings has merged with Company); and
(4) the Successor delivers to the Guaranteed Parties a
Certificate, signed on its behalf by a Responsible Officer, stating
that the conditions precedent set forth in clauses (1), (2), and (3)
have been complied with and an opinion of counsel for Holdings or for
the Successor, from counsel (who may be in-house counsel) and in form
and substance reasonably satisfactory to the Guaranteed Parties, (x)
stating that the agreements entered into to effect such consolidation,
merger, sale, conveyance, transfer, or lease and such assumption
agreements have been duly authorized, executed, and delivered by the
Successor and that they (and this Guarantee so assumed) constitute
legal, valid, and binding obligations of the Successor, enforceable in
accordance with their terms (to the same extent as this Guarantee was
enforceable against Holdings immediately prior to such transaction),
(y) stating that all conditions precedent that are legal in nature
provided for in this Guarantee and relating to such transaction have
been fulfilled, and (z) containing such other matters as the Guaranteed
Parties reasonably request.
Upon any such consolidation, sale, conveyance, merger, transfer, or
lease, the Successor shall succeed to, shall be substituted for, and may
exercise every right and power of Holdings under this Guarantee, with the same
effect as if the Successor had been named as Holdings herein. No such merger,
consolidation, conveyance, sale, transfer, or lease shall have the effect of
releasing Holdings (or any Successor) from its liability under this Guarantee.
5
<PAGE>
8. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL WAIVER.
Holdings irrevocably agrees that any legal action or proceeding brought against
Holdings with respect to this Guarantee 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 Holdings 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. Holdings 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 Guarantee 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 Holdings in any other
jurisdiction in which Holdings shall be subject to suit. HOLDINGS WAIVES ANY
RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS GUARANTEE.
9. INTEGRATION; SUCCESSORS AND ASSIGNS. This Guarantee constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among Holdings and the Guaranteed Parties, with respect to the
subject matter hereof. This Guarantee shall bind Holdings's successors and
assigns, and shall benefit, and be enforceable by, the Guaranteed Parties and
their successors and assigns.
10. PERFORMANCE. Holdings's performance of any or all of the
Obligations shall, for all purposes of the Guaranteed Document, constitute
performance by Company of such Obligations.
6
<PAGE>
ANNEX A to
Note Purchase Agreement
-----------------------
DEFINITIONS
"Act" means 49 U.S.C. (S)(S) 40101-46507.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. For purposes of this definition, "control" means the power,
directly or indirectly, to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise and "controlling," "controlled by" and "under common
control with" have correlative meanings.
"Aircraft Purchase Agreement" means the Purchase Agreement DAC
95-40-D dated December 6, 1995, as amended, between ValueJet Airlines, Inc.
(predecessor to the Company) and the Manufacturer (including all exhibits
thereto, together with all letter agreements entered into that by their terms
constitute part of any such Purchase Agreement);
"Aircraft Purchase Agreement Assignment" means a Purchase
Agreement and Engine Warranties Assignment substantially in the form of Exhibit
A-4 to the Note Purchase Agreement.
"Assumed Amortization Schedule" means Schedule VII to the Note
Purchase Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. (S)(S) 101 et seq.
"Boeing" has the meaning set forth in the sixth recital to the
Note Purchase Agreement.
"Business Day" means any day, other than a Saturday, Sunday or
other day on which commercial banks are authorized or required by law to close
in New York, New York, Orlando, Florida, or, so long as any Certificate is
outstanding, the city and state in which any Trustee, the Subordination Agent or
any Loan Trustee maintains its Corporate Trust Office or receives and disburses
funds.
"Certificate" has the meaning set forth in the third recital
to the Note Purchase Agreement.
"Certificateholder" means the Person in whose name a
Certificate is registered in the Register.
"Class" means the class of Certificates issued by each Pass
Through Trust.
<PAGE>
"Class A Certificates" means the certificates issued by Class
A Trust.
"Class A Purchase Agreement" has the meaning set forth in the
fourth recital to the Note Purchase Agreement.
"Class A Purchasers" has the meaning set forth in the fourth
recital to the Note Purchase Agreement.
"Class A Trust" means the AirTran Pass Through Trust 1999-1A
created and administered pursuant to the applicable Pass Through Trust
Agreement.
"Class B Certificates" means the certificates issued by Class
B Trust.
"Class B Purchase Agreement" has the meaning set forth in the
fifth recital to the Note Purchase Agreement.
"Class B Trust" means the AirTran Pass Through Trust 1999-1B
created and administered pursuant to the applicable Pass Through Trust
Agreement.
"Class C Certificates" means the certificates issued by Class
C Trust.
"Class C Purchase Agreement" has the meaning set forth in the
sixth recital to the Note Purchase Agreement.
"Class C Trust" means the AirTran Pass Through Trust 1999-1C
created and administered pursuant to the applicable Pass Through Trust
Agreement.
"Company" means AirTran Airways, Inc., a Delaware corporation.
"Corporate Trust Office" with respect to any Pass Through
Trustee or any Loan Trustee, means the office of such trustee in the city at
which at any particular time its corporate trust business shall be principally
administered.
"Cut-off Date" means the earlier of (a) the day after the
Delivery Period Termination Date and (b) the date on which a Triggering Event
occurs.
"Delivery Period Termination Date" means the earlier of (a)
May 31, 2000, or, if the Equipment Notes relating to all of the New Aircraft (or
Substitute Aircraft in lieu thereof) have not been purchased by the Pass Through
Trustees on or prior to such date due to any reason beyond the control of the
Company and not occasioned by the Company's fault or negligence, June 30, 2000
and (b) the date on which Equipment Notes issued with respect to all of the New
Aircraft (or Substitute Aircraft in lieu thereof) have been purchased by the
Pass Through Trustees in accordance with the Note Purchase Agreement.
"Delivery Date" means the Business Day on which a New Aircraft
is delivered to and accepted by the Company.
2
<PAGE>
"Deposit" has the meaning set forth in the seventh recital to
the Note Purchase Agreement.
"Deposit Agreement" has the meaning set forth in the seventh
recital to the Note Purchase Agreement.
"Depositary" means ABN AMRO Bank, N.V., Chicago Branch, a
banking institution organized under the laws of The Netherlands.
"Deposit Make-Whole Premium" means, with respect to the
distribution of unused Deposits to holders of any Class of Certificates (other
than the Class C Certificates), as of any date of determination, an amount equal
to the excess, if any, of (a) the present value of the excess of (i) the
scheduled payment of principal and interest to maturity of the related Series of
Equipment Notes, assuming the maximum principal amount thereof were issued on
each remaining Regular Distribution Date for such Class under the Assumed
Amortization Schedule, over (ii) the scheduled payment of principal and interest
to maturity of the Equipment Notes actually acquired by the Pass Through Trustee
for such Class on each such Regular Distribution Date, such present value
computed by discounting such excess on a semiannual basis on each Regular
Distribution Date (assuming a 360-day year of twelve 30-day months) using a
discount rate equal to the Treasury Yield plus 4.50% for the Class A
Certificates and 4.88% for the Class B Certificates (provided that so long as
KfW is the holder of all the Class B Certificates, in the case of the Class B
Certificates, a discount rate equal to the Treasury Yield plus 3.91% per annum
plus the Swap Spread), in each case, over (b) the amount of such unused Deposits
to be distributed to the holders of such Certificates, plus accrued and unpaid
interest to but excluding such date of determination from and including the
preceding Regular Distribution Date (or if such date of determination precedes
the first Regular Distribution Date, the Issuance Date). For purposes of this
definition, "Swap Spread" means, as of the date of determination, the nine-year
swap spread rate, offer side, as displayed on the Reuters Monitor Money Rate
Services page RTRSWP1 (or such other page of such service as may replace such
page) as determined by KfW.
"Equipment Notes" means and includes any equipment notes
issued under any Indenture in the form specified in Section 2.01 thereof (as
such form may be varied pursuant to the terms of such Indenture) and any
Equipment Note issued under any Indenture in exchange for or replacement of any
other Equipment Note.
"Escrow Agent" has the meaning set forth in the first
paragraph of the Note Purchase Agreement.
"Escrow and Paying Agent Agreement" has the meaning set forth
in the seventh recital to the Note Purchase Agreement.
"FAA" means the Federal Aviation Administration of the United
States.
"Final Withdrawal" with respect to each Escrow and Paying
Agent Agreement, has the meaning set forth in Section 1.02 thereof.
3
<PAGE>
"Financing Agreements" means, collectively, the Lease
Financing Agreements and the Owner Financing Agreements.
"Funding Date" has the meaning set forth in Section 1(b)(ii)
of the Note Purchase Agreement.
"Government Entity" means (a) any federal, state, provincial
or similar government, and any body, board, department, commission, court,
tribunal, authority, agency or other instrumentality of any such government or
otherwise exercising any executive, legislative, judicial, administrative or
regulatory functions of such government or (b) any other government entity
having jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
"Guarantee" has the meaning assigned to such term in Section
9.
"Guaranteed Parties" means each of the Escrow Agent, the Pass
Through Trustees, the Subordination Agent, the Certificateholders and the Paying
Agent.
"Guaranteed Document" means the Note Purchase Agreement.
"Holdings" means AirTran Holdings, Inc., a Nevada corporation.
"Indentures" means, collectively, the Leased Aircraft
Indentures and the Owned Aircraft Indentures.
"Intercreditor Agreement" has the meaning set forth in the
eleventh recital to the Note Purchase Agreement.
"Issuance Date" means the date of the original issuance of the
Certificates.
"KfW" has the meaning set forth in the fifth recital to the
Note Purchase Agreement.
"Law" means (a) any constitution, treaty, statute, law,
decree, regulation, order, rule or directive of any Government Entity, and (b)
any judicial or administrative interpretation or application of, or decision
under, any of the foregoing.
"Lease" means a Lease Agreement substantially in the form of
Exhibit A-2 to the Note Purchase Agreement.
"Leased Aircraft" means a New Aircraft subject to a Lease.
"Leased Aircraft Guarantee" means a Guarantee substantially in
the form of Exhibit A-6 to the Note Purchase Agreement.
"Leased Aircraft Indenture" means a Trust Indenture and
Mortgage substantially
4
<PAGE>
in the form of Exhibit A-3 to the Note Purchase Agreement.
"Leased Aircraft Participation Agreement" means a
Participation Agreement substantially in the form of Exhibit A-1 to the Note
Purchase Agreement.
"Lease Financing Agreements" means, collectively, the Aircraft
Purchase Agreement Assignment, the Leased Aircraft Participation Agreement, the
Lease, the Leased Aircraft Indenture, the Leased Aircraft Guarantee, the
Equipment Notes issued thereunder and the Trust Agreement relating to the
financing of a Leased Aircraft.
"Liquidity Facility" has the meaning set forth in the eleventh
recital to the Note Purchase Agreement.
"Liquidity Provider" has the meaning set forth in the eleventh
recital to the Note Purchase Agreement.
"Loan Trustee" means the "Mortgagee" as defined in the
Financing Agreements.
"Mandatory Document Terms" means the terms set forth on
Schedule V to the Note Purchase Agreement.
"Mandatory Economic Terms" means the terms set forth on
Schedule VI to the Note Purchase Agreement.
"Manufacturer" means McDonnell Douglas Corporation, a Maryland
corporation, solely in its capacity as manufacturer or seller of New Aircraft.
"New Aircraft" has the meaning set forth in the second recital
to the Note Purchase Agreement.
"Note Purchase Agreement" means the Note Purchase Agreement to
which this Annex A is attached.
"Notice of Purchase Withdrawal" with respect to each Deposit
Agreement, has the meaning set forth in Section 2.3 thereof.
"Operative Agreements" means, collectively, the Pass Through
Trust Agreements, the Escrow and Paying Agent Agreements, the Deposit
Agreements, the Liquidity Facilities, the Intercreditor Agreement, the Trust
Agreements, the Certificates and the Financing Agreements.
"Owned Aircraft" means a New Aircraft subject to an Owned
Aircraft Indenture.
"Owned Aircraft Guarantee" means a Guarantee substantially in
the form of Exhibit C-3 to the Note Purchase Agreement.
"Owned Aircraft Indenture" means a Trust Indenture and
Mortgage substantially in the form of Exhibit C-2 to the Note Purchase
Agreement.
5
<PAGE>
"Owned Aircraft Participation Agreement" means a Participation
Agreement substantially in the form of Exhibit C-1 to the Note Purchase
Agreement.
"Owner Financing Agreements" means, collectively, the Owned
Aircraft Participation Agreement, the Owned Aircraft Indenture, the Owned
Aircraft Guarantee and the Equipment Notes issued thereunder.
"Owner Participant" means, with respect to any Leased
Aircraft, the Person named as the Owner Participant in the Participation
Agreement with respect to such Leased Aircraft.
"Owner Trust" means with respect to any Leased Aircraft, the
trust created by the "Trust Agreement" referred to in the Leased Aircraft
Indenture related thereto.
"Owner Trustee" means with respect to any Leased Aircraft, the
"Owner Trustee" party to the "Trust Agreement" referred to in the Leased
Aircraft Indenture related thereto.
"Participation Agreements" means, collectively, the Leased
Aircraft Participation Agreements and the Owned Aircraft Participation
Agreements.
"Pass Through Trust" has the meaning set forth in the third
recital to the Note Purchase Agreement.
"Pass Through Trust Agreement" means any of the agreements
described in Schedule II to the Note Purchase Agreement.
"Pass Through Trustee" has the meaning set forth in the first
paragraph of the Note Purchase Agreement.
"Paying Agent" has the meaning set forth in the first
paragraph of the Note Purchase Agreement.
"Person" means any individual, firm, partnership, joint
venture, trust, trustee, Government Entity, organization, association,
corporation, limited liability company, government agency, committee,
department, authority and other body, corporate or incorporate, whether having
distinct legal status or not, or any member of any of the same.
"Qualified Owner Participant" means any bank, trust company,
insurance company, financial institution or corporation (other than, without the
Company's consent, a commercial air carrier, a commercial aircraft operator, a
freight forwarder or Affiliate of any of the foregoing), in each case with a
combined capital and surplus or net worth of at least $50,000,000.
"Rating Agency" means, at any time, the nationally recognized
rating agency which shall have been requested to rate the Certificates and which
shall then be rating the Certificates. The initial Rating Agency will be Moody's
Investors Service, Inc.
6
<PAGE>
"Rating Agency Confirmation" means, with respect to any
Financing Agreement that has been modified in any material respect from the
forms thereof attached to the Note Purchase Agreement or with respect to
Substitute Aircraft, a written confirmation from each of the Rating Agencies
that the use of such Financing Agreement with such modifications, the
substituting of such Substitute Aircraft for an New Aircraft, whichever of the
foregoing shall in a particular case require Rating Agency Confirmation, would
not result in (i) a reduction of the rating for any Class of Certificates below
the then current rating for such Class of Certificates or (ii) a withdrawal or
suspension of the rating of any Class of Certificates.
"Register" means the register maintained pursuant to Sections
3.04 and 7.12 of the Pass Through Trust Agreement with respect to each Pass
Through Trust.
"Regular Distribution Dates" shall mean April 1 and October 1
of each year, commencing April 1, 2000.
"Section 1110" means 11 U.S.C. (S) 1110 of the Bankruptcy Code
or any successor or analogous Section of the federal bankruptcy Law in effect
from time to time.
"Series A Equipment Notes" means Equipment Notes issued under
an Indenture and designated as "Series A" thereunder.
"Series B Equipment Notes" means Equipment Notes issued under
an Indenture and designated as "Series B" thereunder.
"Series C Equipment Notes" means Equipment Notes issued under
an Indenture and designated as "Series C" thereunder.
"State Street" means the State Street Bank and Trust Company
of Connecticut, National Association.
"Subordination Agent" has the meaning set forth in the first
paragraph of the Note Purchase Agreement.
"Substitute Aircraft" has the meaning set forth in Section
1(g) of the Note Purchase Agreement.
"Taxes" means all license, recording, documentary,
registration and other similar fees and all taxes, levies, imposts, duties,
charges, assessments or withholdings of any nature whatsoever imposed by any
Taxing Authority, together with any penalties, additions to tax, fines or
interest thereon or additions thereto.
"Taxing Authority" means any federal, state or local
government or other taxing authority in the United States, any foreign
government or any political subdivision or taxing authority thereof, any
international taxing authority or any territory or possession of the United
States or any taxing authority thereof.
"Treasury Yield" means, as of any date of determination and
with respect to any
7
<PAGE>
Equipment Note, the weighted average yield to maturity of United States Treasury
Notes then most recently auctioned with maturities equal to the average life of
such Equipment Note, or if United States Treasury Notes with such a maturity are
not then auctioned and publicly traded, with maturities next above and below the
then remaining average life of such Equipment Note, such yields in each case to
be determined by averaging (and rounding to the nearest whole multiple of 1/100
of 1% per annum, if the average is not such a multiple) the yields of the
relevant United States Treasury Notes (rounded, if necessary, to the nearest
1/100 of 1% with any figure of 1/200 of 1% or above rounded upward) (i) which
appear on the Reuters Monitor Money Rates Service RTRTSY1 Page (or such other
page of such service as may replace such page), or (ii) if no such yields are
available on any such page of such service, then which appear on Telerate Page
7677 (or such other page of such service as may replace such page) or (iii) if
no such yields are available on any such page of such service, then as quoted by
Salomon Smith Barney Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, in each case, at approximately 11:00 A.M. New York time on the
date two Business Days next preceding the date of such purchase or acceleration,
as the case may be; such weighted average yield of United States Treasury Notes
to be calculated by the Subordination Agent in accordance with the following
formula:
WAY = Y1 + (Y2 - Y1) (X - X1)
-------------------
(X2 - X1)
Where:
WAY = weighted average yield.
X = then remaining average life in years of such
Equipment Note.
X1 = whole integer closest to and less than X that
equals the maturity in years of a United States
Treasury Note then publicly traded.
X2 = whole integer closest to and greater than X that
equals the maturity in years of a United States
Treasury Note then publicly traded.
Y1 = yield of United States Treasury Notes then most
recently auctioned with maturities equal to X1.
Y2 = yield of United States Treasury Notes then most
recently auctioned with maturities equal to X2.
"Triggering Event" has the meaning assigned to such term in
the Intercreditor Agreement.
"Trust Agreement" means a Trust Agreement substantially in the
form of Exhibit A-5 to the Note Purchase Agreement.
8
<PAGE>
EXHIBIT A-1 to
Note Purchase Agreement
-----------------------
FORM OF LEASED AIRCRAFT PARTICIPATION AGREEMENT
<PAGE>
EXHIBIT A-2 to
Note Purchase Agreement
-----------------------
FORM OF LEASE
<PAGE>
EXHIBIT A-3 to
Note Purchase Agreement
-----------------------
FORM OF LEASED AIRCRAFT INDENTURE
<PAGE>
EXHIBIT A-4 to
Note Purchase Agreement
-----------------------
FORM OF AIRCRAFT PURCHASE AGREEMENT ASSIGNMENT
<PAGE>
EXHIBIT A-5 to
Note Purchase Agreement
-----------------------
FORM OF LEASED AIRCRAFT TRUST AGREEMENT
<PAGE>
EXHIBIT A-6 to
Note Purchase Agreement
-----------------------
FORM OF LEASED AIRCRAFT GUARANTEE
<PAGE>
EXHIBIT B to
Note Purchase Agreement
-----------------------
FORM OF DELIVERY NOTICE
Dated as of __________ __, ____
To each of the addressees listed
in Schedule A hereto
RE: Delivery Notice in accordance with Note Purchase
Agreement referred to below
Ladies and Gentlemen:
Reference is made to the Note Purchase Agreement dated as of November
3, 1999 among AirTran Airways, Inc. (the "Company"), AirTran Holdings, Inc.,
State Street Bank and Trust Company of Connecticut, National Association, as
Pass Through Trustee under each of the Pass Through Trust Agreements (as defined
therein) (the "Pass Through Trustee"), State Street Bank and Trust Company of
Connecticut, National Association, as Subordination Agent (the "Subordination
Agent"), First Security Bank, National Association, as Escrow Agent (the "Escrow
Agent") and State Street Bank and Trust Company of Connecticut, National
Association, as Paying Agent (the "Paying Agent") (as in effect from time to
time, the "Note Purchase Agreement"). Unless otherwise defined herein,
capitalized terms used herein shall have the meanings set forth in the Note
Purchase Agreement or, to the extent not defined therein, the Intercreditor
Agreement.
Pursuant to Section 1(b) of the Note Purchase Agreement, the
undersigned hereby notifies you, in respect of the Boeing 717-200 aircraft with
manufacturer's serial number _______ (the "Aircraft"), of the following:
(1) The Company has elected to treat the Aircraft as a [Leased](1)/
[Owned](2) Aircraft;
(2) The Scheduled Delivery Date of the Aircraft is __________ __, ____ [The
Delivery Date of the Aircraft is _________ __, __ and the Funding Date
of the Aircraft is ________ __, __]*; and
- --------
(1) To be inserted in the case of a Leased Aircraft.
(2) To be inserted in the case of an Owned Aircraft.
(*) To be inserted in the case of bridge-financed Aircraft pursuant to
Section 1(f) of the Note Purchase Agreement.
<PAGE>
(3) The aggregate amount of each series of Equipment Notes to be issued,
and purchased by the respective Pass Through Trustees, on the
[Scheduled Delivery Date / Funding Date]*, in connection with the
financing of such Aircraft is as follows:
(a) the Class A Trustee shall purchase Series A Equipment Notes in
the amount of $__________;
(b) the Class B Trustee shall purchase Series B Equipment Notes in
the amount of $__________; and
(c) the Class C Trustee shall purchase Series C Equipment Notes in
the amount of $__________.
The Company hereby instructs the Class A Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated _____ __, ____ [a
date which is no later than one Business Day prior to the [Scheduled Delivery
Date / Funding Date]o] and attach thereto a Notice of Purchase Withdrawal
dated such date completed as set forth on Exhibit A hereto and (ii) deliver such
Withdrawal Certificate and Notice of Purchase Withdrawal to the applicable
Escrow Agent.
The Company hereby instructs the Class B Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated _____ __, ____ [a
date which is no later than one Business Day prior to the [Scheduled Delivery
Date / Funding Date]*] and attach thereto a Notice of Purchase Withdrawal
dated such date completed as set forth on Exhibit B hereto and (ii) deliver such
Withdrawal Certificate and Notice of Purchase Withdrawal to the applicable
Escrow Agent.
The Company hereby instructs the Class C Trustee to (i) execute a
Withdrawal Certificate in the form of Annex A hereto dated _____ __, ____ [a
date which is no later than one Business Day prior to the [Scheduled Delivery
Date / Funding Date]*] and attach thereto a Notice of Purchase Withdrawal
dated such date completed as set forth on Exhibit C hereto and (ii) deliver such
Withdrawal Certificate and Notice of Purchase Withdrawal to the applicable
Escrow Agent.
The Company hereby instructs each Pass Through Trustee to (i) purchase
Equipment Notes of a series and in an amount set forth opposite such Pass
Through Trustee in clause (3) above with a portion of the proceeds of the
withdrawals of Deposits referred to in the applicable Notice of Purchase
Withdrawal referred to above and (ii) re-deposit with the Depositary the excess,
if any, of the amount so withdrawn over the purchase price of such Equipment
Notes.
- --------
* Insert "Funding Date" only in the case of bridge-financed Aircraft pursuant to
Section 1(f) of the Note Purchase Agreement.
2
<PAGE>
The Company hereby instructs each Pass Through Trustee to (a) enter
into the Participation Agreement dated as of _____ __, ____ among the Company,
as [Lessee](3)/[Owner](4), the Subordination Agent, the Pass Through Trustee,
___________________, as Mortgagee [and Loan Participant, _____________________,
as Owner Trustee and _________, as Owner Participant](5), (b) perform its
obligations thereunder and (c) deliver such certificates, documents and legal
opinions relating to such Pass Through Trustee as required thereby.
[The Company hereby certifies that the Owner Participant with respect
to the Aircraft is (a) not an Affiliate of the Company or the Guarantor and (b)
based on representation(s) of the Owner Participant, a [Qualified Owner
Participant/person whose obligations under the Owner Participant Agreements (as
defined in the Participation Agreement) are guaranteed by a Qualified Owner
Participant].](6)
Yours faithfully,
AirTran Airways, Inc.
By:____________________________________
Name:
Title:
- -----------
(3) To be inserted in the case of a Leased Aircraft.
(4) To be inserted in the case of an Owned Aircraft.
(5) To be inserted in the case of a Leased Aircraft.
(6) To be inserted in the case of a Leased Aircraft.
3
<PAGE>
SCHEDULE A
State Street Bank and Trust Company
of Connecticut, National Association, as
Pass Through Trustee, Subordination
Agent, Escrow Agent and Paying Agent
225 Asylum Street
Goodwin Square
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Facsimile: (860) 244-1889
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: Robert Jankowitz
Facsimile: (212) 553-4600
<PAGE>
ANNEX A
WITHDRAWAL CERTIFICATE
(Class __)
First Security Bank, National Association,
as Escrow Agent
Dear Sirs:
Reference is made to the Escrow and Paying Agent Agreement,
dated as of November 3, 1999 (the "Agreement"). We hereby certify to you that
the conditions to the obligations of the undersigned to execute a Participation
Agreement pursuant to the Note Purchase Agreement have been satisfied. Pursuant
to Section 1.02(c) of the Agreement, please execute the attached Notice of
Purchase Withdrawal and immediately transmit by facsimile to the Depositary, at
(312) 992-5111, Attention: Credit Administration, with a copy to (312) 606-8428,
Attention: Claudia Heldring.
Very truly yours,
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, not in its individual capacity but
solely as Pass Through Trustee
By __________________________
Name:
Title:
Dated: ____________, ____
<PAGE>
EXHIBIT A
NOTICE OF PURCHASE WITHDRAWAL
ABN AMRO Bank N.V.
208 South Lasalle Street
Suite 1500
Chicago, IL 60604-1003
Attention: Credit Administration
Telecopier: (312) 992-5111
Copy:
ABN AMRO Bank N.V.
135 South Lasalle Street
Chicago, Illinois 60603
Attention: Claudia Heldring
Telecopier: (312) 606-8428
Ladies and Gentlemen:
Reference is made to the Deposit Agreement (Class __) dated as
of November 3, 1999 (the "Deposit Agreement") between First Security Bank,
National Association, as Escrow Agent, and ABN AMRO Bank N.V., Chicago Branch,
as Depositary (the "Depositary").
In accordance with Section 2.3(a) of the Deposit Agreement,
the undersigned hereby requests the withdrawal of the entire amount of the
Deposit, $_______, Account No. ____________.
The undersigned hereby directs the Depositary to pay the
proceeds of the Deposit to [________________, Account No. _____, Reference:
_________] on _________ __, 199_, upon the telephonic request of a
representative of the Pass Through Trustee.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
as Escrow Agent
By__________________________
Name:
Title:
Dated: _______ __, ____
<PAGE>
EXHIBIT C-1 to
Note Purchase Agreement
-----------------------
FORM OF OWNED AIRCRAFT PARTICIPATION AGREEMENT
<PAGE>
EXHIBIT C-2 to
Note Purchase Agreement
-----------------------
FORM OF OWNED AIRCRAFT INDENTURE
<PAGE>
EXHIBIT C-3 to
Note Purchase Agreement
-----------------------
FORM OF OWNED AIRCRAFT GUARANTEE
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly
provided, a reference to:
(1) each of "Lessee", "Lessor", "Loan Participant", "Owner
Trustee", "Owner Participant", "Mortgagee", "Note Holder", and any
other Person includes any successor in interest to it and any permitted
transferee, permitted purchaser, or permitted assignee of it;
(2) any agreement or other document (including any annex,
schedule, or exhibit thereto, or any other part thereof) includes that
agreement or other document as amended, supplemented, or otherwise
modified from time to time in accordance with its terms and in
accordance with the Operative Agreements, and any agreement or other
document entered into in substitution or replacement therefor;
(3) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued, or reenacted
before the Delivery Date, and thereafter from time to time;
(4) "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof", "hereunder", and words of similar import, when used
in any Operative Agreement, refer to such Operative Agreement as a
whole and not to any particular provision of such Operative Agreement;
(5) "including", "include", and terms or phrases of similar
import means "including [etc.], without limitation";
(6) "or" is conjunctive and not disjunctive; and
(7) a reference to a "section" or "(S)", an "Exhibit", an
"Annex", or a "Schedule" in any Operative Agreement, or in any annex
thereto, is a reference to a section of, or an exhibit, an annex, or a
schedule to, such Operative Agreement or such annex, respectively.
(b) Each exhibit, annex, and schedule to each Operative Agreement is
incorporated in, and is a part of, such Operative Agreement.
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(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only,
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the existence of a Lease
Event of Default, Lease Default, or Special Default referred to in (S) 14.5 of
the Lease shall not prohibit Lessee from taking any action or exercising any
right that is conditioned on the non-existence of any Lease Event of Default,
Lease Default, or Special Default if such Lease Event of Default, Lease Default,
or Special Default consists of the institution of reorganization proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy Code, and the trustee
or debtor-in-possession in such proceedings (1) has agreed to perform its
obligations under the Lease with the approval of the applicable court and
thereafter continues to perform such obligations in accordance with Section
1110, or (2) has assumed the Lease with the approval of the relevant court and
thereafter continues to perform its obligations under the Lease.
DEFINED TERMS
Actual Knowledge: (a) as it applies to Owner Trustee or Mortgagee,
actual knowledge of a responsible officer in the Corporate Trust Department or
the Corporate Trust Office, respectively, and (b) as it applies to Owner
Participant or Lessee, actual knowledge of a Vice President or more senior
officer of Owner Participant or Lessee (respectively), or any other officer of
Owner Participant or Lessee (respectively) having responsibility for the
Transactions; provided, that each of Lessee, Owner Participant, Owner Trustee,
and Mortgagee shall be deemed to have "Actual Knowledge" of any matter as to
which it has received notice from Lessee, Owner Participant, any Note Holder,
Owner Trustee, or Mortgagee, given pursuant to (S) 15.7 of the Participation
Agreement.
Additional Insured: defined in (S) D of Annex D to the Lease.
Adverse Change in Tax Law: (a) for Lessee, a Change in Tax Law that
Lessee regards as one that could adversely affect the economic consequences of
the Transactions as anticipated by Lessee, or (b) for Owner Participant, any
Change in Tax Law that would adversely affect any of the following tax
assumptions:
(1) for federal income tax purposes, the Lease will be a
"true" lease for purposes of the Code, Owner Participant will be
treated as the
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owner of the Aircraft, and Lessee will be treated as the lessee of the
Aircraft;
(2) for federal income tax purposes, Owner Participant will
be entitled to depreciation or cost recovery deductions with respect to
Lessor' s Cost of the Aircraft; and
(3) for federal income tax purposes, Owner Participant will
be entitled to deductions for interest payments on the Equipment Notes.
Affiliate of any Person: any other Person directly or indirectly
controlling, controlled by, or under common control with such Person. For
purposes of this definition, "control" means the power, directly or indirectly,
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract, or otherwise,
and "controlling", "controlled by", and "under common control with" have
correlative meanings.
After-Tax Basis: a basis such that any payment to be received or
receivable by any Person is supplemented by a further payment to that Person so
that the sum of all the two payments, after deducting all Taxes (taking into
account any related current credits or deductions payable by such Person or any
of its Affiliates under any law or governmental authority, is equal to the
payment due to such Person.
Aircraft: the Airframe and the two Engines.
Aircraft Bill of Sale: the full warranty bill of sale covering the
Aircraft delivered by Seller to Owner Trustee on the Delivery Date.
Aircraft Description Exhibit: Exhibit A to the Lease or Exhibit A to
the Mortgage.
Aircraft Documents: all technical data, manuals, and log books, and all
inspection, modification, and overhaul records and other service, repair,
maintenance, and technical records that the relevant Aviation Authority requires
be maintained with respect to the Aircraft, including all required additions,
renewals, revisions, and replacements of any such materials, in each case in
whatever form and by whatever means or medium (including microfiche, microfilm,
paper, or computer disk) such materials are maintained or retained by or on
behalf of Lessee.
Airframe: (1) the aircraft (excluding Engines or engines from time to
time installed thereon) manufactured by Airframe Manufacturer and identified by
Airframe Manufacturer's model number, United States registration number,
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and Airframe Manufacturer's serial number set forth in the Aircraft Description
Exhibit, or (2) any Replacement Airframe, including in either case any and all
Parts incorporated or installed in or attached or appurtenant to such airframe,
and any and all Parts removed from such airframe, unless title to such Parts
does not vest in Lessor in accordance with (S) 8.1 and Annex C of the Lease.
Upon substitution of a Replacement Airframe under and in accordance with the
Lease, such Replacement Airframe shall become subject to the Lease and shall be
the "Airframe" for all purposes of the Operative Agreements, and the replaced
Airframe shall cease to be subject to the Lease and shall cease to be the
"Airframe".
Airframe Manufacturer: McDonnell Douglas Corporation, a Maryland
corporation.
Amortization Amount for any Equipment Note, as of any Payment Date: the
amount determined by multiplying the percentage set forth opposite such Payment
Date on the Amortization Schedule by the Original Amount of such Equipment Note.
Amortization Schedule for an Equipment Note: the amortization schedule
for that Equipment Note delivered pursuant to (S) 2.02 of the Mortgage.
Appraiser: a firm of internationally-recognized, independent aircraft
appraisers.
Average Life Date for any Equipment Note: the date which follows the
time of determination by a period equal to the Remaining Weighted Average Life
of such Equipment Note. The "REMAINING WEIGHTED AVERAGE LIFE" for any Equipment
Note on a given date is the number of days equal to (1) the sum of (a) each
then-remaining scheduled payment of principal of such Equipment Note, TIMES (b)
the number of days from and including such determination date to but excluding
the date on which such payment of principal is scheduled to be made, DIVIDED BY
(2) the then-outstanding principal amount of such Equipment Note.
Aviation Authority: the FAA or, if the Aircraft is registered with any
other Government Entity under and in accordance with (S) 7.1.2 of the Lease,
such other Government Entity.
Bankruptcy Code: the United States Bankruptcy Code, 11 U.S.C. (S) 101
ET SEQ.
Base term: the period beginning on and including the Commencement Date
and ending on the Scheduled Expiration Date, or such earlier date on which the
Term terminates in accordance with the provisions of the Lease.
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Basic Rent: the rent (including, to the extent applicable, Interim Rent
and Renewal Rent) payable for the Aircraft pursuant to (S) 3.2.1(a) of the
Lease.
Bills of Sale: the FAA Bill of Sale and the Aircraft Bill of Sale.
Boeing Agreement: defined in (S) 14.8(b) of the Lease.
Business Day: any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required by law to close in New York,
NY, Orlando, FL, Salt Lake City, UT, and so long as any Equipment Note is
outstanding, the city and state in which Mortgagee maintains its corporate trust
office or receives and disburses funds.
Cash Equivalents: the following securities (which shall mature within
90 days of the date of purchase thereof): (1) direct obligations of the U.S.
Government; (2) obligations fully guaranteed by the U.S. Government; (3)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee, or any bank, trust company,
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained earnings of at least $1 billion and having a rate of "A" or better from
the Thomson BankWatch Service; or (4) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
or Moody's equal to or higher than A1 or P1, respectively.
Certificate Holder: a registered holder of one or more Pass-Through
Certificates or, if any Pass-Through Certificate is held by Depository Trust
Company, a beneficiary in a fractional Interest of such Pass-Through
Certificate.
Change in Tax Law: any amendment, modification, addition, or change in
or to the provisions of the Code, any other federal tax statutes, the Treasury
Regulations promulgated thereunder, the Internal Revenue Service Revenue
Rulings, Revenue Procedures, or other administrative or judicial interpretations
of the Code or the federal tax statutes that affects the tax assumptions set
forth in the Tax Indemnity Agreement or otherwise affects Owner Participant's
anticipated Net Economic Return (other than a change in the alternative minimum
tax or other change that results in Owner Participant's being subject to
alternative minimum tax or unable to use all tax benefits because of its
particular tax situation).
Citizen of the United States: defined in (S) 40102(a)(15) of the
Transportation Code and in the FARs.
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Closing: the closing of the transactions contemplated by the
Participation Agreement on the Delivery Date.
Code: the Internal Revenue Code of 1986; provided, that when used in
relation to a Plan, "Code" shall be interpreted in accordance with the
regulations and rulings issued thereunder.
Collateral: defined in the "Granting Clause" of the Mortgage.
Commencement Date: defined in Schedule 1 to the Lease.
Commitment for any Participant: the amount of its participation in the
payment of Lessor's Cost.
Commitment Termination Date: defined in Schedule 3 to the Participation
Agreement.
Consent and Agreement: Consent and Agreement N9__AT, dated the Delivery
Date, of Airframe Manufacturer.
Continuous Stay Period: defined in (S) 4.04(a) of the Mortgage.
Corporate Trust Department or Trust Office: Owner Trustee's principal
corporate trust office, located from time to time at Owner Trustee's address for
notices under the Participation Agreement, or such other office at which Owner
Trustee's corporate trust business shall be administered and which Owner Trustee
specifies by notice in writing to Lessee, Mortgagee, and each Note Holder.
Corporate Trust Office: Mortgagee's principal office, located at
Mortgagee's address for notices under the Participation Agreement, or such other
office at which Mortgagee's corporate trust business shall be administered and
which Mortgagee specifies by notice in writing to Lessee, Owner Trustee, and
each Note Holder.
CRAF: the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C. (S) 9511 - 13, or any similar substitute program.
Debt: any liability for borrowed money, or any liability for the
payment of money in connection with any letter of credit transaction, or any
other liabilities evidenced or to be evidenced by bonds, debentures, notes, or
other similar instruments.
Debt Rate: (1) for any Series, the rate per annum specified for such
Series under the heading "Interest Rate" in Schedule I to the Mortgage, and (2)
for any other purpose, with respect to any period, the weighted average interest
rate
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per annum during such period borne by the outstanding Equipment Notes, excluding
any interest payable at the Past-Due Rate.
Deficiency Agreement: Deficiency Agreement N9__AT, dated the Delivery
Date, among Airframe Manufacturer, Owner Trustee, and Owner Participant.
Delayed Delivery Date: a delayed Delivery Date notified to each
Participant, Owner Trustee, and Mortgagee by Lessee pursuant to (S) 4.3 of the
Participation Agreement, which delayed Delivery Date shall be a Business Day not
later than the Commitment Termination Date.
Delivery Date: _______________, _____ (which is the date when the
Aircraft is delivered to and accepted by Lessee under the Lease and when the
Closing occurs).
Deposit Agreement: each of the three Deposit Agreements between
Depository and Escrow Agent, dated as of the Issuance Date, each of which
relates to one of the Pass-Through Trusts, provided, that, for purposes of any
obligation of Lessee, no amendment, modification, or supplement to, or
substitution or replacement of, any such Deposit Agreement shall be effective
unless Lessee consents to it.
Depository: ABN AMRO Bank N.V. (acting through its Chicago branch), as
Depository under each Deposit Agreement.
Dollars, United States Dollars, or $: the lawful currency of the United
States.
DoT: the Department of Transportation of the United States, or any
Government Entity succeeding to the functions of such Department of
Transportation.
EBO Date: defined in Schedule 1 to the Lease.
EBO Price: defined in Schedule 1 to the Lease.
Eligible Account: an account established by and with an Eligible
Institution at Mortgagee's request, which institution agrees, for all purposes
of the UCC (including UCC Article 8), that (1) such account shall be a
"securities account" (as defined in UCC (S) 8-501), (2) all property (other than
cash) credited to such account shall be treated as a "financial asset" (as
defined in UCC (S) 8-102(9)), (3) Mortgagee shall be the "entitlement holder"
(as defined in UCC (S) 8-102(7)) of such account, (4) it will comply with all
entitlement orders issued by Mortgagee to the exclusion of Lessee and Owner
Trustee, and (5) the "securities
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intermediary jurisdiction" (under UCC (S) 8-110(e)) shall be the state of New
York.
Eligible Institution: the corporate trust department of (1) State
Street Bank and Trust Company of Connecticut, National Association, acting
solely in its capacity as a "securities intermediary" (as defined in UCC (S)
8-102(14)), or (2) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured
debt rating from Moody's and Standard & Poor's of at least A-3 or its
equivalent.
Enforcement Date: defined in (S) 4.03 of the Mortgage.
Engine: (1) each of the engines manufactured by Engine Manufacturer and
identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number in the Aircraft Description Exhibit and originally installed on
the Airframe on delivery thereof pursuant to the Lease, or (2) any Replacement
Engine, in any case whether or not from time to time installed on the Airframe
or installed on any other airframe or aircraft, including (for both clauses (1)
and (2)) any and all Parts incorporated or installed in or attached or
appurtenant to such engine, and any and all Parts removed from such engine,
unless title to such Parts does not vest in Lessor in accordance with (S) 8.1
and Annex C of the Lease. Upon substitution of a Replacement Engine under and in
accordance with the Lease, such Replacement Engine shall become subject to the
Lease and shall be an "Engine" for all purposes of the Operative Agreements, and
the replaced Engine shall cease to be subject to the Lease and shall cease to be
an "Engine".
Engine Consent and Agreement: Engine Consent and Agreement N9__AT,
dated the Delivery Date, of Engine Manufacturer.
Engine Manufacturer: BMW Rolls-Royce GmbH.
Equipment Note: any equipment note issued under the Mortgage in the
form specified in (S) 2.01 and Exhibit B thereof (as such form may be varied
pursuant to the terms of the Mortgage), or any Equipment Note issued under the
Mortgage in exchange for or replacement of any Equipment Note.
Equipment Note Register: defined in (S) 2.07 of the Mortgage.
ERISA: the Employee Retirement Income Security Act of 1974.
Escrow Agent: First Security Bank, National Association, as Escrow
Agent under each of the Escrow Agreements.
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Escrow Agreement: each of the three Escrow and Paying Agent Agreements,
among Escrow Agent, Paying Agent, certain initial purchasers of the Pass-Through
Certificates named therein, and one of the Pass-Through Trustees, dated as of
the Issuance Date, each of which relates to one of the Pass-Through Trusts,
provided, that, for purposes of any obligation of Lessee, no amendment,
modification, or supplement to, or substitution or replacement of, any such
Escrow Agreement shall be effective unless Lessee consents to it.
Event of Loss with respect to the Aircraft, the Airframe, or any
Engine: any of the following circumstances, conditions, or events with respect
to such property, for any reason whatsoever:
(1) the destruction of such property, damage to such property
beyond economic repair, or rendition of such property
permanently unfit for normal use by Lessee;
(2) the actual or constructive total loss of such property, or any
damage to such property, or requisition of title or use of
such property, which results in an insurance settlement with
respect to such property on the basis of a total loss or
constructive or compromised total loss;
(3) any theft, hijacking, or disappearance of such property for 90
consecutive days or more;
(4) any seizure, condemnation, confiscation, taking, or
requisition of use of such property by any Government Entity
or purported Government Entity (other than a requisition of
use by a U.S. Government Entity) for 180 consecutive days or,
if earlier, at the end of the Term; or any taking of title to
such property by any Government Entity or purported Government
Entity (whether by seizure, condemnation, confiscation,
requisition, or otherwise);
(5) any seizure, condemnation, confiscation, taking, or
requisition of use of such property by any U.S. Government
Entity that continues until the 30th day after the last day of
the Term; and
(6) as a result of any law, rule, regulation, order, or other
action by the Aviation Authority or by any Government Entity
of the government of registry of the Aircraft or by any
Government Entity otherwise having jurisdiction over the
operation or use of the Aircraft, the use of such property in
the normal course of Lessee's business of passenger air
transportation is prohibited for 180 consecutive days, unless,
before the expiration of such 180-day period, Lessee
undertakes and is diligently carrying forward such
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steps as are necessary or desirable to permit the normal use
of such property by Lessee, but in any event if such use is
prohibited for a continuous period of one year.
Excluded Payments: (1) indemnity payments paid or payable by Lessee to
or in respect of Owner Participant or FSB, their Affiliates, successors, and
permitted assigns, and their directors, officers, employees, and agents pursuant
to (S) 9 of the Participation Agreement, or any corresponding payments under the
Lease, (2) proceeds of public liability insurance paid or payable as a result of
insurance claims made, or losses suffered, by Owner Participant or FSB, that are
payable directly to Owner Participant or FSB for its own account, (3) proceeds
of insurance maintained with respect to the Aircraft by Owner Participant or any
Affiliate thereof for its own account or benefit (whether directly or through
Owner Trustee) and permitted under (S) 11.2 of the Lease, (4) all payments
required to be made under the Tax Indemnity Agreement by Lessee, or under the
Deficiency Agreement or RVG by Airframe Manufacturer, (5) any Transaction
Expenses paid or payable by Lessee to Owner Trustee (to the extent for its sole
benefit) or Owner Participant pursuant to the Lease or the Participation
Agreement, (6) any interest that pursuant to the Operative Agreements may from
time to time accrue in respect of any of the amounts described in clauses (1)
through (5) above, and (7) any right to enforce the payment of any amount
described in clauses (1) through (6) above (provided, that the rights referred
to in this clause (7) shall not include the exercise of any remedies provided
for in the Lease, other than the right to sue for specific performance of any
covenant to make such payment or to sue for damages for the breach of any such
covenant).
Expenses: any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses, and
disbursements (including reasonable fees and disbursements of legal counsel,
accountants, appraisers, inspectors, or other professionals, and costs of
investigation).
FAA: thet Federal Aviation Administration of the United States, or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
FAA Bill of Sale: a bill of sale for the Aircraft on AC Form 8050-2 (or
any other FAA-approved form), delivered to Owner Trustee on the Delivery Date by
Seller.
FAA Counsel: Crowe & Dunlevy.
FAA-Filed Documents: the Lease, the Mortgage, the Trust Agreement, the
FAA Bill of Sale, [INCLUDE ANY RELEASE OR TERMINATION,] an application for
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registration of the Aircraft with the FAA in Owner Trustee's name, and the
related affidavits of U.S. citizenship.
FARS: the Federal Aviation Regulations issued or promulgated pursuant
to the Transportation Code from time to time.
Fair Market Rental Value: the fair market rental value in Dollars for
the Aircraft that would apply in an arm's-length transaction between an informed
and willing lessee under no compulsion to lease, and an informed and willing
lessor under no compulsion to lease, for the applicable Renewal Term, assuming
that (1) the Aircraft has been maintained in accordance with, and is in the
condition required by, the Lease, (2) rent would be paid semiannually, and (3)
the Aircraft would be leased during any such Renewal Term on the same terms and
conditions (except for Basic Rent amount) as during the Base Term.
Fair Market Sales Value: the fair market sales value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing buyer under no compulsion to buy, and an informed and willing seller
under no compulsion to sell, in a transaction that would close on or about the
relevant time of determination, assuming that (1) the Aircraft has been
maintained in accordance with the Lease, and is in the condition required by the
Lease, and (2) the Aircraft will be delivered to such informed and willing buyer
in the return condition required by the Lease.
Financing Statements: UCC-1 (and, where appropriate, UCC-3) financing
statements (1) covering the Collateral, by Owner Trustee, as debtor, showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction where
(in Mortgagee's opinion) filing is necessary to perfect its Lien on the
Collateral, and (2) covering the Aircraft, as a precautionary matter, by Lessee,
as lessee, showing Owner Trustee as lessor and Mortgagee as assignee of Owner
Trustee, for filing in Florida and each other jurisdiction where (in Owner
Trustee's or Mortgagee's opinion) filing is reasonably desirable.
Fixed Renewal Term: the first or second term for which the Lease is
extended by Lessee (if applicable) pursuant to (S) 17 of the Lease.
FSB: First Security Bank, National Association, a national banking
association, not in its capacity as trustee under the Trust Agreement, but in
its individual capacity.
GAAP: generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
varied by any applicable financial accounting rules or
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regulations issued by the SEC, and applied on a basis consistent with prior
periods except as disclosed in the pertinent Person's financial statements.
Government Entity: (1) any federal, state, provincial, or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative, or regulatory
functions of such government, or (2) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
GTA: the General Terms Agreement, as defined in the Purchase Agreement
Assignment.
Guarantee: Guarantee N9__AT, dated the Delivery Date, issued by
Holdings in favor of Owner Trustee, FSB, Mortgagee, SSB, the Certificate
Holders, and each Participant.
Guarantor Confirmation: an agreement, in form and substance reasonably
satisfactory to the Participants, under which Holdings confirms its obligations
under the Guarantee after giving effect to the transactions necessitating the
delivery of that agreement.
Holdings: AirTran Holdings, Inc., a Nevada corporation
Indemnitee: (1) FSB and Owner Trustee; (2) SSB and Mortgagee; (3) each
separate or additional trustee appointed pursuant to the Trust Agreement or the
Mortgage; (4) each Participant; (5) each Certificate Holder; (6) the Trust
Estate and the Collateral; (7) each Affiliate of the Persons described in
clauses (1), (2), (3), (4) and (5); (8) the directors, officers, employees, and
agents of each of the Persons described in clauses (1) through (4) and in
clauses (5) and (7); (9) the successors and permitted assigns of the Persons
described in clauses (1) through (5), and in clauses (7) through (8); and (9)
the Pass-Through Indemnitees; provided, that the Pass-Through Indemnitees are
Indemnitees only for purposes of (S) 9.1 of the Participation Agreement. If any
Indemnitee is Airframe Manufacturer or Engine Manufacturer or any subcontractor
or supplier of either thereof, such Person shall be an Indemnitee only in its
capacity as Owner Participant or Certificate Holder.
Intercreditor Agreement: the Intercreditor Agreement among Pass-Through
Trustees, Liquidity Provider, and Subordination Agent, dated as of the Issuance
Date.
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Interim Term: the period commencing on and including the Delivery Date,
and ending on and including the day before the Commencement Date (or such
earlier date on which the Term terminates in accordance with the provisions of
the Lease).
Interim Rent: defined in Schedule 1 to the Lease.
IRS: the Internal Revenue Service of the United States, or any
Government Entity succeeding to the functions of such Internal Revenue Service.
Issuance Date: November ___, 1999.
KFW Agreement: defined in (S) 14.8(a) of the Lease.
Law: (1) any constitution, treaty, statute, law, decree, regulation,
order, rule, or directive of any Government Entity, and (2) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
Lease or Lease Agreement: Lease Agreement N9__AT, dated the Delivery
Date, between Owner Trustee and Lessee.
Lease Default: (1) any condition, circumstance, act, or event that,
with the giving of notice or the lapse of time, would constitute a Lease Event
of Default, or (2) any Lease Event of Default.
Lease Event of Default: any one or more of the conditions,
circumstances, acts, or events set forth in (S) 14 of the Lease.
Lessee: AirTran Airways, Inc., a Delaware corporation.
Lessee Operative Agreements: the Participation Agreement, the Lease,
the Tax Indemnity Agreement, the Purchase Agreement Assignment, and each other
agreement between Lessee and any other party to the Participation Agreement,
relating to the Transactions, delivered on the Delivery Date.
Lessee Person: Lessee, any sublessee, assignee, successor, or other
user or Person in possession of the Aircraft, the Airframe, or an Engine with or
without color of right, or any Affiliate of any of the foregoing (excluding any
Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any Person
using or claiming any rights with respect to the Aircraft, the Airframe, or an
Engine directly by or through any of the Persons in this parenthetical, but not
excluding any Person claiming directly or indirectly through or under the
Lease).
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Lessee's Advisor: defined in Schedule 3 to the Participation Agreement.
Lessor: Owner Trustee in its capacity as lessor under the Lease.
Lessor Lien, with respect to any Person, on any property (including the
Trust Estate, the Collateral, the Aircraft, Airframe, Engines, Parts, or
Aircraft Documents) or any payments: any Lien on such property or payments that
results from (1) claims against such Person (if such Person is a trustee,
whether in its individual capacity or in its capacity as a trustee) not related
to any of the Transactions, (2) acts or omissions of such Person (if such Person
is a trustee, whether in its individual capacity or in its capacity as a
trustee) in violation of its obligations under any of the terms of the Operative
Agreements, or not related to the Transactions, (3) Taxes against such Person
(if such Person is a trustee, whether in its individual capacity or in its
capacity as a trustee) or any of its Affiliates that Lessee is not required to
indemnify under the Participation Agreement, or (4) from claims against such
Person arising out of its transfer of all or part of its interest in the
Aircraft, the Trust Estate, or the Operative Agreements, other than a Transfer
required by the terms of the Operative Agreements or occurring pursuant to the
exercise of remedies set forth in (S) 15 of the Lease.
Lessor's Cost: the aggregate of the amounts paid by Owner Trustee to
Airframe Manufacturer and Lessee to purchase the Aircraft pursuant to the
Purchase Agreement Assignment and the Participation Agreement, as designated by
Dollar amount in Schedule 3 to the Participation Agreement.
Lien: any mortgage, pledge, lien, charge, claim, encumbrance, lease, or
security interest affecting the title to or any interest in property.
Liquidity Facilities: the three Revolving Credit Agreements (consisting
of a separate Revolving Credit Agreement with Liquidity Provider with respect to
each Pass-Through Trust) between Subordination Agent, as borrower, and Liquidity
Provider, each dated as of the Issuance Date, provided, that, for purposes of
any obligation of Lessee, no amendment, modification, or supplement to, or
substitution or replacement of, any such Liquidity Facility shall be effective
unless Lessee consents to it.
Liquidity Provider: ABN AMRO Bank N.V. (acting through its Chicago
branch), as "Class A Liquidity Provider", "Class B Liquidity Provider", and
"Class C Liquidity Provider" (as such terms are defined in the Intercreditor
Agreement).
Loan Participants: (1) until the Closing is consummated, Pass-Through
Trustees, and (2) after the Closing is consummated, each Note Holder.
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Loss Payment Date: the date on which payment is due pursuant to (S)
10.1.2(a)(1) of the Lease.
Maintenance Program: defined in Annex C to the Lease.
Majority in Interest of Note Holders as of a particular date of
determination: the holders of a majority in unpaid Original Amount of all
Equipment Notes outstanding as of such date (excluding any Equipment Notes held
by Owner Trustee, Lessee, or Owner Participant or any Affiliate of any such
party or any interests of Owner Trustee or Owner Participant therein by reason
of subrogation pursuant to (S) 4.03 of the Mortgage (unless all Equipment Notes
then outstanding are held by Owner Trustee, Lessee, Owner Participant, or any
Affiliate of any thereof)); provided, that for the purposes of directing any
action, casting any vote, or giving any consent, waiver, or instruction
hereunder, any Note Holder may (in its sole discretion) allocate any fractional
portion of the principal amount of its Equipment Note(s) in favor of or in
opposition to any such action, vote, consent, waiver, or instruction. A
"majority in interest" of holders of any Series of Equipment Notes shall be the
holders described in the preceding sentence if each reference therein to
"Equipment Notes" were replaced with "such Series of Equipment Notes".
Make-Whole Amount with respect to any Equipment Note: an amount (as
determined by an independent investment bank of national standing) equal to the
excess, if any, of (a) the present value of the remaining scheduled payments of
principal and interest to maturity of such Equipment Note, computed by
discounting such payments on a semiannual basis on each Payment Date (assuming a
360-day year of twelve 30-day months), using a discount rate equal to the
Treasury Yield plus the Margin, over (b) the outstanding principal amount of
such Equipment Note plus accrued interest to the determination date. For
purposes of this definition, "Treasury Yield" means, at the determination date
for any Equipment Note, the interest rate (expressed as a decimal and, in the
case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semi-annual yield to maturity
for United States Treasury securities maturing on the Average Life Date of such
Equipment Note and trading in the public securities markets as determined by
interpolation between the most-recent weekly average yield to maturity for two
series of United States Treasury securities, trading in the public securities
markets, (aa) one maturing as close as possible to, but earlier than, the
Average Life Date of such Equipment Note, and (bb) the other maturing as close
as possible to, but later than, the Average Life Date of such Equipment Note,
such yields in each case to be determined by averaging (and rounding to the
nearest whole multiple of 1/100 of 1% per annum, if the average is not such a
multiple) the yields of the relevant United States Treasury securities (rounded,
if necessary, to the nearest 1/100 of 1% with any figure of
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1/200 of 1% or above rounded upward) (aa) which appear on the Reuter Monitor
Money Rates Service BNDS Page (or such other page of such service as may replace
such page), (bb) if no such yields are available on any such page of such
service, then which appear on Telerate Page 7677 (or such other page of such
service as may replace such page), or (cc) if no such yields are available on
any such page of such service, then as quoted by Salomon Smith Barney Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, in each case, at
approximately 11:00 a.m. New York City time on the date two Business Days before
the determination date). "Margin" means (1) for the purpose of computing the
Make-Whole Amount payable under (S) 4.04 of the Mortgage, 1.5% per annum and (2)
in all other cases, 0% per annum. The determination date for a Make-Whole Amount
shall be the third Business Day before the applicable payment or redemption
date. Notwithstanding the foregoing, the Make-Whole Amount shall be zero on any
Series C Equipment Note prepaid on or before the second anniversary of the
Issuance Date other than pursuant to (S) 4.04 of the Mortgage.
Materially Adverse Change with respect to any Person: any event,
condition, or circumstance that materially adversely affects such Person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities, and agreements under the Operative
Agreements.
Minimum Liability Insurance Amount: defined in Schedule 1 to the Lease.
Moody's: Moody's Investors Service, Inc.
Mortgage: Trust Indenture and Mortgage N9__AT, dated the Delivery Date,
between Owner Trustee and Mortgagee.
Mortgage Agreements: the Participation Agreement, the Lease, the
Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, the Engine Consent and Agreement, the Bills of Sale, any Permitted
Sublease assignment or assigned Permitted Sublease contemplated by subclause (3)
of the Granting Clause in the Mortgage, and any other contract, agreement, or
instrument from time to time assigned or pledged under the Mortgage.
Mortgage Default: (1) any condition, circumstance, act, or event that,
with the giving of notice or the lapse of time, would constitute a Mortgage
Event of Default, or (2) any Mortgage Event of Default.
Mortgage Event of Default: any one or more of the conditions,
circumstances, acts, or events in (S) 4.02 of the Mortgage.
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Mortgage Indemnitee: (1) SSB and Mortgagee, (2) each separate or
additional trustee appointed pursuant to the Mortgage, (3) Subordination Agent,
(4) Liquidity Provider, (5) each Pass-Through Trustee, (6) Paying Agent, (7)
Escrow Agent, and (8) each of the directors, officers, employees, and agents of
the Persons described in clauses (1) through (7).
Mortgaged Property: defined in (S) 3.03 of the Mortgage.
Mortgagee: State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity but
solely as loan trustee under the Mortgage.
Mortgagee Agreements: the Participation Agreement, the Mortgage, and
each other agreement between Mortgagee and any other party to the Participation
Agreement, relating to the Transactions, delivered on the Delivery Date.
Mortgagee Event: (1) in the event of a reorganization proceeding
involving Lessee under Chapter 11 of the Bankruptcy Code, (a) the trustee in
such proceeding or Lessee does not assume or agree to perform its obligations
under the Lease, as contemplated under Section 1110, during the 60-day period
under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may
apply under Section 1110(b) of the Bankruptcy Code), or (b) at any time after
agreeing to perform or assuming such obligations, such trustee or Lessee ceases
to perform such obligations with the result that the Continuous Stay Period
comes to an end, or (2) either the Equipment Notes become due and payable
pursuant to (S) 4.04(b) of the Mortgage, or Mortgagee takes action or notifies
Owner Trustee that it intends to take action to foreclose the Lien of the
Mortgage or otherwise commence the exercise of any significant remedy in
accordance with (S) 4.04(a) of the Mortgage.
Net Economic Return: Owner Participant's net after-tax yield, using the
"multiple investment sinking fund" method of analysis, and aggregate net
after-tax cash flow, computed on the basis of the same methodology and
assumptions as the initial Owner Participant used in determining Basic Rent,
Stipulated Loss Value percentages, and Termination Value percentages, as of the
Delivery Date, as such assumptions are adjusted for events that have been the
basis for adjustments to Basic Rent pursuant to (S) 3.2.1(b) of the Lease or
events giving rise to indemnity payments pursuant to (S) 5 of the Tax Indemnity
Agreement; provided, that, even if the initial Owner Participant transfers its
interest, Net Economic Return shall be calculated as if the initial Owner
Participant had retained its interest; provided further, that, notwithstanding
the preceding proviso, solely for purposes of (S) 11 of the Participation
Agreement and calculating any adjustments to Basic Rent, Stipulated Loss Values,
and
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Termination Values in connection with a refunding pursuant to such (S) 11 at a
time when Owner Participant is a transferee (other than an Affiliate of the
initial Owner Participant), the after-tax yield (but not the after-tax cash
flow) component of Net Economic Return shall be calculated on the basis of the
methodology and assumptions used by the transferee Owner Participant as of the
date when it acquires its interest.
Net Present Value of Rents: the present value, as of the date of
determination, discounted at 10% per annum, compounded semiannually to the date
of determination, of all unpaid Basic Rent payments during the then-remaining
portion of the Base Term, expressed as a percentage of Lessor's Cost.
Net Worth for any Person: the excess of its total assets over its total
liabilities.
New Debt: debt securities in an aggregate principal amount specified in
the Re-Funding Information.
Non-U.S. Person: any Person, other than a United States person as
defined in Code (S) 7701(a)(30).
Note Holder: a registered holder of one or more Equipment Notes.
Note Purchase Agreement: the Note Purchase Agreement, dated as of the
Issuance Date, among AirTran Airways, Inc., Subordination Agent, Escrow Agent,
Paying Agent, and Pass-Through Trustee under each Pass-Through Trust Agreement,
providing for the issuance and sale of equipment notes.
Officer's Certificate of any party to the Participation Agreement: a
certificate signed by the Chairman, the President, any Vice President (including
those with varying ranks such as Executive, Senior, Assistant, or Staff Vice
President), the Treasurer, or the Secretary of such party.
Operative Agreements: the Participation Agreement, the Trust Agreement,
the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent
and Agreement, the Lease, the Mortgage, the Bills of Sale, the Tax Indemnity
Agreement, the Deficiency Agreement, the RVG, the Guarantee, the Boeing
Agreement, the KfW Agreement, and the Equipment Notes.
Operative Indenture: an indenture under which notes have been issued
and purchased by Pass-Through Trustees pursuant to the Note Purchase Agreement.
OP Jurisdiction: defined in Schedule 3 to the Participation Agreement.
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Original Amount of an Equipment Note: the stated original principal
amount of such Equipment Note and, with respect to all Equipment Notes, the
aggregate stated original principal amounts of all Equipment Notes.
Owner Participant: the Person executing the Participation Agreement as
"Owner Participant"; except that, after an Owner Participant Transfers its
interest to a successor Owner Participant, such transferor shall not be an
"Owner Participant".
Owner Participant Agreements: the Participation Agreement, the Tax
Indemnity Agreement, the Trust Agreement and each other agreement between Owner
Participant and any other party to the Participation Agreement relating to the
Transactions, delivered [on the Delivery Date].
Owner Participant's Percentage: the percentage of Lessor's Cost
allocated to Owner Participant in Schedule 2 to the Participation Agreement.
Owner Trustee: First Security Bank, National Association, a national
banking association, not in its individual capacity, except as expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.
Owner Trustee Agreements: the Participation Agreement, the Lease, the
Trust Agreement, the Mortgage, the Equipment Notes, the Purchase Agreement
Assignment, and each other agreement between Owner Trustee and any other party
to the Participation Agreement, relating to the Transactions, delivered on the
Delivery Date.
Participant: Owner Participant or a Loan Participant.
Participation Agreement: Participation Agreement N9__AT, dated the
Delivery Date, among Lessee, Owner Participant, Owner Trustee, Pass-Through
Trustees, Subordination Agent, and Mortgagee.
Parts: all appliances, parts, components, instruments, appurtenances,
accessories, furnishings, seats, and other equipment of whatever nature (other
than (1) Engines or engines, and (2) any items leased by Lessee from a third
party other than Lessor) from time to time installed or incorporated in or
attached or appurtenant to the Airframe or any Engine.
Pass-Through Agreements: the Pass-Through Trust Agreements, the Note
Purchase Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Liquidity Facilities, and the Fee Letters referred
to in (S) 2.03 of each of the Liquidity Facilities, provided,, that no
amendment, modification, or supplement to, or substitution or replacement of,
any such Fee
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Letter shall be effective for purposes of any obligation of Lessee, unless
Lessee consents to it.
Pass-Through Certificates: the pass-through certificates issued by the
Pass-Through Trusts (including any pass-through certificates for which such
pass-through certificates may be exchanged).
Pass-Through Indemnitees: (1) Subordination Agent, Paying Agent, Escrow
Agent, Liquidity Provider, and Pass-Through Trustees, (2) each Affiliate of a
Person described in the preceding clause (1), (3) the directors, officers,
employees, and agents of the Persons described in clauses (1) and (2), and (4)
the successors and permitted assigns of the Persons described in clauses (1),
(2), and (3).
Pass-Through Trust: each of the three separate pass-through trusts
created under the Pass-Through Trust Agreements.
Pass-Through Trust Agreement: each of the three separate Pass-Through
Trust Agreements, each dated as of the Issuance Date, by and between Lessee and
Pass-Through Trustee.
Pass-Through Trustee: State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, in its
capacity as trustee under each Pass-Through Trust Agreement.
Pass-Through Trustee Agreements: the Participation Agreement, the
Pass-Through Trust Agreements, the Note Purchase Agreement, the Deposit
Agreements, the Escrow Agreements, and the Intercreditor Agreement.
Past-Due Rate: defined in Schedule 1 to the Lease.
Paying Agent: State Street Bank and Trust Company of Connecticut,
National Association, as Paying Agent under each of the Escrow Agreements.
Payment Date: (1) each April 1 and October 1 during the Term,
commencing with the first such date to occur after the Commencement Date, (2)
the Scheduled Expiration Date, and (3) each Scheduled Renewal Term Expiration
Date, if any.
Payment Period: each of the consecutive semiannual periods (or such
applicable shorter period ended on the Scheduled Expiration Date and the first
and last Payment Dates of any Renewal Term) during the Term ending on a Payment
Date, the first such period commencing on and including the Commencement Date.
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Permitted Air Carrier: any Permitted Foreign Air Carrier or U.S. Air
Carrier.
Permitted Country: any country listed on Schedule 5 to the Lease,
except any such country that, when the pertinent sublease or other transfer
begins, does not maintain normal diplomatic relations with the United States
(or, in the case of Taiwan, diplomatic relations at least as good as those in
effect on the Issuance Date), is involved in internal or external war or
military conflict, or is a country with which it would constitute a breach of
Law for Lessor, Mortgagee, or any Participant to engage directly or indirectly
in busine(S)
Permitted Foreign Air Carrier: any air carrier that (1) has its
principal executive offices in a Permitted Country, and (2) is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
Permitted Government Entity: (1) the U.S. Government, or (2) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
Permitted Institution: any bank, trust company, insurance company,
financial institution, or corporation (other than, without Lessee's consent, a
commercial air carrier, a commercial aircraft operator, a freight forwarder, an
airframe or aircraft engine manufacturer, or an Affiliate of any of the
foregoing), in each case with a combined capital and surplus or net worth of at
least $50,000,000.
Permitted Lien: any Lien described in clauses (a) through (g) of (S) 6
of the Lease.
Permitted Manufacturer: any manufacturer of commercial airframes or jet
aircraft engines, or subsidiary of any such manufacturer, that has its principal
executive offices in the United States or a Permitted Country.
Permitted Sublease: a sublease or sub-sublease permitted under (S)
7.2.7 of the Lease.
Permitted Sublessee: the sublessee under a Permitted Sublease.
Person or Person: an individual, firm, partnership, joint venture,
trust, trustee, Government Entity, organization, association, corporation,
limited liability company, government agency, committee, department, authority,
and other body, corporate or incorporate, whether having distinct legal status
or not, or any member of any of the same.
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Plan: any employee benefit plan within the meaning of ERISA (S) 3(3),
or any plan within the meaning of Code (S) 4975(e)(1).
Preliminary Notice: defined in (S) 17.1 of the Lease.
PTT Percentage with respect to each Pass-Through Trustee: the
percentage of Lessor's Cost allocated to such Pass-Through Trustee in Schedule 2
to the Participation Agreement.
Purchase Agreement: Purchase Agreement DAC 95-40-D, dated December 6,
1995, between Airframe Manufacturer and ValuJet Airlines, Inc. (predecessor to
Lessee), including all exhibits thereto, and all letter agreements that by their
terms constitute part of such Purchase Agreement, all to the extent assigned
pursuant to the Purchase Agreement Assignment.
Purchase Agreement Assignment: Purchase Agreement and Engine Warranties
Assignment N9__AT, dated the Delivery Date, between Lessee and Owner Trustee.
Purchase Date: the last Business Day of the Base Term or any Renewal
Term, as specified in any Purchase Notice.
Purchase Notice: defined in (S) 17.3.1 of the Lease.
Purchase Price: the amount required to be paid to Seller to purchase
the Aircraft.
QIB: defined in (S) 2.08 of the Mortgage.
Re-Funding Certificate: a certificate of an authorized representative
of Owner Participant delivered pursuant to (S) 11.1.1 of the Participation
Agreement, setting forth (1) the Re-Funding Date and (2) the following
information, subject to the limitations in (S) 11 of the Participation
Agreement: (a) the principal amount of debt to be issued by Owner Trustee on the
Re-Funding Date, (b) the proposed adjusted debt-to-equity ratio, and (c) the
proposed revised schedules of Basic Rent, Stipulated Loss Value percentages, and
Termination Value percentages, and the proposed Amortization Schedules,
calculated in accordance with (S) 3.2.1 of the Lease.
Re-Funding Date: the proposed date on which the outstanding Equipment
Notes will be redeemed and refinanced pursuant to (S) 11 of the Participation
Agreement.
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Re-Funding Information: the information set forth in the Re-Funding
Certificate (other than the Re-Funding Date), as revised by any verification
procedures demanded by Lessee pursuant to (S) 3.2.1(d) of the Lease.
Removable Parts: defined in (S) D of Annex C to the Lease.
Renewal Notice: defined in (S) 17.2.1 of the Lease.
Renewal Rent: the basic rent payable for a Renewal Term, determined
pursuant to (S) 17.2.2 of the Lease.
Renewal Rent Limit: defined in Schedule 1 to the Lease.
Renewal Term: a Fixed Renewal Term or a Subsequent Renewal Term.
Rent: Basic Rent and Supplemental Rent.
Replacement Airframe: an airframe substituted for the Airframe pursuant
to (S) 10 of the Lease.
Replacement Engine: an engine substituted for an Engine pursuant to the
Lease.
Responsible Officer of a Person: (1) the President or Chief Financial
Officer of such Person, (2) any other officer of such Person customarily bearing
responsibility for matters relating to the transactions contemplated by the
Operative Agreements, or (3) any officer of such Person specifically authorized
to take responsibility for any matter relating to the transactions contemplated
by the Operative Agreements.
RVG: Residual Agreement N9__AT, dated the Delivery Date, between
Airframe Manufacturer and Owner Participant.
Return Acceptance Supplement: a Return Acceptance Supplement, dated as
of the date the Aircraft is returned to Lessor pursuant to (S) 5 of the Lease,
entered into by Lessor and Lessee, substantially in the form of Exhibit B to the
Lease.
Scheduled Delivery Date: the expected Delivery Date that Lessee
notifies to each Participant, Owner Trustee, and Mortgagee pursuant to (S) 4.1
of the Participation Agreement, which must be a Business Day not later than the
Commitment Termination Date.
Scheduled Expiration Date: defined in Schedule 1 to the Lease.
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Scheduled Renewal Term Expiration Date: (1) for the first Fixed Renewal
Term, the second anniversary of the Scheduled Expiration Date, (2) for the
second Fixed Renewal Term, the fourth anniversary of the Scheduled Expiration
Date, and (3) for any Subsequent Renewal Term, the first anniversary of its
commencement date.
SEC: the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of the Securities and Exchange
Commission.
Section 1110: 11 U.S.C. (S) 1110 of the Bankruptcy Code, or any
successor or analogous section of the federal bankruptcy Law in effect from time
to time.
Secured Obligations: defined in (S) 2.06 of the Mortgage.
Securities Act: the Securities Act of 1933.
Security: a "security" as defined in (S) 2(1) of the Securities Act.
Seller: [Airframe Manufacturer] [Lessee] [other].
Senior Holder: defined in (S) 2.14(c) of the Mortgage.
Series: Series A, Series B, or Series C.
Series A or Series A Equipment Notes: Equipment Notes issued under the
Mortgage and designated as "Series A" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series A".
Series B or Series B Equipment Notes: Equipment Notes issued under the
Mortgage and designated as "Series B" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series B".
Series C or Series C Equipment Notes: Equipment Notes issued under the
Mortgage and designated as "Series C" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series C".
Similar aircraft: defined in Schedule 1 to the Lease.
SLV Date for any month: the day in that month specified in Schedule 3
to the Lease or, if that day is not a Business Day, the following Business Day.
SLV Rate: defined in Schedule 1 to the Lease.
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Special Default: (1) Lessee's failure to pay any amount of Basic Rent,
Stipulated Loss Value, Termination Value, or EBO Price when due, (2) any Default
referred to in (S) 14.5 of the Lease, or (3) any Lease Event of Default.
SSB: State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its capacity as Mortgagee
under the Mortgage, but in its individual capacity.
Standard & Poor's: Standard & Poor's Ratings Services.
Stipulated Loss Value for the Aircraft: (1) during the Interim Term or
the Base Term, Lessor's Cost multiplied by the percentage in Schedule 3 to the
Lease (as adjusted from time to time in accordance with (S) 3.2.1 of the Lease)
for the pertinent SLV Date, and (2) during any Renewal Term, the amount
determined pursuant to (S) 17.2.3 of the Lease. Notwithstanding anything to the
contrary in any Operative Agreement, Stipulated Loss Value shall always be
sufficient to pay in full, as of the date of payment thereof (assuming timely
payment of the Equipment Notes before such date), the unpaid principal amount of
all Equipment Notes outstanding as of such date, together with accrued and
unpaid interest on all Equipment Notes as of such date (without regard to any
interest accrued on the Equipment Notes at a rate exceeding the Debt Rate).
Subordination Agent: State Street Bank and Trust Company of
Connecticut, National Association, as subordination agent under the
Intercreditor Agreement.
Subordination Agent Agreements: the Participation Agreement, the
Liquidity Facilities, and the Intercreditor Agreement.
Subsequent Renewal Term: each term (if any) for which the Lease is
extended by Lessee after the second Fixed Renewal Term.
Supplemental Rent: without duplication, (1) all amounts, liabilities,
indemnities, and obligations (other than Basic Rent, but including any
Make-Whole Amount) that Lessee assumes or becomes obligated to pay or agrees to
pay under any Lessee Operative Agreement to or on behalf of Lessor or any other
Person, including Stipulated Loss Value, Termination Value, and indemnity
payments under (S) 9 of the Participation Agreement, but excluding any amount as
to which Lessee is obligated to pay a pro rata share pursuant to clause (5) of
this definition, (2) (a) to the extent not payable (whether or not in fact paid)
under (S) 6(a) of the Note Purchase Agreement (as originally in effect or
amended with Owner Participant's consent), the fees payable to Liquidity
Provider under (S) 2.03 of each Liquidity Facility and the related Fee Letter
(as defined in the Intercreditor Agreement), multiplied by a fraction the
numerator
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of which is the then-outstanding aggregate principal amount of the Equipment
Notes, and the denominator of which is the then-outstanding aggregate principal
amount of all "Series A Equipment Notes", "Series B Equipment Notes", and
"Series C Equipment Notes" (each as defined in the Note Purchase Agreement); (b)
(x) the amount equal to interest on any Downgrade Advance (other than any
Applied Downgrade Advance) payable under (S) 3.07 of each Liquidity Facility,
multiplied by (y) the fraction specified in the foregoing clause (a); (c) (x)
the amount equal to interest on any Non-Extension Advance (other than any
Applied Non-Extension Advance) payable under (S) 3.07 of each Liquidity
Facility, multiplied by (y) the fraction specified in the forgoing clause (a);
(d) if any payment default exists with respect to interest on any Equipment
Notes, (x) an amount equal to interest on any Unpaid Advance, Applied Downgrade
Advance, or Applied Non-Extension Advance payable under (S) 3.07 of each
Liquidity Facility, plus any interest in the Past-Due Rate actually payable
(whether or not in fact paid) by Lessee in respect of the overdue scheduled
interest on the Equipment Notes in respect of which such Unpaid Advance, Applied
Downgrade Advance, or Applied Non-Extension Advance was made, multiplied by (y)
a fraction the numerator of which is the sum of all then-overdue interest on the
Equipment Notes (other than interest becoming due and payable solely as a result
of acceleration of any Equipment Notes), and the denominator of which shall be
the sum of all then-overdue interest on all "Series A Equipment Notes", "Series
B Equipment Notes", and "Series C Equipment Notes" (each as defined in the Note
Purchase Agreement) (other than interest becoming due and payable solely as a
result of acceleration of any such "Equipment Notes"); and (e) Lessee's pro rata
share of any other amounts owed to Liquidity Provider by Subordination Agent as
borrower under each Liquidity Facility (other than amounts due as repayment of
advances thereunder or as interest on such advances), except to the extent
payable pursuant to clause (a), (b), (c), or (d) above, (3) Lessee's pro rata
share of all compensation and reimbursement of expenses, disbursements, and
advances payable by Lessee under the Pass-Through Trust Agreements, (4) Lessee's
pro rata share of all compensation and reimbursement of expenses and
disbursements payable to Subordination Agent under the Intercreditor Agreement,
except with respect to any income or franchise taxes incurred by Subordination
Agent in connection with the transactions contemplated by the Intercreditor
Agreement, (5) Lessee's pro rata share of any amount payable under (S) 9.1 (and,
if attributable thereto, (S) 9.5) of the Participation Agreement to any
Pass-Through Indemnitee to the extent such amount relates to, results from, or
arises out of or in connection with (a) the Pass-Through Agreements or the
enforcement of any of the terms of any of the Pass-Through Agreements, (b) the
offer, sale, or delivery of the Pass-Through Certificates or any interest
therein or represented thereby, or (c) any breach of or failure to perform or
observe, or any other noncompliance with, any covenant or agreement or other
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obligation to be performed by Lessee under any Pass-Through Agreement, or the
falsity of any representation or warranty of Lessee in any Pass-Through
Agreement, and (6) if Lessee requests any amendment to any Operative Agreement
or Pass-Through Agreement, Lessee's pro rata share of all reasonable fees and
expenses (including fees and disbursements of counsel) of Escrow Agents and
Paying Agents in connection therewith payable by Pass-Through Trustees under the
Escrow Agreements. As used herein, "LESSEE'S PRO RATA SHARE" means as of any
time a fraction, the numerator of which is the then-outstanding principal
balance of Equipment Notes, and the denominator of which is the aggregate
then-outstanding principal balance of all "Equipment Notes" (as each such term
is defined in each of the Operative Indentures). For purposes of this
definition, "Applied Downgrade Advance", "Applied Non-Extension Advance", "Cash
Collateral Account", "Downgrade Advance", "Final Advance", "Investment
Earnings", "Non-Extension Advance", and "Unpaid Advance" have the same meanings
as in each Liquidity Facility.
Tax Attribute Period: the period from the Delivery Date through
December 31, 200[6][7].
Tax Indemnitee: (1) FSB and Owner Trustee, (2) SSB and Mortgagee, (3)
each separate or additional trustee appointed pursuant to the Trust Agreement or
the Mortgage, (4) each Participant, (5) the Trust Estate and the Collateral, and
(6) the successors, assigns, and agents of the foregoing. For purposes of this
definition, the term "Owner Participant" shall include any member of an
affiliated group (within the meaning of Code (S) 1504) of which Owner
Participant is a member at the pertinent time, if consolidated, joint, or
combined returns are filed for such affiliated group for federal, state, or
local income tax purposes. If any Tax Indemnitee is Airframe Manufacturer or
Engine Manufacturer or any subcontractor or supplier of either thereof, such
Person shall be a Tax Indemnitee only in its capacity as Owner Participant.
Tax Indemnity Agreement: Tax Indemnity Agreement N9__AT, dated the
Delivery Date, between Lessee and Owner Participant.
Taxes: all taxes, levies, imposts, duties, charges, assessments, or
withholdings of any nature whatsoever imposed by any Taxing Authority, and any
penalties, additions to tax, fines, or interest thereon or additions thereto.
Taxing Authority: any federal, state, or local government or other
taxing authority in the United States, any foreign government or political
subdivision or taxing authority thereof, any international taxing authority, or
any territory or possession of the United States or taxing authority thereof.
Term: the term, commencing on the Delivery Date, for which the Aircraft
is leased pursuant to (S) 3 of the Lease, consisting of the Interim Term, the
Base
27
<PAGE>
Term, and any Renewal Term(s); provided, that, if at the scheduled end of the
Term the Aircraft or Airframe is being used, or was within the previous six
months being used, by the U.S. Government pursuant to CRAF, the Term shall be
deemed extended for the period necessary to accommodate usage of the Aircraft or
Airframe pursuant to CRAF plus six months thereafter, and Lessee shall be
obligated to pay Basic Rent for any such extension period at a semiannual rate
equal to the average of the Basic Rent paid during the Base Term or the
applicable Renewal Term (whichever ended immediately before such extension).
Termination Date: any Payment Date occurring after the fifth
anniversary of the Delivery Date on which the Lease terminates in accordance
with (S) 9 of the Lease.
Termination Value for the Aircraft: Lessor's Cost multiplied by the
percentage in Schedule 4 to the Lease (as adjusted from time to time in
accordance with (S) 3.2.1 of the Lease) for the pertinent Termination Value
Date. Notwithstanding anything to the contrary in any Operative Agreement,
Termination Value shall always be sufficient to pay in full, as of the date of
payment thereof (assuming timely payment of the Equipment Notes before such
date), the unpaid principal amount of all Equipment Notes outstanding as of such
date, together with accrued and unpaid interest on all such Equipment Notes as
of such date (without regard to any interest accrued on the Equipment Notes at a
rate exceeding the Debt Rate).
Termination Value Date for any month: the day in such month specified
in Schedule 4 to the Lease or, if such day is not a Business Day, the following
Business Day.
Threshold Amount: defined in Schedule 1 to the Lease.
Transaction Expenses: (1) the reasonable and actual fees and
disbursements incurred in connection with the negotiation, execution, and
delivery of the Operative Agreements of (a) Bingham Dana LLP (special counsel
for Mortgagee and the Loan Participants), such information to be furnished by
Mortgagee and Subordination Agent, (b) Ray, Quinney & Nebeker (special counsel
for Owner Trustee under the Trust Agreement), such information to be furnished
by Owner Trustee, (c) FAA Counsel, such information to be furnished by Lessee,
(d) special counsel to Owner Participant (as defined in Schedule 3 to the
Participation Agreement), such information to be furnished by Owner Participant,
(e) Milbank, Tweed, Hadley & McCloy LLP (special counsel to the placement agents
for the Class A and Class B Pass-Through Certificates), such information to be
furnished by Lessee, (f) Chapman and Cutler and Milbank, Tweed, Hadley & McCloy
LLP (special counsel to (respectively) the initial Class
28
<PAGE>
A and Class B Pass-Through Certificate holders), such information to be
furnished by Lessee, and (g) Troutman Sanders LLP (special counsel to Lessee),
such information to be furnished by Lessee, (2) all fees, taxes, and other
charges payable in connection with the recording or filing of instruments and
financing statements, such information to be furnished by Lessee, (3) the
initial fee and reasonable and actual disbursements of Owner Trustee under the
Trust Agreement, such information to be furnished by Owner Trustee, (4) the
initial fee and reasonable and actual disbursements of Mortgagee under the
Mortgage, such information to be furnished by Mortgagee, (5) the fee of the
Appraiser with respect to the appraisal of the Aircraft referred to in (S)
5.1.2(l) of the Participation Agreement, such information to be furnished by
Owner Participant, (6) the equity placement fee and reasonable disbursements of
Lessee's Advisor, such information to be furnished by Lessee, and (7) an
allocable portion of the placement fee and other expenses (including legal fees)
relating to the offering of the Pass-Through Certificates, such information to
be furnished by Lessee.
Transactions: the transactions contemplated by the Operative
Agreements.
Transfer: the transfer, sale, assignment, or other conveyance of all or
any interest in any property, right, or interest.
Transferee: a Person to whom Owner Participant, Owner Trustee, Loan
Participant, or Note Holder purports or intends to Transfer any or all of its
right, title, or interest in the Trust Estate or in its Equipment Note and the
Collateral, as described in (S) 10.1.1(a), (S) 10.1.2, or (S) 10.1.3 (but
excluding participants in any participation referred to in (S) 10.1.3) of the
Participation Agreement.
Transportation Code: subtitle VII of title 49, United States Code.
Trust: the trust created by the Trust Agreement.
Trust Agreement: Trust Agreement N9__AT, dated the Delivery Date,
between Owner Participant and Owner Trustee.
Trust Estate: all Owner Trustee's estate, right, title, and interest in
and to the Aircraft, the Lease, the Purchase Agreement, and the other Mortgage
Agreements, including all Basic Rent and Supplemental Rent (including insurance
proceeds and requisition, indemnity, or other payments of any kind for of with
respect to the Aircraft), but excluding any Excluded Payment.
UCC: the Uniform Commercial Code as in effect in any applicable
jurisdiction.
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United States or U.S.: the United States of America; provided, that for
geographic purposes, "United States" means the 50 states and the District of
Columbia of the United States of America.
U.S. Air Carrier: any United States air carrier who is a Citizen of the
United States holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of the Transportation Code
for aircraft capable of carrying 10 or more individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating certificate
issued pursuant to FAR Part 121, or who may operate as an air carrier by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.
U.S. Government: the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
U.S. Person: any Person described in Code (S) 7701(a)(30).
Wet Lease: any arrangement whereby Lessee or a Permitted Sublessee
agrees to furnish the Aircraft, the Airframe, or any Engine to a third party
pursuant to which the Aircraft, Airframe, or Engine is at all times in the
operational control of Lessee or a Permitted Sublessee, provided, that Lessee's
obligations under this Lease shall continue in full force and effect
notwithstanding any such arrangement.
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<PAGE>
------------------------------------------------------
CONFIDENTIAL: Subject to restrictions on dissemination
set forth in (S) 8 of this Agreement
------------------------------------------------------
================================================================================
PARTICIPATION AGREEMENT N9__AT
dated as of _______________, ____
among
AIRTRAN AIRWAYS, INC.,
Lessee,
[_______________________ ],
Owner Participant,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly
provided herein, but solely as Owner Trustee,
Owner Trustee,
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly provided
herein, but solely as Mortgagee, Subordination Agent under
the Intercreditor Agreement, and Pass-Through Trustee under
each of the Pass-Through Trust Agreements,
Mortgagee and Loan Participant
----------------------------
One Boeing model 717-200 aircraft
bearing manufacturer's serial no. 550__
and U.S. registration no. N9__AT
================================================================================
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION...........................................................................2
2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF
EQUIPMENT NOTES; TERMINATION OF
OBLIGATION TO PARTICIPATE.......................................................................2
2.1 Participation in Lessor's Cost...............................................................2
2.2 Nature of Obligations of Participants........................................................3
2.3 Termination of Obligation to Participate.....................................................3
3. COMMITMENT TO LEASE AIRCRAFT...........................................................................3
4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S
COST; POSTPONEMENT OF SCHEDULED
DELIVERY DATE...................................................................................3
4.1 Notices of Scheduled Delivery Date...........................................................3
4.2 Payment of Lessor's Cost.....................................................................4
4.3 Postponement of Scheduled Delivery Date......................................................5
4.4 Closing......................................................................................5
5. CLOSING CONDITIONS.....................................................................................5
5.1 Conditions to Participants' Obligations......................................................5
5.2 Conditions to Owner Trustee's Obligations....................................................12
5.3 Conditions to Mortgagee's Obligations........................................................12
5.4 Conditions to Lessee's Obligations...........................................................13
5.5 Post-Registration Opinion....................................................................14
6. REPRESENTATIONS AND WARRANTIES.........................................................................14
6.1 Lessee's Representations and Warranties......................................................14
6.2 Owner Participant's Representations and Warranties...........................................19
6.3 FSB's Representations and Warranties.........................................................21
6.4 SSB's Representations and Warranties.........................................................23
7. COVENANTS..............................................................................................26
7.1 Lessee's Covenants...........................................................................27
7.2 Owner Participant's Covenants................................................................28
7.3 FSB's and Owner Trustee's Covenants..........................................................31
7.4 SSB's Covenants..............................................................................33
7.5 Note Holders' Covenants......................................................................34
7.6 Other Agreements.............................................................................35
8. CONFIDENTIALITY........................................................................................43
9. INDEMNIFICATION AND EXPENSES...........................................................................44
9.1 General Indemnity............................................................................44
9.2 Expenses.....................................................................................51
9.3 General Tax Indemnity........................................................................52
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.4 Payments.....................................................................................63
9.5 Interest.....................................................................................63
9.6 Benefit of Indemnities.......................................................................63
10. ASSIGNMENT OR TRANSFER OF INTERESTS...................................................................63
10.1 Participants, Owner Trustee, and Note Holders...............................................63
10.2 Effect of Transfer..........................................................................65
11. RE-FUNDING AND CERTAIN OTHER MATTERS..................................................................66
11.1 Re-Funding Generally........................................................................66
11.2 Limitations on Obligation to Refund.........................................................68
11.3 Execution of Facilitating Documents.........................................................68
11.4 ERISA.......................................................................................68
11.5 Consent to Optional Redemptions.............................................................69
11.6 Lessee's Assumption of Equipment Notes......................................................69
12. SECTION 1110..........................................................................................72
13. CHANGE OF CITIZENSHIP.................................................................................72
13.1 Generally...................................................................................72
13.2 Owner Participant...........................................................................73
13.3 Owner Trustee...............................................................................73
13.4 Mortgagee...................................................................................73
14. CONCERNING OWNER TRUSTEE..............................................................................73
15. MISCELLANEOUS.........................................................................................74
15.1 Amendments..................................................................................74
15.2 Severability................................................................................74
15.3 Survival....................................................................................74
15.4 Reproduction of Documents...................................................................75
15.5 Counterparts................................................................................75
15.6 No Waiver...................................................................................75
15.7 Notices.....................................................................................75
15.8 Governing Law; Submission to Jurisdiction; Venue............................................76
15.9 Third-Party Beneficiary.....................................................................77
15.10 Entire Agreement...........................................................................77
15.11 Further Assurances.........................................................................77
</TABLE>
ii
<PAGE>
ANNEX, SCHEDULES, AND EXHIBITS
ANNEX A Definitions
SCHEDULE 1 Accounts; Addresses
SCHEDULE 2 Commitments
SCHEDULE 3 Certain Terms
EXHIBIT A Opinion of special counsel to Lessee and Holdings
EXHIBIT B Opinion of corporate counsel to Lessee and Holdings
EXHIBIT C Opinion of corporate counsel to Airframe Manufacturer
EXHIBIT D Opinion of special counsel to Owner Trustee
EXHIBIT E Opinion of special counsel to Mortgagee and Loan Participants
EXHIBIT F Opinion of special counsel to Owner Participant
EXHIBIT G Opinion of FAA Counsel
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<PAGE>
PARTICIPATION AGREEMENT N9__AT
This Participation Agreement N9__AT (this "Agreement"), dated as of
_______________, ____, is entered into by and among (1) AirTran Airways, Inc.
("Lessee"), a Delaware corporation, (2) ______________________________ ("Owner
participant"), a corporation organized under the laws of the OP Jurisdiction,
(3) First Security Bank, National Association, a national banking association,
not in its individual capacity (except as expressly provided herein), but solely
as Owner Trustee (in its capacity as Owner Trustee, "Owner Trustee" or "Lessor",
and in its individual capacity, "FSB"), (4) State Street Bank and Trust Company
of Connecticut, National Association, a national banking association, not in its
individual capacity (except as expressly provided herein), but solely as
mortgagee (in its capacity as Mortgagee, "Mortgagee", and in its individual
capacity, "SSB"), (5) State Street Bank and Trust Company of Connecticut,
National Association, not in its individual capacity (except as expressly
provided herein), but solely as trustee under each of the Pass-Through Trust
Agreements (each, a "Pass-Through Trustee"), and (6) State Street Bank and Trust
Company of Connecticut, National Association, not in its individual capacity
(except as expressly provided herein), but solely as subordination agent under
the Intercreditor Agreement ("Subordination Agent").
RECITALS
A. Owner Participant and FSB are entering into the Trust
Agreement, pursuant to which Owner Trustee agrees to hold the Trust Estate for
the use and benefit of Owner Participant.
B. Lessee and Airframe Manufacturer entered into the Purchase
Agreement, pursuant to which Airframe Manufacturer agreed to manufacture certain
aircraft (including the Aircraft) and sell them to Lessee, and Lessee agreed to
buy certain aircraft (including the Aircraft) from Airframe Manufacturer.
C. Lessee and Owner Trustee are entering into the Purchase
Agreement Assignment, pursuant to which Lessee assigns to Owner Trustee [certain
of Lessee's rights relating to the Aircraft against] [Lessee's right to purchase
the Aircraft from] Airframe Manufacturer.
D. Pursuant to each of the Pass-Through Trust Agreements, on the
Issuance Date, the Pass-Through Trusts were created and the Pass-Through
Certificates were issued and sold.
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E. Pursuant to the Note Purchase Agreement, each Pass-Through
Trustee agreed to use a portion of the proceeds from the issuance and sale of
the Pass-Through Certificates issued by each Pass-Through Trust to purchase from
Owner Trustee, on behalf of the related Pass-Through Trust, the Equipment Note
bearing the same interest rate as the Pass-Through Certificates issued by such
Pass-Through Trust.
F. Owner Trustee and Mortgagee are entering into the Mortgage for
the benefit of the Note Holders, pursuant to which Owner Trustee agrees (1) to
issue Equipment Notes, in the amounts and otherwise as provided in the Mortgage,
the proceeds of which will be used to pay a portion of Lessor's Cost, and (2) to
mortgage, pledge, and assign to Mortgagee all of Owner Trustee's right, title,
and interest in the Collateral to secure the Secured Obligations, including
Owner Trustee's obligations under the Equipment Notes.
G. Lessor and Lessee are entering into the Lease, pursuant to
which Lessor is leasing the Aircraft to Lessee and Lessee is leasing the
Aircraft from Lessor.
H. The parties to this Agreement want to set forth in this
Agreement the terms and conditions upon and subject to which the foregoing
transactions shall be effected.
The parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION
The terms defined in Annex A, when capitalized as in Annex A, have the
same meanings when used in this Agreement. Annex A also contains rules of usage
that control construction in this Agreement.
2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
TERMINATION OF OBLIGATION TO PARTICIPATE
2.1 PARTICIPATION IN LESSOR'S COST
Subject to the terms and conditions of this Agreement, on the Delivery
Date, Owner Participant and each Pass-Through Trustee shall participate in the
payment of Lessor's Cost as follows:
(a) Owner Participant shall participate in the payment of Lessor's
Cost for the Aircraft by making an equity investment in the
beneficial ownership of the Aircraft in the amount in Dollars
equal to Owner Participant's Percentage multiplied by Lessor's
Cost; and
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<PAGE>
(b) each Pass-Through Trustee shall make a non-recourse secured
loan to Owner Trustee to finance, in part, Owner Trustee's
payment of Lessor's Cost in the amount in Dollars equal to
such Pass-Through Trustee's PTT Percentage multiplied by
Lessor's Cost, such loan to be evidenced by one or more
Equipment Notes, dated the Delivery Date, issued to
Subordination Agent as the registered holder on behalf of each
such Pass-Through Trustee for the related Pass-Through Trust
by Owner Trustee in accordance with this Agreement and the
Mortgage, in an aggregate principal amount equal to the
Commitment of each such Pass-Through Trustee.
2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS
The obligations hereunder of each Participant are several, and not
joint, and a Participant shall have no obligation to make available to Owner
Trustee any portion of any amount not paid hereunder by any other Participant.
The failure by either Participant to perform its obligations hereunder shall not
affect the obligations of Lessee toward the other Participant, except to the
extent provided in (S) 5.4.
2.3 TERMINATION OF OBLIGATION TO PARTICIPATE
Notwithstanding any other provision of this Agreement, if the Closing
does not occur on or before the Commitment Termination Date, the Commitment of
each Participant and its obligation to participate in the payment of Lessor's
Cost shall expire and be of no further force and effect; provided, that the
liability of any Participant that has defaulted in the payment of its Commitment
shall not be released.
3. COMMITMENT TO LEASE AIRCRAFT
Subject to the terms and conditions of this Agreement, concurrently
with the issuance of the Equipment Notes on the Delivery Date, Owner Trustee
shall purchase and accept delivery of the Aircraft under and pursuant to the
Purchase Agreement and the Purchase Agreement Assignment, and thereupon Owner
Trustee shall lease the Aircraft to Lessee, and Lessee shall lease the Aircraft
from Owner Trustee, under the Lease.
4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT
OF SCHEDULED DELIVERY DATE
4.1 NOTICES OF SCHEDULED DELIVERY DATE
3
<PAGE>
Without limiting its obligations to the Loan Participant under (S) 1(b)
of the Note Purchase Agreement, Lessee agrees to give Participants, Owner
Trustee, and Mortgagee at least one Business Day's written notice of the
Scheduled Delivery Date, which notice shall set forth Lessor's Cost and the
amount of each Participant's Commitment. Each Participant agrees that making its
Commitment available shall constitute a waiver of such notice. Owner Trustee and
Mortgagee shall be deemed to have waived such notice if Mortgagee receives from
each Participant funds in the full amount of its respective Commitment.
4.2 PAYMENT OF LESSOR'S COST
(a) Each Participant agrees, subject to the terms and conditions
of this Agreement, to make the Dollar amount of its Commitment available, by
wire transfer of immediately available funds to SSB's account at __________
Bank, ABA no. __________, account no. __________, reference AirTran Lease
N9__AT, at or before 12:00 noon, New York City time, on the Scheduled Delivery
Date. All such funds made available by each Participant to SSB shall, until
payment thereof to Seller and Lessee as provided in (S) 4.2(b)(2) or return
thereof to the respective Participant as provided in (S) 4.3.2, be held by SSB
in trust for the benefit of the respective Participant, as the sole and
exclusive property of the respective Participant and not as part of the Trust
Estate or the Collateral.
(b) Subject to the satisfaction, or waiver by the applicable
party, of the conditions precedent set forth in (S) 5, and simultaneously with
the receipt by the parties hereto of all amounts to be paid to them on the
Delivery Date pursuant to this (S) 4.2, Owner Trustee shall:
(1) purchase, take title to, and accept delivery of the
Aircraft;
(2) in consideration of the transfer of title to the Aircraft
to Owner Trustee, direct SSB to pay, from the funds made available to
SSB hereunder by the Participants, all or a specified portion of its
Commitment to (aa) Seller, which payments in the aggregate shall be
equal to Lessor's Cost, by wire transfer of immediately available funds
to Seller's account set forth in Schedule 1, or (bb) to Seller and
Lessee, which payments in the aggregate shall be equal to Lessor's
Cost, by wire transfer of immediately available funds to Seller's and
Lessee's accounts set forth in Schedule 1 or as otherwise directed by
Lessee;
(3) execute an application for registration of the Aircraft
with the FAA;
4
<PAGE>
(4) execute the Mortgage and issue the Equipment Notes to
Subordination Agent in accordance with (S) 2.1(b);
(5) lease the Aircraft to Lessee pursuant to the Lease; and
(6) take such other action as may be required to be taken by
Owner Trustee on the Delivery Date by the terms of any Operative
Agreement.
4.3 POSTPONEMENT OF SCHEDULED DELIVERY DATE
4.3.1 POSTPONEMENT
If for any reason whatsoever the Closing is not consummated on the
Scheduled Delivery Date, Lessee may, subject to the provisions of 1(e) of the
Note Purchase Agreement, by telephonic notice, given by 5:00 p.m. New York City
time (such telephonic notice to be promptly confirmed in writing by personal
delivery or facsimile) on the Scheduled Delivery Date, to each Participant,
Owner Trustee, and Mortgagee, designate a Delayed Delivery Date, in which case
Owner Participant will keep its funds available, and each Loan Participant shall
comply with its obligations under (S) 5.01 of each applicable Pass-Through Trust
Agreement.
4.3.2 RETURN OF FUNDS
SSB shall promptly return to each Participant that makes funds
available to it in accordance with (S) 4.2(a) such funds, together with interest
or income earned thereon, if the Closing fails to occur on the Scheduled
Delivery Date, provided, that any funds made available by the Loan Participant
shall be returned on such Scheduled Delivery Date.
4.4 CLOSING
The Closing shall occur at the offices of Troutman Sanders LLP, 5200
Bank of America Plaza, Atlanta, GA (with a set of Operative Agreements also
being delivered in New York City), or such other place as the parties shall
agree.
5. CLOSING CONDITIONS
5.1 CONDITIONS TO PARTICIPANTS' OBLIGATIONS
Each Participant's obligation to make the Dollar amount of its
Commitment available for payment as directed by Owner Trustee on the Delivery
Date is subject to the satisfaction or such Participant's waiver, on or before
the Delivery Date, of the conditions in this (S) 5.1; provided, that it shall
5
<PAGE>
not be a condition to the obligation of any Participant that any document be
produced or action taken that is to be produced or taken by such Participant or
by a Person within such Participant's control; provided, further, that
(S) 5.1.2(b), (l) and (t)(8) shall not be conditions to the Loan Participants'
obligations and (S) 5.1.15 and (S) 5.1.16 shall not be conditions to Owner
Participant's obligations.
5.1.1 NOTICE
Such Participant received the notice described in (S) 4.1 or, in the
case of a Delayed Delivery Date, (S) 4.3, when and as required thereby.
5.1.2 DELIVERY OF DOCUMENTS
Except as otherwise provided in this (S) 5.1.2, such Participant
receives executed counterparts of the following documents, and such counterparts
(x) have been duly authorized, executed, and delivered by the party or parties
thereto, (y) are reasonably satisfactory in form and substance to such
Participant, and (z) are in full force and effect:
(a) the Lease (Mortgagee to receive the sole executed chattel
paper original thereof);
(b) the Tax Indemnity Agreement, the Deficiency Agreement,
and the RVG; provided, that only Owner Participant, Lessee, and (as to
the Deficiency Agreement only) Owner Trustee shall receive copies of
those agreements;
(c) the Trust Agreement;
(d) the Mortgage;
(e) the Purchase Agreement Assignment, the Consent and
Agreement, and the Engine Consent and Agreement;
(f) the Guarantee;
(g) the Equipment Notes dated the Delivery Date; provided,
that only Subordination Agent shall receive the authenticated Equipment
Notes;
(h) an excerpted copy of the Purchase Agreement to the extent
relating to Airframe Manufacturer's or Engine Manufacturer's warranties
or related obligations or any right in the Purchase Agreement assigned
to Owner Trustee pursuant to the Purchase Agreement Assignment;
provided, that only Owner Trustee and Mortgagee shall receive copies of
6
<PAGE>
such agreements (copies of which may be inspected by Participants and
their respective special counsel on the Delivery Date, but after the
Delivery Date such copies shall be retained by Owner Trustee and
Mortgagee and may be inspected and reviewed by Owner Participant or
Loan Participant or their counsel if and only if a Lease Default
exists);
(i) the Bills of Sale;
(j) an invoice from Seller to Owner Trustee in respect of the
Aircraft specifying the amount of the Purchase Price and an invoice
from Lessee specifying the amount due to Lessee in respect of the
Aircraft, which shall equal Lessor's Cost of the Aircraft;
(k) the broker's report and insurance certificates required
by (S) 11 of the Lease;
(l) an appraisal or appraisals from an Appraiser, which
appraisal or appraisals shall be reasonably satisfactory in form and
substance to Owner Participant; provided, that only Owner Participant
and Lessee shall receive copies of such appraisal(s);
(m) (1) a copy of Lessee's articles of incorporation,
by-laws, and resolutions, in each case certified as of the Delivery
Date by the Secretary or an Assistant Secretary of Lessee, duly
authorizing Lessee's execution, delivery, and performance of the Lessee
Operative Agreements required to be executed and delivered by Lessee on
or before the Delivery Date in accordance with the provisions hereof
and thereof; (2) a copy of Holdings's articles of incorporation,
by-laws, and resolutions, in each case certified as of the Delivery
Date by the Secretary or an Assistant Secretary of Holdings, duly
authorizing Holdings's execution, delivery, and performance of the
Guarantee; (3) incumbency certificates of Lessee, Holdings, Owner
Participant, FSB, and SSB as to the person(s) authorized to execute and
deliver the relevant Operative Agreements on behalf of such party; (4)
copies of the certificate or articles of incorporation, by-laws, and
general authorizing resolutions of the boards of directors (or
executive committees) or other satisfactory evidence of authorization
of Owner Participant, FSB, and SSB, certified as of the Delivery Date
by the Secretary or an Assistant or Attesting Secretary of Owner
Participant, FSB, and SSB, respectively, which authorize the execution,
delivery and performance by Owner Participant, FSB, and SSB,
respectively, of each of the Operative Agreements to which it is a
party, together with such other documents and evidence with respect to
it as Lessee or any Participant reasonably requests in order to
establish the consummation of the transactions contemplated by this
Agreement
7
<PAGE>
and the taking of all corporate proceedings in connection therewith;
and (5) good-standing certificates for Lessee for Delaware and Florida,
for Holdings for Nevada and Florida, and for Owner Participant for
_________;
(n) Officer's Certificates of Lessee and Holdings, dated the
Delivery Date, stating that its representations and warranties in this
Agreement or the Guarantee (respectively) are true and correct as of
the Delivery Date (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of
such earlier date);
(o) an Officer's Certificate of FSB, dated the Delivery Date,
stating that its representations and warranties, in its individual
capacity and as Owner Trustee, in this Agreement are true and correct
as of the Delivery Date (or, to the extent that any such representation
and warranty expressly relates to an earlier date, true and correct as
of such earlier date);
(p) an Officer's Certificate of Owner Participant, dated the
Delivery Date, stating that its representations and warranties in this
Agreement are true and correct as of the Delivery Date (or, to the
extent that any such representation and warranty expressly relates to
an earlier date, true and correct as of such earlier date);
(q) an Officer's Certificate of SSB, dated the Delivery Date,
stating that its representations and warranties, in its individual
capacity or as Mortgagee, a Pass-Through Trustee, or Subordination
Agent (as applicable) in this Agreement are true and correct as of the
Delivery Date (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of
such earlier date);
(r) an application for registration of the Aircraft with the
FAA in the name of Owner Trustee (FAA Counsel to receive the sole
executed copy thereof, for filing with the FAA);
(s) the Financing Statements;
(t) the following opinions of counsel, in each case dated the
Delivery Date:
(1) an opinion of Troutman Sanders LLP, special
counsel to Lessee and Holdings, substantially in the form of
Exhibit A;
(2) an opinion of Lessee's and Holdings's Legal
Department, substantially in the form of Exhibit B;
8
<PAGE>
(3) an opinion of [______,] corporate counsel to
Airframe Manufacturer, substantially in the form of Exhibit C;
(4) an opinion of Ray, Quinney & Nebeker, special
counsel to Owner Trustee, substantially in the form of Exhibit
D;
(5) an opinion of Bingham Dana LLP, special counsel
to Mortgagee and the Loan Participants, substantially in the
form of Exhibit E;
(6) an opinion of [______,] special counsel to Owner
Participant, substantially in the form of Exhibit F;
(7) an opinion of FAA Counsel, substantially in the
form of Exhibit G; and
(8) an opinion of [___________,] special tax counsel
to Owner Participant, with respect to certain tax consequences
of the transactions contemplated hereby; provided, that only
Owner Participant shall receive such opinion; and
(u) each Participant receives copies of such other documents
as it reasonably requests, except that the Loan Participants will not
receive copies of the Purchase Agreement (although special counsel for
the Loan Participants may inspect the Purchase Agreement in connection
with the transactions contemplated hereby or as a basis for such
counsel's closing opinion) or of the Tax Indemnity Agreement.
5.1.3 OTHER COMMITMENTS
Each other Participant makes available the Dollar amount of its
Commitment as directed by Owner Trustee in accordance with (S) 4.
5.1.4 VIOLATION OF LAW
No change occurs after the date of this Agreement in any applicable Law
that makes it a violation of Law for (a) Lessee, any Participant, Subordination
Agent, Owner Trustee, or Mortgagee to execute, deliver, and perform the
Operative Agreements to which it is a party, or (b) any Participant to make the
Dollar amount of its Commitment available or, in the case of any Loan
Participant, to acquire an Equipment Note or to realize the benefits of the
security afforded by the Mortgage.
5.1.5 TAX LAW CHANGE
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In respect of Owner Participant, no Adverse Change in Tax Law has been
enacted, promulgated, or issued on or before the Delivery Date. Owner
Participant shall consider promptly, and shall consult with Lessee concerning,
any such Adverse Change in Tax Law, and shall advise Lessee and Loan Participant
promptly if Owner Participant determines that an Adverse Change in Tax Law which
has been enacted or promulgated or, if proposed, has a substantial likelihood of
becoming effective, would cause Owner Participant to elect not to close. At any
time on or before the Delivery Date, Owner Participant may notify Lessee and
Loan Participant that Owner Participant elects not to close as a result of the
enactment, promulgation, or issuance of any Adverse Change in Tax Law on or
before the Delivery Date, specifying such Adverse Change in Tax Law; and failure
to give such notice on or before the Delivery Date shall preclude Owner
Participant from not closing as a result of any Adverse Change in Tax Law.
5.1.6 REPRESENTATIONS, WARRANTIES, AND COVENANTS
The representations and warranties of each other party to this
Agreement made, in each case, in any Operative Agreement to which it is a party,
are true and accurate in all material respects as of the Delivery Date (unless
any such representation and warranty was made with reference to a specified
date, in which case such representation and warranty was true and accurate as of
such specified date), and each other party to this Agreement has performed and
observed, in all material respects, all of its covenants, obligations, and
agreements in each Operative Agreement to which it is a party to be observed or
performed by it as of the Delivery Date.
5.1.7 NO DEFAULT
On the Delivery Date, no Lease Default or Mortgage Default exists or
would result from the sale, mortgage, or lease of the Aircraft, and no "Event of
Default" or "Mortgage Event of Default" exists with respect to any other
aircraft financed through the issuance of Pass-Through Certificates.
5.1.8 NO EVENT OF LOSS
No Event of Loss with respect to the Airframe or any Engine has
occurred, and no circumstance, condition, act, or event has occurred that, with
the giving of notice or lapse of time, would give rise to or constitute an Event
of Loss with respect to the Airframe or any Engine.
5.1.9 TITLE
Owner Trustee has good and marketable title (subject to filing and
recordation of the FAA Bill of Sale with the FAA) to the Aircraft, free and
clear
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of Liens, except (a) the rights of Lessee under the Lease, (b) the Lien created
by the Mortgage, (c) the beneficial interest of Owner Participant created by the
Trust Agreement, (d) Liens permitted by clause (d) (solely for taxes not yet
due) of (S) 6 of the Lease, and (e) Liens permitted by clause (e) of (S) 6 of
the Lease.
5.1.10 CERTIFICATION
The Aircraft has been duly certificated by the FAA as to type, and
(upon registration in Owner Trustee's name) will be eligible for an FAA
airworthiness certificate.
5.1.11 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee of
Owner Trustee under the Mortgage), is entitled to the benefits of Section 1110
(as currently in effect) with respect to the right to take possession of the
Airframe and Engines as provided in the Lease in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
5.1.12 FILING
The FAA-Filed Documents are in the process of being duly filed for
recordation with the FAA in accordance with the Transportation Code, and each
Financing Statement has been duly filed or is in the process of being duly filed
in the appropriate jurisdiction.
5.1.13 NO PROCEEDINGS
No action or proceeding has been instituted, nor is any action
threatened in writing, before any Government Entity, nor has any order,
judgment, or decree been issued or proposed to be issued by any Government
Entity, to set aside, restrain, enjoin, or prevent the completion and
consummation of any Operative Agreement or the Transactions.
5.1.14 GOVERNMENTAL ACTION
All appropriate action required to have been taken before the Delivery
Date by the FAA, or any other Government Entity of the United States, in
connection with the Transactions has been taken, and all orders, permits,
waivers, authorizations, exemptions, and approvals of such entities required to
be in effect on the Delivery Date in connection with the Transactions have been
issued.
5.1.15 NOTE PURCHASE AGREEMENT
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The conditions precedent to the obligations of the Loan Participants
and the other requirements relating to the Aircraft and the Equipment Notes in
the Note Purchase Agreement have been satisfied.
5.1.16 PERFECTED SECURITY INTEREST
After giving effect to the filing of the FAA-Filed Documents and the
Financing Statements, Mortgagee shall have a duly-perfected first-priority
security interest in all of Owner Trustee's right, title, and interest in the
Aircraft, the Lease, and all other then-existing Collateral subject only to
Permitted Liens not of record.
5.1.17 NO MATERIALLY ADVERSE CHANGE
Since the date of Holdings's balance sheet referred to in (S) 6.1.7,
there has been no materially adverse change in Holdings's financial condition or
operations, except for matters disclosed in the financial statements referred to
in (S) 6.1.7.
5.2 CONDITIONS TO OWNER TRUSTEE'S OBLIGATIONS
Owner Trustee's obligation to direct the Participants to apply the
Commitments to pay Lessor's Cost on the Delivery Date is subject to the
satisfaction or Owner Trustee's waiver, on or before the Delivery Date, of the
conditions in this (S) 5.2.
5.2.1 NOTICE
Owner Trustee received the notice described in (S) 4.1 or, in the case
of a Delayed Delivery Date, (S) 4.3, when and as required thereby.
5.2.2 DOCUMENTS
Owner Trustee receives executed originals of the documents described in
(S) 5.1.2, except as otherwise provided therein, unless the failure to receive
any such document is the result of any action or inaction by Owner Trustee.
5.2.3 OTHER CONDITIONS PRECEDENT
Each of the conditions in (S)(S) 5.1.4, 5.1.6, 5.1.7, and 5.1.11 are
satisfied, unless the failure of any such condition to be satisfied is the
result of any action or inaction by Owner Trustee.
5.3 CONDITIONS TO MORTGAGEE'S OBLIGATIONS
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Mortgagee's obligation to authenticate the Equipment Notes on the
Delivery Date is subject to the satisfaction or Mortgagee's waiver, on or before
the Delivery Date, of the conditions in this (S) 5.3.
5.3.1 NOTICE
Mortgagee received the notice described in (S) 4.1 or, in the case of a
Delayed Delivery Date, (S) 4.3, when and as required thereby.
5.3.2 DOCUMENTS
Mortgagee receives executed originals of the documents described in (S)
5.1.2, except as otherwise provided therein, unless the failure to receive any
such document is the result of any action or inaction by Mortgagee.
5.3.3 OTHER CONDITIONS PRECEDENT
Each of the conditions in (S)(S) 5.1.4, 5.1.6, 5.1.7, and 5.1.11 have
been satisfied, unless the failure of any such condition to be satisfied is the
result of any action or inaction by Mortgagee.
5.4 CONDITIONS TO LESSEE'S OBLIGATIONS
Lessee's obligation to lease the Aircraft on the Delivery Date is
subject to the satisfaction or Lessee's waiver, on or before the Delivery Date,
of the conditions in this (S) 5.4.
5.4.1 DOCUMENTS
Lessee receives executed originals of the documents described in (S)
5.1.2, except as otherwise provided therein, and they are satisfactory to
Lessee, unless the failure to receive any such document is the result of any
action or inaction by Lessee.
5.4.2 SALES TAX
Lessee is satisfied that no sales, use, value-added,
goods-and-services, or like tax, and no stamp tax duty, is payable with respect
to the delivery of the Aircraft on the Delivery Date (to the extent that Lessee
could be liable therefor under (S) 9.3).
5.4.3 OTHER CONDITIONS
Each of the conditions in (S)(S) 5.1.3 (as to all Participants),
5.1.4, 5.1.5, 5.1.6, 5.1.7 (as to Mortgage Defaults' not constituting Lease
Defaults), 5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13, and 5.1.14 have been
satisfied or waived
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by Lessee, unless the failure of any such condition to be satisfied is the
result of any action or inaction by Lessee.
5.4.4 TAX LAW CHANGE
No Adverse Change in Tax Law has been enacted, promulgated, or proposed
on or before the Delivery Date. Lessee agrees to consider promptly, and to
consult with Owner Participant concerning, any such Adverse Change in Tax Law,
and to notify Owner Participant and Loan Participant promptly if Lessee
determines that an Adverse Change in Tax Law which has been enacted or
promulgated or, if proposed, has a substantial likelihood of becoming effective,
would cause Lessee to elect not to close the transactions contemplated by the
Lease and this Agreement. At any time on or before the Delivery Date, Lessee may
notify Owner Participant and Loan Participant that Lessee elects not to close
the transactions contemplated by the Lease and this Agreement as a result of the
enactment, promulgation, or proposal of any Adverse Change in Tax Law on or
before the Delivery Date, specifying such Adverse Change in Tax Law.
5.5 POST-REGISTRATION OPINION
Promptly after the registration of the Aircraft and the recordation of
the FAA-Filed Documents pursuant to the Transportation Code, Lessee will cause
FAA Counsel to deliver to Lessee, each Participant, Owner Trustee, and Mortgagee
a favorable opinion or opinions addressed to each of them with respect to such
registration and recordation.
6. REPRESENTATIONS AND WARRANTIES
6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES
Lessee represents and warrants to each Participant, Subordination
Agent, Owner Trustee, and Mortgagee that:
6.1.1 ORGANIZATION; QUALIFICATION
Lessee is a corporation duly incorporated, validly existing, and in
good standing under the Laws of Delaware, and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into and perform its obligations
under the Lessee Operative Agreements. Lessee is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which the
nature and extent of the business conducted by it, or the ownership of its
properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Materially Adverse Change to Lessee.
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6.1.2 CORPORATE AUTHORIZATION
Lessee has taken, or caused to be taken, all necessary corporate action
(including obtaining any consent or approval of stockholders required by its
articles of incorporation or by-laws) to authorize its execution, delivery, and
performance of its obligations under each of the Lessee Operative Agreements.
6.1.3 NO VIOLATION
Lessee's execution, delivery, and performance of its obligations under
the Lessee Operative Agreements do not and will not (a) violate any provision of
Lessee's articles of incorporation or by-laws, (b) violate any Law applicable to
or binding on Lessee, or (c) violate or constitute any default under (other than
any violation or default that would not result in a Materially Adverse Change to
Lessee), or result in the creation of any Lien (other than as permitted under
the Lease) upon the Aircraft under, any lease, loan, or other material agreement
to which Lessee is a party or by which Lessee or any of its properties is bound.
6.1.4 APPROVALS
Lessee's execution, delivery, and performance of its obligations under
the Lessee Operative Agreements do not and will not require the consent or
approval of, the giving of notice to, the registration with, the recording or
filing of any documents with, or the taking of any other action in respect of
(a) any trustee or other holder of any Debt of Lessee, or (b) any Government
Entity, other than (x) the FAA-Filed Documents and the Financing Statements (and
continuation statements periodically), and (y) filings, recordings, notices, or
other ministerial actions pursuant to any routine recording, contractual, or
regulatory requirements.
6.1.5 VALID AND BINDING AGREEMENTS
The Lessee Operative Agreements have been duly authorized, executed,
and delivered by Lessee, and (assuming their due authorization, execution, and
delivery by the other parties thereto) constitute legal, valid, and binding
obligations of Lessee and are enforceable against Lessee in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, and other similar Laws affecting the rights of creditors generally
and general principles of equity.
6.1.6 LITIGATION
Except as set forth in Holdings's most recent Annual Report on Form
10-K, filed by Lessee with the SEC before the Issuance Date, or in any Quarterly
Report on Form 10-Q or Current Report on Form 8-K filed by
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Holdings with the SEC subsequent to such Form 10-K but before the Issuance Date,
no action, claim, or proceeding is now pending or, to Lessee's Actual Knowledge,
threatened, against Lessee, Holdings, or any of their Affiliates, before any
Government Entity, that is reasonably likely to be determined adversely to
Lessee and if determined adversely to Lessee would result in a Materially
Adverse Change.
6.1.7 FINANCIAL CONDITION
Holdings's audited consolidated balance sheet for its most-recent
fiscal year ended before the Issuance Date, included in Holdings's most-recent
Annual Report on Form 10-K filed by Holdings with the SEC, and the related
consolidated statements of operations and cash flows for the period then ended,
have been prepared in accordance with GAAP and fairly present in all material
respects the financial condition of Holdings and its consolidated subsidiaries
as of such date and the results of its operations and cash flows for such
period, and since the date of such balance sheet, there has been no materially
adverse change in such financial condition or operations, except for matters
disclosed in (a) the financial statements referred to above, or (b) any
subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by
Holdings with the SEC before the Issuance Date.
6.1.8 REGISTRATION AND RECORDATION
Except for (a) registering the Aircraft with the FAA pursuant to the
Transportation Code in the name of Owner Trustee, (b) filing for recordation
(and recording) the FAA-Filed Documents, (c) filing the Financing Statements
(and continuation statements relating thereto at periodic intervals), (d)
Mortgagee's taking possession and retaining the chattel paper original
counterpart of the Lease, and (e) affixing the placards referred to in (S) 7.1.3
of the Lease, no further action, including filing or recording any document
(including any financing statement under UCC Article 9) is necessary in order to
establish and perfect Owner Trustee's right, title, and interest, and
Mortgagee's security interest, in the Aircraft and the Lease, as against Lessee
and any other Person, in any applicable jurisdiction in the United States. On
the Delivery Date, subject to making the filings described above and to
Mortgagee's taking possession of the chattel paper original counterpart of the
Lease, Mortgagee, shall have a duly-perfected first-priority Lien on all of the
then-existing items of the Collateral, free and clear of Liens (other than
Permitted Liens not of record).
6.1.9 UCC LOCATION
Lessee's chief executive office and chief place of business (as defined
in UCC Article 9) are located at 9955 AirTran Blvd., Orlando, FL 32807.
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6.1.10 NO DEFAULT
No Lease Default exists.
6.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to Lessee's Actual Knowledge, no circumstance, condition, act, or
event has occurred that, with the giving of notice or lapse of time, gives rise
to or constitutes an Event of Loss to the Airframe or any Engine.
6.1.12 COMPLIANCE WITH LAWS
(a) Lessee is a Citizen of the United States and a U.S. Air Carrier.
(b) Lessee holds all licenses, permits, and franchises from the
appropriate Government Entities necessary to authorize Lessee to engage in air
transportation and to carry on scheduled commercial passenger service as
currently conducted, except to the extent that the failure to hold any such
license, permit, or franchise would not give rise to a Materially Adverse Change
to Lessee.
(c) Lessee is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940.
6.1.13 SECURITIES LAWS
Neither Lessee nor any Person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or the Lease or any interest in the Trust Estate
and Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Mortgage, for sale to, or solicited any offer to acquire any
such interest or security from, or has sold any such interest or security to,
any Person in violation of the Securities Act.
6.1.14 BROKER'S FEES
No Person acting on behalf of Lessee is or will be entitled to any
broker's fee, commission, or finder's fee in connection with the Transactions,
except for fees payable to Lessee's Advisor(s), if any.
6.1.15 SECTION 1110
Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee
under the Mortgage), will be entitled to the benefits of Section 1110 (as
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currently in effect), with respect to the right to take possession of the
Airframe and Engines as provided in the Lease, in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.
6.1.16 TITLE
On the Delivery Date, Owner Trustee will receive good and marketable
title to the Aircraft free and clear of all Liens except Permitted Liens not of
record.
6.1.17 CONDITION OF AIRCRAFT
The Aircraft is fully equipped to operate in commercial service, does
not require any modifications, additions, or improvements for its intended use
by Lessee, and complies with all governmental requirements governing the service
in which the Aircraft is being used and is anticipated to be used by Lessee and
is in the condition required by the Lease. The Aircraft has been duly
certificated by the FAA as to type. A current and valid airworthiness
certificate issued by the FAA is in effect with respect to the Aircraft (or, if
not yet in effect because the Aircraft has not yet been FAA-registered, the
Aircraft is in such condition as to be immediately eligible for an FAA
airworthiness certificate upon FAA registration).
6.1.18 TAXES
On the Delivery Date, all sales, use, or transfer taxes then due and
payable upon the purchase of the Aircraft by Owner Trustee and on the leasing
thereof to Lessee will have been paid or, as between the parties to this
Agreement, Lessee shall be liable for the payment thereof. Except as set forth
in (S) 9, no fees or other charges in connection with the execution and delivery
of the Operative Agreements or the issuance of the Equipment Notes to be
delivered on the Delivery Date are payable for which, as between the parties to
this Agreement, Lessee is not liable.
6.1.19 INSURANCE
On the Delivery Date, the insurance required by the Lease is in full
force and effect, and all premiums which have become due or are due with respect
to the insurance required to be provided by Lessee in respect of the Aircraft or
required under (S) 11 of the Lease have been paid.
6.1.20 MARGIN REQUIREMENTS
Lessee will not directly or indirectly use any of the proceeds from the
issuance of the Equipment Notes, or from Owner Participant's acquisition of its
beneficial interest in the Trust Estate, so as to result in a violation of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.
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6.1.21 ERISA
No Plan maintained by Lessee or any entity required to be aggregated
with Lessee under Code (S) 414(b) or (c) (an "ERISA Affiliate") has incurred an
"accumulated funding deficiency" (within the meaning of ERISA), and neither
Lessee nor any ERISA Affiliate of Lessee has incurred any material liability to
the Pension Benefit Guaranty Corporation.
6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES
Owner Participant represents and warrants to Lessee, Loan Participants,
Subordination Agent, Owner Trustee, and Mortgagee that:
6.2.1 ORGANIZATION, ETC.
Owner Participant (a) is a corporation duly incorporated, validly
existing and in good standing under the Laws of the OP Jurisdiction, (b) has the
corporate power and authority to conduct the business in which it is currently
engaged, to own or hold under lease its properties, and to enter into and
perform its obligations under the Owner Participant Agreements, and (c) has [or
its guarantor has] a tangible net worth (exclusive of goodwill) greater than $50
million.
6.2.2 CORPORATE AUTHORIZATION
Owner Participant has taken (or caused to be taken) all necessary
corporate action (including obtaining any consent or approval of stockholders
required by its [certificate] of incorporation or by-laws) to authorize its
execution, delivery, and performance of its obligations under each of the Owner
Participant Agreements.
6.2.3 NO VIOLATION
Owner Participant's execution, delivery, and performance of its
obligations under each of the Owner Participant Agreements do not and will not
(a) violate any provision of Owner Participant's [certificate] of incorporation
or by-laws, (b) violate any Law applicable to or binding on Owner Participant,
or (c) violate or constitute any default under, or result in the creation of any
Lien (other than as provided for or otherwise permitted in the Operative
Agreements) upon the Trust Estate under, any lease, loan, or other material
agreement to which Owner Participant is a party or by which Owner Participant or
any of its properties is bound.
6.2.4 APPROVALS
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Owner Participant's execution, delivery, and performance of its
obligations under each of the Owner Participant Agreements do not and will not
require the consent or approval of, the giving of notice to, the registration
with, the recording or filing of any documents with, or the taking of any other
action in respect of (a) any trustee or other holder of any Debt of Owner
Participant, and (b) any Government Entity, other than filing the FAA-Filed
Documents and the Financing Statements.
6.2.5 VALID AND BINDING AGREEMENTS
The Owner Participant Agreements have been duly authorized, executed,
and delivered by Owner Participant, and (assuming the due authorization,
execution, and delivery by the other parties thereto) constitute legal, valid,
and binding obligations of Owner Participant and are enforceable against Owner
Participant in accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, and other similar Laws affecting the rights
of creditors generally and general principles of equity.
6.2.6 CITIZENSHIP
[IF APPLICABLE] Owner Participant is a Citizen of the United States.
6.2.7 NO LIENS
There are no Lessor Liens attributable to Owner Participant on all or
any part of the Trust Estate.
6.2.8 INVESTMENT BY OWNER PARTICIPANT
Owner Participant is acquiring its beneficial interest in the Trust
Estate for its own account, for investment and not with a view to any resale or
distribution thereof; provided, that, subject to the transfer restrictions in
(S) 10, its disposition of its beneficial interest in the Trust Estate shall at
all times be within its control.
6.2.9 ERISA
No part of the funds to be used by Owner Participant to acquire or hold
its interests in the Trust Estate directly or indirectly constitutes assets of a
Plan.
6.2.10 LITIGATION
There are no pending or, to Owner Participant's Actual Knowledge,
threatened actions or proceedings against Owner Participant before any
Government Entity that, if determined adversely to Owner Participant, would
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materially adversely affect Owner Participant's ability to perform its
obligations under the Owner Participant Agreements.
6.2.11 SECURITIES LAWS
Neither Owner Participant nor any Person authorized to act on its
behalf has directly or indirectly offered any beneficial interest in or Security
relating to the ownership of the Aircraft or any interest in the Trust Estate,
or any of the Equipment Notes or any other interest in or Security under the
Mortgage, for sale to, or solicited any offer to acquire any of the same from,
any Person in violation of the Securities Act or applicable state securities
Laws.
6.2.12 BROKER'S FEES
No Person acting on behalf of Owner Participant is or will be entitled
to any broker's fee, commission, or finder's fee in connection with the
Transactions.
6.3 FSB'S REPRESENTATIONS AND WARRANTIES
FSB represents and warrants to Lessee, Owner Participant, Loan
Participants, Subordination Agent, and Mortgagee that:
6.3.1 ORGANIZATION, ETC.
FSB is a national banking association duly organized, validly existing
and in good standing under the Laws of the United States, holding a valid
certificate to do business as a national banking association with banking
authority to execute, deliver, and perform its obligations under the Owner
Trustee Agreements.
6.3.2 CORPORATE AUTHORIZATION
FSB has taken (or caused to be taken) all necessary corporate action
(including obtaining any consent or approval of stockholders required by Law or
by its articles of association or by-laws) to authorize the execution and
delivery by FSB or Owner Trustee, of each of the Owner Trustee Agreements, and
the performance of its obligations thereunder.
6.3.3 NO VIOLATION
FSB's and Owner Trustee's execution, delivery, and performance of their
respective obligations under the Owner Trustee Agreements do not and will not
(a) violate any provision of FSB's articles of association or by-laws, (b)
violate any Utah Law or federal banking Law applicable to or binding on Owner
Trustee or FSB, or (c) violate or constitute any default under, or result in the
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creation of any Lien (other than the Lien of the Mortgage) upon any property of
FSB, Owner Trustee, or any of FSB's subsidiaries under, any lease, loan, or
other material agreement to which FSB or Owner Trustee is a party or by which
FSB, Owner Trustee, or any of their properties is or may be bound or affected.
6.3.4 APPROVALS
FSB's and Owner Trustee's execution, delivery, and performance of their
respective obligations under the Owner Trustee Agreements do not and will not
require the consent, approval, or authorization of, the giving of notice to, the
registration with, the recording or filing of any documents with, or the taking
of any other action in respect of, (a) any trustee or other holder of any Debt
of FSB, or (b) any Government Entity governing banking and trust powers, other
than filing the FAA-Filed Documents and the Financing Statements.
6.3.5 VALID AND BINDING AGREEMENTS
The Owner Trustee Agreements have been duly authorized, executed, and
delivered by FSB and Owner Trustee, and (assuming the due authorization,
execution, and delivery thereof by the other parties thereto) constitute legal,
valid, and binding obligations of FSB and Owner Trustee and are enforceable
against FSB and Owner Trustee in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, and other similar Laws
affecting the rights of creditors generally and general principles of equity.
6.3.6 CITIZENSHIP
FSB is a Citizen of the United States.
6.3.7 CHIEF EXECUTIVE OFFICE
The chief executive office (as defined in UCC Article 9) of Owner
Trustee is located at 79 South Main Street, Salt Lake City, Utah 84111.
6.3.8 TITLE
On the Delivery Date, Owner Trustee shall have received whatever title
to the Aircraft as was conveyed to it by Seller.
6.3.9 NO LIENS; FINANCING STATEMENTS
There are no Lessor Liens attributable to FSB or Owner Trustee in
respect of all or any part of the Aircraft, Trust Estate, or the Collateral.
Except for the Financing Statements, neither FSB nor Owner Trustee has executed
any UCC financing statement relating to the Aircraft or the Lease.
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6.3.10 LITIGATION
There are no pending or, to FSB's Actual Knowledge, threatened actions
or proceedings against FSB or Owner Trustee before any Government Entity that,
if determined adversely to FSB, would materially adversely affect the ability of
FSB or Owner Trustee to perform its obligations under the Owner Trustee
Agreements.
6.3.11 SECURITIES LAWS
Neither FSB, nor any Person authorized to act on its behalf, has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicited any offer to acquire any such interest or security from, or has
sold any such interest or security to, any Person other than the Participants,
except for the offering and sale of the Pass-Through Certificates.
6.3.12 EXPENSES AND TAXES
There are no Expenses or Taxes that may be imposed on or asserted
against the Trust, the Trust Estate, or any part thereof or any interest
therein, the Collateral, Lessee, Owner Participant, any Pass-Through Trustee,
Subordination Agent, Owner Trustee, or Mortgagee (except as to Owner Trustee,
Taxes imposed on the fees payable to Owner Trustee) under the laws of Utah in
connection with Owner Trustee's execution, delivery, or performance of any
Operative Agreement or in connection with the issuance of the Equipment Notes,
which Expenses or Taxes would not have been imposed if Owner Trustee had not (x)
had its principal place of business in Utah, (y) performed (in its individual
capacity or as Owner Trustee) any or all of its duties under the Operative
Agreements in Utah, or (z) engaged in any activities unrelated to the
transactions contemplated by the Operative Agreements in Utah.
6.4 SSB'S REPRESENTATIONS AND WARRANTIES
SSB represents and warrants (with respect to (S) 6.4.10, solely in its
capacity as Subordination Agent) to Lessee, Owner Participant, and Owner Trustee
that:
6.4.1 ORGANIZATION, ETC.
SSB is a national banking association corporation duly organized,
validly existing and in good standing under the Laws of the United States, with
banking and trust authority to execute, deliver, and perform its obligations
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under the Mortgagee Agreements, the Pass-Through Trustee Agreements, and the
Subordination Agent Agreements.
6.4.2 CORPORATE AUTHORIZATION
SSB has taken (or caused to be taken) all necessary corporate action
(including obtaining any consent or approval of stockholders required by Law or
by its certificate of incorporation or by-laws) to authorize the execution and
delivery by SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(as applicable) of the Mortgagee Agreements, the Pass-Through Trustee
Agreements, and the Subordination Agent Agreements and the performance by SSB,
Mortgagee, each Pass-Through Trustee, and Subordination Agent (as applicable) of
its obligations thereunder.
6.4.3 NO VIOLATION
The execution and delivery by SSB, Mortgagee, each Pass-Through
Trustee, and Subordination Agent (as applicable) of the Mortgagee Agreements,
the Pass-Through Trustee Agreements, and the Subordination Agent Agreements, and
the performance by SSB, Mortgagee, each Pass-Through Trustee, and Subordination
Agent (as applicable) of its obligations thereunder, do not and will not (a)
violate any provision of SSB's articles of association or by-laws, (b) violate
any Law applicable to or binding on SSB governing SSB's banking or trust powers
or (except in the case of any Law relating to any Plan) Mortgagee, any
Pass-Through Trustee, or Subordination Agent, or (c) violate or constitute any
default under, or result in the creation of any Lien (other than the Lien of the
Mortgage) upon any property of SSB, Mortgagee, any Pass-Through Trustee,
Subordination Agent, or any of SSB's subsidiaries under any lease, loan, or
other agreement to which SSB, Mortgagee, any Pass-Through Trustee, or
Subordination Agent is a party or by which SSB, Mortgagee, any Pass-Through
Trustee, Subordination Agent, or any of their properties is bound.
6.4.4 APPROVALS
The execution and delivery by SSB, Mortgagee, each Pass-Through
Trustee, and Subordination Agent (as applicable) of the Mortgagee Agreements,
the Pass-Through Trustee Agreements, and the Subordination Agent Agreements, and
the performance by SSB, Mortgagee, each Pass-Through Trustee, and Subordination
Agent (as applicable) of its obligations thereunder, do not and will not require
the consent, approval, or authorization of, the giving of notice to, the
registration with, the recording or filing of any document with, or the taking
of any other action in respect of (a) any trustee or other holder of any Debt of
SSB, or (b) any Government Entity governing SSB's banking or trust powers.
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6.4.5 VALID AND BINDING AGREEMENTS
The Mortgagee Agreements, the Pass-Through Trustee Agreements, and the
Subordination Agent Agreements have been duly authorized, executed, and
delivered by SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(as applicable), and (assuming the due authorization, execution, and delivery by
the other parties thereto) constitute legal, valid, and binding obligations of
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent (as
applicable) and are enforceable against SSB, Mortgagee, each Pass-Through
Trustee, and Subordination Agent (as applicable) in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency, or other
similar Laws affecting the rights of creditors generally and general principles
of equity.
6.4.6 CITIZENSHIP
SSB is a Citizen of the United States.
6.4.7 NO LIENS
There are no Lessor Liens attributable to SSB in respect of all or any
part of the Trust Estate or the Collateral.
6.4.8 LITIGATION
There are no pending or, to SSB's Actual Knowledge, threatened actions
or proceedings against SSB, Mortgagee, any Pass-Through Trustee, or
Subordination Agent, before any Government Entity that, if determined adversely
to SSB, Mortgagee, any Pass-Through Trustee, or Subordination Agent, would
materially adversely affect the ability of SSB, Mortgagee, any Pass-Through
Trustee, or Subordination Agent to perform its obligations under any of the
Mortgagee Agreements, the Pass-Through Trustee Agreements, or the Subordination
Agent Agreements.
6.4.9 SECURITIES LAWS
Neither SSB nor any Person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Collateral or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicited any offer to acquire any such interest or security from, or has
sold any such interest or security to, any Person other than the Participants,
except for the offering and sale of the Pass-Through Certificates.
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6.4.10 INVESTMENT
Subordination Agent has not directly or indirectly offered any
Equipment Note for sale to any Person or solicited any offer to acquire any
Equipment Notes from any Person, nor has the Subordination Agent authorized
anyone to act on its behalf to offer directly or indirectly any Equipment Note
for sale to any Person, or to solicit any offer to acquire any Equipment Note
from any Person; and Subordination Agent is not in default under any Liquidity
Facility.
6.4.11 TAXES
There are no Taxes payable by any Pass-Through Trustee or SSB imposed
by Connecticut or any political subdivision or taxing authority thereof in
connection with such Pass-Through Trustee's or SSB's execution, delivery, and
performance of this Agreement or any Pass-Through Trustee Agreement (other than
franchise or other taxes based on or measured by any fees or compensation
received by any such Pass-Through Trustee or SSB for services rendered in
connection with the transactions contemplated by any of the Pass-Through Trust
Agreements), and there are no Taxes payable by any Pass-Through Trustee or SSB
imposed by Connecticut or any political subdivision of such state in connection
with the acquisition, possession, or ownership by any such Pass-Through Trustee
of any of the Equipment Notes (other than franchise or other taxes based on or
measured by any fees or compensation received by any such Pass-Through Trustee
or SSB for services rendered in connection with the transactions contemplated by
any of the Pass-Through Trust Agreements), and, assuming that the trusts created
by the Pass-Through Trust Agreements will not be taxable as corporations, but,
rather, that each will be characterized as a grantor trust under Part I, subpart
E of Subchapter J of the Code or as a partnership under Subchapter K of the
Code, such trusts will not be subject to any Taxes imposed by Connecticut or any
political subdivision of such state.
6.4.12 CONTROL
SSB is not an Affiliate of Owner Participant or Owner Trustee.
6.4.13 BROKER'S FEES
No Person acting on behalf of SSB, Mortgagee, any Pass-Through Trustee,
or Subordination Agent is or will be entitled to any broker's fee, commission,
or finder's fee in connection with the Transactions.
7. COVENANTS
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7.1 LESSEE'S COVENANTS
Lessee agrees for the benefit of Owner Participant, Loan Participants,
Owner Trustee, and Mortgagee as follows:
7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Lessee shall at all times maintain its corporate existence, except as
permitted by (S) 13.2 of the Lease, and shall at all times remain a U.S. Air
Carrier.
7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Lessee will give to Owner Participant, Owner Trustee, and Mortgagee
timely written notice (but in any event at least 30 days before the expiration
of the period of time specified under applicable Law to prevent lapse of
perfection) of any relocation of its chief executive office (as defined in UCC
Article 9), and will promptly take any action required by (S) 7.1.3(c) as a
result of such relocation.
7.1.3 CERTAIN ASSURANCES
(a) Lessee shall duly execute, acknowledge, and deliver (or cause to be
executed, acknowledged, and delivered) all such further documents, and shall do
and cause to be done such further things, as Owner Participant, Owner Trustee,
or Mortgagee reasonably requests to accomplish the purposes of the Operative
Agreements, provided that no document so executed by Lessee will expand any
obligations or limit any rights of Lessee in respect of the Transactions.
(b) Lessee shall promptly take such action with respect to the
recording, filing, re-recording, and refiling of the Lease, the Trust Agreement,
and the Mortgage, and any supplements thereto, as shall be necessary to
establish, perfect, and protect Owner Trustee's interests and rights in and to
the Aircraft and under the Lease and the perfection and priority of the Lien
created by the Mortgage. Lessee shall furnish to Owner Participant or Owner
Trustee such information (other than with respect to the citizenship of Owner
Participant and Owner Trustee) in Lessee's possession or otherwise reasonably
available to Lessee and required to enable Owner Participant or Owner Trustee to
apply to register the Aircraft under the Transportation Code (subject to
Lessee's rights under (S) 7.1.2 of the Lease), and shall pay or cause to be paid
all out-of-pocket costs and expenses thereof (including reasonable attorneys'
fees and disbursements).
(c) Lessee will cause the FAA-Filed Documents, the Financing
Statements, and all continuation statements (and any amendments necessitated by
any combination, consolidation, or merger pursuant to (S) 13.2
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of the Lease, or any relocation of its chief executive office) in respect of the
Financing Statements to be prepared and, subject only to the execution and
delivery thereof by Owner Trustee or Mortgagee (as applicable), duly and timely
filed and recorded, or filed for recordation, to the extent permitted under the
Transportation Code (with respect to the FAA-Filed Documents) or the UCC or
similar law of any other applicable jurisdiction (with respect to such other
documents).
(d) If the Aircraft is registered in a country other than the United
States pursuant to (S) 7.1.2 of the Lease and (S) 7.6.11 hereof, Lessee will
furnish to Owner Trustee, Mortgagee, and each Participant annually while the
Aircraft is not U.S.-registered (starting with the calendar year after such
registration is effected) an opinion of special counsel reasonably satisfactory
to Owner Trustee and Mortgagee stating that, in the opinion of such counsel,
either (1) such action has been taken with respect to the recording, filing,
re-recording, and re-filing of the Operative Agreements and any supplements and
amendments thereto as is necessary to establish, perfect, and protect Owner
Trustee's and Mortgagee's right, title and interest in and to the Aircraft and
the Operative Agreements, reciting the details of such actions, or (2) no such
action is necessary to maintain the perfection of such right, title, and
interest.
7.1.4 SECURITIES LAWS
Neither Lessee nor any Person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or any of the Equipment Notes or any other interest in or
security under the Mortgage for sale to, or solicit any offer to acquire any
such interest or security from, or sell any such interest or security to, any
Person in violation of the Securities Act or applicable state or foreign
securities Laws.
7.1.5 ASSET DISPOSITIONS
Lessee will not transfer or assign assets, or pay dividends to any
Affiliate, subsidiary, or related company, if such a transfer, assignment, or
payment would materially impair Lessee's ability to meet its obligations under
the Operative Agreements.
7.2 OWNER PARTICIPANT'S COVENANTS
Owner Participant agrees for the benefit of Lessee, and (except with
respect to (S) 7.2.4) Loan Participants, Owner Trustee, and Mortgagee, as
follows:
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7.2.1 LIENS
Owner Participant (a) (x) will not directly or indirectly create,
incur, assume, or suffer to exist any Lessor Lien attributable to it on or with
respect to all or any part of the Trust Estate, the Collateral, or the Aircraft,
and (y) will, at its own cost and expense, promptly take such action as is
necessary to discharge any Lessor Lien attributable to Owner Participant on all
or any part of the Trust Estate, the Collateral or the Aircraft; provided, that
Owner Participant may in good faith by appropriate proceedings contest claims or
charges resulting in any such Lien as long as such contest does not involve any
material danger of the sale, forfeiture, loss, or loss of use of the Aircraft or
the interest of Lessor, Mortgagee, or any Participant therein; and (b) will hold
harmless and indemnify Lessee, Owner Trustee, each Note Holder, Mortgagee, each
of their respective Affiliates, successors, and permitted assigns, the Trust
Estate, and the Collateral from and against (1) any and all Expenses, (2) any
reduction in the amount payable out of the Trust Estate or the Collateral, and
(3) any interference with the possession, operation, or other use of all or any
part of the Aircraft imposed on, incurred by, or asserted against any of the
foregoing as a consequence of any such Lessor Lien.
7.2.2 REVOCATION OF TRUST AGREEMENT
(a) Owner Participant will comply with the provisions of the Trust
Agreement applicable to it, will not terminate or revoke the Trust Agreement or
the trusts created thereunder without the prior written consent of Lessee and
Mortgagee, and will not amend, modify, or supplement the Trust Agreement, or
waive any of the provisions thereof, if such amendment, modification,
supplement, or waiver would have a materially adverse effect on Lessee, without
the consent of Lessee, or any adverse effect on Mortgagee or any Note Holder,
without the consent of Mortgagee.
(b) Notwithstanding (S) 7.2.2(a), Owner Participant may at any time
remove Owner Trustee pursuant to (S) 9.1 of the Trust Agreement or terminate the
Trust Agreement pursuant to (S) 11.2 of the Trust Agreement (subject to the
proviso thereto).
7.2.3 CHANGE OF SITUS OF OWNER TRUST
If, at any time, any Tax Indemnitee or the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to (S) 9.3 of this Agreement
and if, as a consequence thereof, Lessee requests that the situs of the Trust be
moved to another state in the United States from the state in which it is then
located, the situs of the Trust may be moved with the written consent of Owner
Participant (which consent shall not be unreasonably withheld) and Owner
Participant will take whatever action is reasonably necessary to accomplish such
removal; provided, that, in any event, (a) Lessee shall provide such additional
tax indemnification as Owner Participant and the Note Holders or
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the Pass-Through Trustees reasonably request to cover any additional
unindemnified Taxes or loss of Tax benefits described in the assumptions in the
Tax Indemnity Agreement resulting from such change in situs, (b) the rights and
obligations under the Operative Agreements of Owner Participant, the Note
Holders, Pass-Through Trustees, and Mortgagee shall not be adversely affected as
a result of the taking of such action, (c) the Lien of the Mortgage on the
Collateral shall not be adversely affected by such action, and Lessee and Owner
Trustee shall execute and deliver such documents as Mortgagee reasonably
requests to protect and maintain the perfection and priority of such Lien, (d)
Owner Participant, Pass-Through Trustees, and Mortgagee shall receive an opinion
or opinions of counsel (which counsel is reasonably satisfactory to Owner
Participant, Pass-Through Trustees, and Mortgagee), in scope, form, and
substance reasonably satisfactory to Owner Participant, Pass-Through Trustees,
and Mortgagee, to the effect that (1) the Trust, as thus removed, remains a
validly-established trust, (2) any amendments to the Trust Agreement
necessitated by such removal have been duly authorized, executed, and delivered
and constitute valid and binding obligations of such parties, enforceable in
accordance with their terms, (3) covering such other matters as Owner
Participant, Pass-Through Trustees, or Mortgagee reasonably request, (e) if such
removal involves the replacement of Owner Trustee, then Owner Participant,
Pass-Through Trustees, and Mortgagee shall receive an opinion of counsel to such
successor Owner Trustee, in form and substance reasonably satisfactory to Owner
Participant, Pass-Through Trustees, and Mortgagee, covering the matters
described in the opinion delivered pursuant to (S) 5.1.2(t)(4), and (f) Lessee
shall indemnify and hold harmless Owner Participant, Note Holders, Pass-Through
Trustees, FSB, and Owner Trustee, on a net after-tax basis, against any and all
reasonable out-of-pocket costs and expenses (including attorneys' fees and
disbursements), fees and expenses of any new owner trustee, registration,
recording, or filing fees, and taxes incurred by Owner Participant, Note
Holders, Pass-Through Trustees, or Owner Trustee in connection with such change
of situs. Owner Participant agrees, for Lessee's benefit, that Owner Participant
will not consent to or direct a change in the situs of the Trust Estate without
Lessee's prior written consent.
7.2.4 COMPLIANCE WITH LEASE PROVISIONS
Owner Participant agrees, solely for Lessee's benefit, to comply with
the express provisions applicable to Owner Participant in the Lease.
7.2.5 SECURITIES ACT
Owner Participant will not directly or indirectly offer any beneficial
interest or security relating to the ownership of the Aircraft or any interest
in the Trust Estate or any of the Equipment Notes or any other interest in or
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security under the Mortgage for sale to, or solicit any offer to acquire any
such interest or security from, or sell any such interest or security to, any
Person in violation of the Securities Act or applicable state or foreign
securities Laws, provided, that this (S) 7.2.5 shall not impose on Owner
Participant any responsibility with respect to any such offer, sale, or
solicitation by any other party hereto.
7.2.6 REGARDING OWNER TRUSTEE
Owner Participant will cause Owner Trustee to perform its obligations
under each Owner Trustee Agreement.
7.3 FSB'S AND OWNER TRUSTEE'S COVENANTS
FSB and Owner Trustee agree for the benefit of Lessee, Owner
Participant, each Note Holder, and Mortgagee as follows:
7.3.1 LIENS
FSB (a) will not directly or indirectly create, incur, assume, or
suffer to exist any Lessor Lien attributable to it or Owner Trustee on all or
any part of the Trust Estate, the Collateral, or the Aircraft, (b) will, at its
own cost and expense, promptly take such action as is necessary to discharge any
Lessor Lien attributable to FSB or Owner Trustee on all or any part of the Trust
Estate, the Collateral, or the Aircraft, and (c) will personally hold harmless
and indemnify Lessee, Owner Participant, each Note Holder, Mortgagee, each of
their Affiliates, successors, and permitted assigns, the Trust Estate, and the
Collateral from and against (1) any and all Expenses, (2) any reduction in the
amount payable out of the Trust Estate or the Collateral, and (3) any
interference with the possession, operation, or other use of all or any part of
the Aircraft imposed on, incurred by, or asserted against any of the foregoing
as a consequence of any such Lessor Lien.
7.3.2 OTHER BUSINESS
Owner Trustee will not enter into any business or other activity except
as contemplated by the Operative Agreements.
7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
FSB and Owner Trustee will give to Lessee, each Participant, and
Mortgagee 30 days' prior written notice of any relocation of its chief executive
office (as defined in UCC Article 9), and will promptly take any action required
by (S) 7.3.8 as a result of such relocation.
7.3.4 SECURITIES ACT
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Neither FSB nor Owner Trustee will directly or indirectly offer any
beneficial interest or Security relating to the ownership of the Aircraft or any
interest in the Trust Estate or any of the Equipment Notes or any other interest
in or security under the Mortgage for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any Person in violation of the Securities Act or applicable state or foreign
securities Laws, provided, that the foregoing shall not impose on FSB or Owner
Trustee any responsibility with respect to any such offer, sale, or solicitation
by any other party hereto.
7.3.5 PERFORMANCE OF AGREEMENTS
Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.
7.3.6 RELEASE OF LIEN OF MORTGAGE
In each instance referred to in the Lease in which a transfer of any
property is required to be made by Owner Trustee to Lessee or any other Person
(other than Mortgagee or Owner Participant), Owner Trustee shall, at Lessee's
request and expense, use reasonable efforts to procure from Mortgagee the prompt
release of the Lien of the Mortgage with respect to such property.
7.3.7 NOTICES; DOCUMENTS
If any claim with respect to any liabilities is filed against Owner
Trustee and Owner Trustee has Actual Knowledge thereof, then Owner Trustee shall
promptly notify Lessee and Mortgagee in writing thereof. Owner Trustee further
agrees to provide to Lessee promptly any documents (including the certificate of
aircraft registration) that it receives from the FAA with respect to the
Aircraft.
7.3.8 FILINGS
After the Delivery Date, Owner Trustee shall duly execute and deliver
to Lessee all filings and recordings (including all filings and UCC financing
statements under the Transportation Code and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office), prepared and delivered to it by Lessee, required to perfect Owner
Trustee's title to the Aircraft and the Lien of the Mortgage (or to maintain
such perfection) and to make such title and Lien valid and enforceable.
7.3.9 TRUST AGREEMENT
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FSB and Owner Trustee hereby (a) agree for the benefit of Lessee, Loan
Participants, and Mortgagee not to amend, supplement, terminate, or otherwise
modify any provision of the Trust Agreement in a manner that adversely affects
the rights of any such party without the prior written consent of such party,
and (b) agree for the benefit of Lessee, Loan Participant, and Mortgagee not to
revoke the trust created by the Trust Agreement so long as the Mortgage remains
undischarged or if such revocation would have an adverse effect on Lessee.
Nothing in this Agreement shall impair any right under the Trust Agreement of
FSB to resign as Owner Trustee in accordance with the provisions of the Trust
Agreement.
7.4 SSB'S COVENANTS
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
agree for the benefit of Lessee, Owner Participant, and Owner Trustee as
follows:
7.4.1 LIENS
SSB (a) will not directly or indirectly create, incur, assume, or
suffer to exist any Lessor Lien attributable to it on or with respect to all or
any part of the Trust Estate, the Collateral, or the Aircraft, (b) will, at its
own cost and expense, promptly take such action as is necessary to discharge any
Lessor Lien attributable to SSB on all or any part of the Trust Estate, the
Collateral, or the Aircraft, and (c) will personally hold harmless and indemnify
Lessee, Owner Participant, each Note Holder, Owner Trustee, each of their
respective Affiliates, successors, and permitted assigns, the Trust Estate, and
the Collateral from and against (1) any and all Expenses, (2) any reduction in
the amount payable out of the Trust Estate or the Collateral, and (3) any
interference with the possession, operation, or other use of all or any part of
the Aircraft, imposed on, incurred by, or asserted against any of the foregoing
as a consequence of any such Lessor Lien.
7.4.2 SECURITIES ACT
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(respectively) will not offer any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Collateral or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicit any offer to acquire any such interest or security from, or sell
any such interest or security to, any Person in violation of the Securities Act
or applicable state or foreign securities Laws, provided, that the foregoing
shall not impose on SSB any responsibility with respect to any such offer, sale,
or solicitation by any other party hereto or the initial sale of the Equipment
Notes to Subordination Agent.
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7.4.3 PERFORMANCE OF AGREEMENTS
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(respectively) shall perform its obligations under the Mortgagee Agreements, the
Pass-Through Trustee Agreements, and the Subordination Agent Agreements in
accordance with their terms.
7.4.4 WITHHOLDING TAXES
SSB shall indemnify (on an after-tax basis) and hold harmless Lessee,
Lessor, and Owner Participant against any United States withholding taxes (and
related interest, penalties, and additions to tax) as a result of SSB's failure
to withhold on payments to any Note Holder who does not provide to Mortgagee
necessary certificates or forms to substantiate the right to exemption from such
withholding tax.
7.5 NOTE HOLDERS' COVENANTS
Each Note Holder (including Subordination Agent), as to itself only,
agrees for the benefit of Lessee, Owner Participant, Owner Trustee, and
Mortgagee as follows:
7.5.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on
an after-tax basis) and hold harmless Lessee, Lessor, Owner Participant, and
Mortgagee against any United States withholding taxes (and related interest,
penalties, and additions to tax) as a result of the inaccuracy or invalidity of
any certificate or form provided by such Note Holder to Mortgagee in connection
with such withholding taxes. Any amount payable under this (S) 7.5.1 shall be
paid within 30 days after the pertinent Note Holder receives a written demand
therefor.
7.5.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (1) not transfer any Equipment Note or
interest therein in violation of the Securities Act or applicable state or
foreign securities Law; provided, that the foregoing provisions of this (S)
7.5.2(a) shall not impose on such Note Holder any responsibility for any such
offer, sale, or solicitation by any other party hereto, and (2) perform and
comply with the obligations specified to be imposed on it (as a Note Holder)
under the Mortgage and the Equipment Notes.
(b) Except as otherwise required by the terms of (S) 2.13 of the
Mortgage or (S) 11 hereof, such Note Holder will not sell, assign, convey,
exchange, or otherwise transfer any Equipment Note or any interest in, or
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represented by, any Equipment Note (this provision not being applicable to the
Pass-Through Certificates) unless the proposed transferee thereof first provides
Lessee and Owner Participant with both of the following:
(1) a written representation and covenant that either (aa) no
portion of the funds it uses to purchase, acquire, and hold such
Equipment Note or interest directly or indirectly constitutes, or may
be deemed under the Code or ERISA or any rulings, regulations, or court
decisions thereunder to constitute, the assets of any Plan, or (bb) the
transfer, and subsequent holding, of such Equipment Note or interest
shall not involve or give rise to a transaction that constitutes a
prohibited transaction within the meaning of ERISA (S) 406 or Code (S)
4975(c)(1) involving Lessee, Owner Participant, a Pass-Through Trustee,
Subordination Agent, or the proposed transferee (other than a
transaction that is exempted from the prohibitions of such sections by
applicable provisions of ERISA or the Code or administrative exemptions
or regulations issued thereunder); and
(2) a written covenant that it will not transfer any
Equipment Note or any interest in, or represented by, any Equipment
Note unless the subsequent transferee also makes the representation
described in clause (1) of this (S) 7.5.2(b) and agrees to comply with
this clause (2).
7.6 OTHER AGREEMENTS
7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES
Lessee, Owner Participant, and Owner Trustee agree that for all
purposes, after the Closing, Owner Trustee will be the owner of the Aircraft
(except that Owner Participant will be the owner for income tax purposes) and
Lessee will be the lessee thereof. No transfer, by operation of Law or
otherwise, of Owner Participant's beneficial interest in and to the Trust Estate
shall operate to transfer legal title to any part of the Trust Estate to any
transferee thereof.
7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS
Lessee, each Participant, each Note Holder, FSB, Owner Trustee, SSB,
and Mortgagee agree for the benefit of each of the others that it will not
commence or join in any proceeding under the Bankruptcy Code to commence a case
under (S) 303 of the Bankruptcy Code against the Trust Estate. Nothing contained
herein shall be deemed to preclude any Participant, any Note Holder, FSB, Owner
Trustee, SSB, or Mortgagee from filing any claim against the Trust Estate in any
case commenced against the Trust Estate.
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7.6.3 CERTAIN BANKRUPTCY MATTERS
If (a) all or any part of the Trust Estate becomes the property of, or
Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions (including Bankruptcy Code (S) 1111(b)), FSB or Owner
Participant is required, by reason of FSB's or Owner Participant's being held to
have recourse liability to any Note Holder or Mortgagee directly or indirectly
(other than the recourse liability of FSB or Owner Participant under this
Agreement or the Mortgage or by separate agreement), to make payment on account
of any amount payable as principal, Make-Whole Amount (if any), interest, or
other amounts on the Equipment Notes, and (c) any Note Holder or Mortgagee
actually receives any Excess Amount (as defined below) which reflects any
payment by FSB or Owner Participant on account of clause (b) of this paragraph,
then such Note Holder or Mortgagee shall promptly refund to FSB or Owner
Participant (whichever shall have made such payment) such Excess Amount.
For purposes of this (S) 7.6.3, "Excess Amount" means the amount by
which such payment exceeds the amount that would have been received by a Note
Holder or Mortgagee if FSB or Owner Participant had not become subject to the
recourse liability referred to in clause (b) of the preceding paragraph. Nothing
in this (S) 7.6.3 shall prevent a Note Holder or Mortgagee from enforcing any
personal recourse obligation (and retaining the proceeds thereof) of FSB or
Owner Participant under this Agreement (other than as referred to in clause (b)
of the preceding paragraph) or the Mortgage (including any exhibits or annexes
thereto) or from retaining any amount paid by Owner Participant under (S) 2.13
or (S) 4.03 of the Mortgage.
7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING
(a) Each of Owner Participant, each Pass-Through Trustee, Subordination
Agent, each Note Holder, Owner Trustee, and Mortgagee agrees (as to itself) for
the benefit of Lessee that, unless a Lease Event of Default exists, such Person
shall not interfere (and shall not permit any Affiliate or other Person claiming
by, through, or under it to interfere) with Lessee's rights in accordance with
the Lease to the quiet enjoyment, possession, and use of the Aircraft during the
Term.
(b) Any assignment, sale, transfer, or other conveyance of the Aircraft
by Owner Trustee made pursuant to the terms of this Agreement or the Lease shall
bind Owner Participant, and shall be effective to transfer or convey all right,
title, and interest of Owner Trustee and Owner Participant in and to the
Aircraft. No purchaser or other grantee shall be required to inquire as to the
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authorization, necessity, expediency, or regularity of such assignment, sale,
transfer, or conveyance, or as to the application of any sale or other proceeds
with respect thereto by Owner Trustee, as regards Owner Participant.
7.6.5 RELEASE OF LIEN OF MORTGAGE
Each of Lessee, Lessor, and Mortgagee agrees that in each instance
referred to in the Lease in which a transfer of any property is required to be
made by Lessor to Lessee or any other Person (other than Mortgagee), Mortgagee
shall, upon request of Lessor and compliance with the applicable provisions of
the Lease and the Mortgage (including payment of all amounts then due and
payable to each Liquidity Provider as Supplemental Rent), promptly execute (at
Lessee's cost and expense) such instruments as Lessor or Lessee reasonably
requests to evidence the release of the Lien of the Mortgage on such property.
7.6.6 NON-RECOURSE
Loan Participant and Mortgagee agree that (a) obligations of Owner
Trustee under the Mortgage or any other Operative Agreement and with respect to
the Equipment Notes shall be non-recourse to Owner Participant and to FSB, and
(b) they will look solely to the income and proceeds from the Trust Estate and
the Collateral to the extent available for distribution to Note Holder or
Mortgagee as provided in the Mortgage, and neither Owner Participant nor FSB
will be personally liable to Loan Participant or Mortgagee for any amounts
payable by Owner Trustee under the Mortgage or any other Operative Agreement;
provided, that the foregoing is not intended nor shall it be construed to limit
any recourse liability of Owner Participant or FSB to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any representation or warranty
or covenant given by such Person (in the case of FSB, in its individual
capacity).
7.6.7 OTHER DOCUMENTS; AMENDMENT
(a) Each of Owner Participant and Owner Trustee hereby agrees for the
benefit of Lessee, the Loan Participants, and Mortgagee not to amend,
supplement, or otherwise modify any provision of the Trust Agreement in a manner
that could adversely affect such party, without the prior written consent of
such party. Notwithstanding the foregoing, so long as the Lease has not been
terminated or expired, each Participant, Mortgagee, and Owner Trustee hereby
agree for the benefit of Lessee that, without Lessee's consent, they will not
amend, supplement, or otherwise modify (1) Article III, Article IX, or (S) 2.05
of the Mortgage, (2) any provision of any Operative Agreement that will affect
the stated principal amount of or premium or interest on the
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Equipment Notes, or (3) any other provision of the Mortgage or Equipment Notes
in a manner that could adversely affect Lessee. Mortgagee and Owner Trustee
agree to furnish promptly to Lessee copies of any supplement, amendment, waiver,
or modification of any of the Operative Agreements to which Lessee is not a
party. Each Loan Participant agrees that it will not take any action in respect
of the Collateral except through Mortgagee pursuant to the Mortgage or as
otherwise permitted by the Mortgage.
(b) Owner Trustee agrees to join with Lessee to the extent that action
on its part is necessary or appropriate (1) to cause the following to be duly
accomplished in accordance with applicable United States federal Law by the time
the Aircraft is delivered under this Agreement and the Lease: (aa) to apply to
register the Aircraft in Owner Trustee's name, and (bb) all related action
necessary in order for Lessee to have temporary or permanent authority to
operate the Aircraft as contemplated by the Lease, and (2) forthwith upon
delivery of the Aircraft under this Agreement and the Lease, to cause all
necessary documents to be duly filed for recording in accordance with applicable
United States federal Law.
7.6.8 CONSENTS
Each of each Participant, each Pass-Through Trustee, Subordination
Agent, Owner Trustee, and Mortgagee covenants and agrees, for Lessee's benefit,
that it shall not unreasonably withhold its consent to any consent or approval
requested of it or of Owner Trustee or Mortgagee under the terms of any of the
Operative Agreements which by its terms is not to be unreasonably withheld.
7.6.9 INSURANCE
Each of Owner Participant, the Pass-Through Trustees, Subordination
Agent, and Owner Trustee agrees not to obtain or maintain insurance for its own
account as permitted by (S) 11.2 of the Lease if such insurance would limit,
increase the cost of, or otherwise adversely affect the coverage of any
insurance required to be obtained or maintained by Lessee pursuant to (S) 11 and
Annex D of the Lease.
7.6.10 EXTENT OF NOTE HOLDER'S INTEREST
A Note Holder shall not, as such, have any further interest in, or
other right with respect to, the Trust Estate or the Collateral when and if the
principal and Make-Whole Amount (if any) of and interest on the Equipment Note
held by such Note Holder, and all other sums, then due and payable to such Note
Holder under any Operative Agreement, have been paid in full.
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7.6.11 FOREIGN REGISTRATION
(a) Each Participant, Owner Trustee, and Mortgagee hereby agree for
Lessee's benefit that, subject to (S) 7.1.2 of the Lease, Lessee shall be
entitled to register the Aircraft or cause the Aircraft to be registered in a
country other than the United States, if Lessor and each Participant receive at
least 30 days' prior written notice of such proposed re-registration, and if:
(1) such registration is made only after the Tax Attribute
Period, unless Lessee prepays on a lump-sum basis any liability due
under the Tax Indemnity Agreement as a result of such registration
based upon the assumption that such registration would continue for the
remainder of the term of the Permitted Sublease described in clause (3)
below;
(2) no Special Default exists at the time of such
registration;
(3) such proposed change of registration is made in connection
with a Permitted Sublease;
(4) such country is a country with which the United States
then maintains normal diplomatic relations or, if Taiwan, the United
States then maintains diplomatic relations at least as good as those in
effect on the Issuance Date; and
(5) any import or export permits necessary to take the
Aircraft into such country and any exchange permits necessary to allow
all Rent and other payments provided for under the Lease and the other
Operative Agreements shall be in full force and effect;
(6) all insurance provided for in the Lease shall be in full
force and effect before, at the time of, and after such change in
registration, and Owner Participant, Owner Trustee, and Mortgagee
receive a certificate of Lessee's or a Permitted Sublessee's insurance
broker to such effect;
(7) the courts of such jurisdiction would provide
substantially equivalent protection to Owner Trustee and Mortgagee as
provided under U.S. law in respect of the exercise of remedies,
including that there are no possessory rights in favor of Lessee, any
Permitted Sublessee, or any third party, including any Government
Entity, which would, upon bankruptcy or other default by Lessee or any
Permitted Sublessee, prevent the return of the Aircraft to Owner
Trustee in accordance with and when permitted by the terms of the Lease
upon Owner Trustee's (or Mortgagee's) exercise of its remedies
thereunder, or, if such possessory rights exist, they are not
materially greater than those available to lessees and sublessees under
United States law and there are no procedural impediments to the return
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of the Aircraft to Owner Trustee greater than under United States law,
and upon termination of any Permitted Sublease, registration shall be
terminable without material burden or delay and there is no material
impediment under the laws of such country of registration to the
enforceability (other than immaterial differences in procedures of
enforcement) of the rights and remedies of Owner Trustee and Mortgagee
provided for under the Operative Agreements (it being understood that,
in the absence of restrictions similar to those imposed under (S)(S)
362 and 363 of the Bankruptcy Code, rights and remedies similar to
those available under Section 1110 are not required);
(8) Owner Trustee and Mortgagee receive evidence reasonably
satisfactory to them that such country imposes, or Lessee agrees to
cause the Aircraft to be maintained in accordance with, a Maintenance
Program as required by clause (1) in (S) A of Annex C to the Lease;
(9) no Liens (except Permitted Liens) on the Trust Estate
shall arise by reason of such re-registration, and the Mortgage shall
continue as a first-priority Lien on the Aircraft;
(10) any export licenses, certificates of deregistration, and
powers of attorney required in connection with any repossession or
return of the Aircraft will be able to be obtained in the normal course
without material delay, and without material burden on Owner Trustee or
Mortgagee (however, Lessee shall be responsible for the cost thereof);
(11) the Aircraft has been duly certificated as to type and
airworthiness by the appropriate aviation authority of such country;
(12) all action is taken as Owner Trustee and Mortgagee deem
reasonably necessary (including any increase in or changes in types of
insurance coverage or change in indemnities to take into account
differences in applicable Laws) to ensure that all insurance and
indemnities provided for in the Operative Agreements shall be in full
force and effect prior to, at the time of, and following such
re-registration; and
(13) Owner Trustee and Mortgagee receive an opinion of counsel
(subject to customary exceptions) reasonably satisfactory to Owner
Participant and Mortgagee, addressed to each such party and to each
Participant and Certificate Holder, to the effect that:
(aa) such country recognizes Owner Trustee's
ownership interest in the Aircraft;
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(bb) Lessee's obligations, and Owner Trustee's rights
and remedies, under the Lease are valid, binding, and
enforceable under the laws of such jurisdiction (or the laws
of the jurisdiction to which the laws of such jurisdiction
would refer as the applicable governing law);
(cc) after giving effect to such change in
registration, the Lien of the Mortgage on Owner Trustee's
right, title, and interest in and to the Aircraft and the
Lease continue as a valid and duly-perfected first-priority
security interest, and all filing, recording, or other action
necessary to protect the same have been accomplished (or, if
such opinion cannot be given at the time of such proposed
change in registration because such change in registration is
not yet effective, (1) the opinion shall detail what filing,
recording, or other action is necessary, and (2) Owner Trustee
and Mortgagee receive a certificate from Lessee that all
possible preparations to accomplish such filing, recording,
and other action are done, and such filing, recording, and
other action are accomplished, and a supplemental opinion to
that effect shall be delivered to Owner Trustee and Mortgagee
promptly after the effective date of such change in
registration;
(dd) it is not necessary, solely as a consequence of
such change in registration and without giving effect to any
other activity of Owner Trustee, Owner Participant, or
Mortgagee (or any Affiliate thereof), for Owner Trustee, Owner
Participant, or Mortgagee (respectively) to qualify to do
business in such jurisdiction as a result of such
reregistration in order to exercise any rights or remedies
with respect to the Aircraft pursuant to the Lease;
(ee) there is no tort liability of the owner or
lessor of an aircraft not in possession thereof under the laws
of such jurisdiction, except tort liability not of materially
greater scope or magnitude than might be imposed on a passive
lender or lessor under U.S. law (it being agreed that, if such
opinion cannot be given in a form satisfactory to Owner
Participant, such opinion shall be waived if insurance
reasonably satisfactory to Owner Participant is provided to
cover such risk);
(ff) unless Lessee agrees to provide insurance
covering the risk of requisition of use of the Aircraft by the
government of such country (so long as the Aircraft is
registered under the laws of such country), the laws of such
country require fair compensation by
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the government of such country payable in currency freely
convertible into Dollars and freely removable from such
country (without license or permit, unless Lessee before such
proposed reregistration has obtained such license or permit)
for the taking or requisition by such government of such use;
(gg) neither Owner Trustee nor Mortgagee nor any
Participant nor any Certificate Holder will be subjected to
any adverse tax consequences as a result of such
re-registration for which Lessee is not required to indemnify
such Person, unless Lessee agrees to indemnify such Person
therefor by means of an indemnity agreement reasonably
satisfactory to such Person (and Holdings guarantees such
indemnity pursuant to the Guarantee); and
(hh) to the effect set forth in clauses (5), (7), (9)
(including an annual filing opinion), (10), and (11), subject
to then-customary assumptions, exceptions, and limitations,
and stating that such country maintains normal diplomatic
relations with the United States.
(b) In addition, as a condition precedent to any change in
registration, Lessee shall give to Lessor and Mortgagee assurances reasonably
satisfactory to each of them:
(1) that the provisions of (S) 11 of the Lease have been
complied with after giving effect to such change of registration;
(2) of Lessee's payment of all reasonable out-of-pocket
expenses of Lessor, each Participant, and Mortgagee in connection with
such change of registry, including (aa) the reasonable fees and
disbursements of counsel to Lessee, Lessor, and Mortgagee, (bb) any
filing or recording fees, Taxes, or similar payments incurred in
connection with the change of registration of the Aircraft and the
creation and perfection of the security interest therein in favor of
Mortgagee for the benefit of Note Holders, and (cc) all costs and
expenses incurred in connection with any filings necessary to continue
in the United States the perfection of the security interest in the
Aircraft and the Lease in favor of Mortgagee for the benefit of Note
Holders; and
(3) to the effect that the tax and other indemnities in favor
of each Person named as an indemnitee under any other Operative
Agreement afford to each such Person substantially the same protection
as provided before such change of registration (or Lessee agrees upon
additional indemnities that, together with such original indemnities,
in
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the reasonable judgment of Lessor and Mortgagee, afford such
protection).
7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED
Notwithstanding anything to the contrary set forth in any Operative
Agreement:
(a) except as set forth in the Purchase Agreement Assignment, nothing
in the Operative Agreements shall constitute or be deemed to be a waiver by
Lessee of any rights, remedies, or claims it may have against Airframe
Manufacturer or Engine Manufacturer or any subcontractor or supplier of either;
and the Operative Agreements do not and shall not be construed or deemed to
create any rights, waivers, immunities, or indemnities in favor of Airframe
Manufacturer, Engine Manufacturer, or any subcontractor or supplier of either
with respect to any such rights, remedies, or claims of Lessee; and
(b) neither Airframe Manufacturer, by its execution and delivery of the
Consent and Agreement, nor Engine Manufacturer, by its execution and delivery of
the Engine Consent and Agreement, shall be deemed to have waived any rights,
remedies, or claims which Airframe Manufacturer or Engine Manufacturer (or any
subcontractor or supplier of either) has against Lessee; and the Operative
Agreements do not and shall not be construed or deemed to create any rights,
waivers, immunities, or indemnities in favor of Lessee with respect to any such
rights, remedies, or claims of Airframe Manufacturer or Engine Manufacturer (or
any subcontractor or supplier of either).
7.6.13 INTEREST IN CERTAIN ENGINES
Each Participant, Owner Trustee, and Mortgagee agree, for the benefit
of each lessor, conditional seller, or secured party of any airframe or engine
leased to, purchased by, or owned by Lessee or any Permitted Sublessee subject
to a lease, conditional sale, or other security agreement that it will not
acquire or claim, as against such lessor, conditional seller, 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, conditional sale, or other security agreement and owned by such lessor or
conditional seller or subject to a security interest in favor of such secured
party.
8. CONFIDENTIALITY
Lessee, Owner Participant, Note Holders, Owner Trustee, and Mortgagee
shall keep Annexes B, C, and D and Schedules 1, 2, 3, and 4 to the Lease, the
Participation Agreement, the Purchase Agreement Assignment, and the Tax
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Indemnity Agreement confidential, and shall not disclose, or cause to be
disclosed, the same to any Person, except (a) to Certificate Holders, (b) to
prospective and permitted transferees of Lessee's, Owner Participant's, a Note
Holder's, a Certificate Holder's, Liquidity Provider's, Owner Trustee's,
Mortgagee's, or other Mortgage Indemnitee's interest or their counsel,
independent insurance brokers, auditors, or other agents who agree to hold such
information confidential, (c) to Lessee's, Owner Participant's, a Note Holder's,
Liquidity Provider's, a Pass-Through Trustee's, Owner Trustee's, Mortgagee's, or
other Mortgage Indemnitee's counsel, independent insurance brokers, auditors, or
other agents, Affiliates, or investors who agree to hold such information
confidential, (d) as may be required by any statute, court, or administrative
order or decree, legal process, or governmental ruling or regulation, including
those of any applicable insurance regulatory bodies (including the National
Association of Insurance Commissioners), federal or state banking examiners,
Internal Revenue Service auditors, or any stock exchange, (e) with respect to
Lessee and Owner Participant, by mutual agreement of such parties, (f) with
respect to a Note Holder or any Pass-Through Trustee, to a nationally-recognized
rating agency for the purpose of obtaining a rating on the Equipment Notes or
the Pass-Through Trust Certificates or to support an NAIC rating for the
Equipment Notes, or (g) to such other Persons as are reasonably deemed necessary
by the disclosing party in order to protect the interests of such party or for
the purposes of enforcing such documents by such party; provided, that any and
all disclosures permitted by clauses (d), (e), (f) and (g) above shall be made
only to the extent necessary to meet the specific requirements or needs of the
Persons making such disclosures.
9. INDEMNIFICATION AND EXPENSES
9.1 GENERAL INDEMNITY
9.1.1 INDEMNITY
Whether or not any of the Transactions are consummated, Lessee shall
indemnify, protect, defend, and hold harmless each Indemnitee from, against, and
in respect of, and shall pay on a net after-tax basis, any and all Expenses of
any kind or nature whatsoever imposed on, incurred by, or asserted against any
Indemnitee, relating to, resulting from, or arising out of or in connection with
any one or more of the following:
(a) the Operative Agreements, the Pass-Through Agreements, or the
enforcement of any of the terms of any of the Operative
Agreements or the Pass-Through Agreements;
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(b) the Aircraft, the Airframe, any Engine, or any Part,
including, with respect thereto, (1) the manufacture, design,
purchase, acceptance, nonacceptance, rejection, ownership,
registration, reregistration, deregistration, delivery,
nondelivery, lease, sublease, assignment, possession, use,
non-use, operation, maintenance, testing, repair, overhaul,
condition, alteration, modification, addition, improvement,
storage, airworthiness, replacement, repair, sale,
substitution, return, abandonment, redelivery, or other
disposition of the Aircraft, any Engine, or any Part, (2) any
claim or penalty arising out of violations of applicable Laws
by Lessee (or any Permitted Sublessee), (3) tort liability,
whether or not arising out of the negligence of any Indemnitee
(whether active, passive, or imputed), (4) death or property
damage of passengers, shippers, or others, (5) environmental
control, noise, or pollution, and (6) any Liens in respect of
the Aircraft, any Engine, or any Part;
(c) the offer, sale, assumption, or delivery of any Equipment
Notes, Pass-Through Certificates, or any interest therein or
represented thereby; and
(d) any breach of or failure to perform or observe, or any other
noncompliance with, any covenant, agreement, or other
obligation to be performed by Lessee under any Lessee
Operative Agreement or any Pass-Through Agreement, or the
falsity of any representation or warranty of Lessee in any
Lessee Operative Agreement or any Pass-Through Agreement,
other than in the Tax Indemnity Agreement.
9.1.2 EXCEPTIONS
Notwithstanding anything in (S) 9.1.1, Lessee shall not be required to
indemnify, protect, defend, and hold harmless any Indemnitee pursuant to (S)
9.1.1 against any Expense of such Indemnitee:
(a) for any Taxes or a loss of Tax benefit, whether or not Lessee
is required to indemnify therefor pursuant to (S) 9.3 or the
Tax Indemnity Agreement;
(b) except to the extent attributable to acts or events occurring
prior thereto, acts or events (other than acts or events
related to Lessee's performance of its obligations pursuant to
the terms of the Lessee Operative Agreements) that occur after
the earlier of: (1) with respect to the Airframe, any Engine,
or any Part, the return of possession (which, if the Aircraft
is placed in storage as provided in
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(S) 5 of the Lease, is the date that the Aircraft is placed in
storage) of such Airframe, Engine, or Part pursuant to the
Lease (other than pursuant to (S) 15 thereof, in which case
Lessee's liability under this (S) 9.1 shall survive for so
long as Lessor is entitled to exercise remedies under such (S)
15), and (2) the termination of the Term in accordance with
the Lease (excluding, as to the Note Holders, Certificate
Holders, and Mortgagee, a termination in connection with
Lessee's assumption of Equipment Notes as contemplated by (S)
11.6 of this Agreement);
(c) to the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of such Indemnitee of any
Equipment Note or interest therein, except (1) for
out-of-pocket costs and expenses incurred as a result of any
such Transfer pursuant to the exercise of remedies under any
Operative Agreement resulting from a Lease Event of Default,
and (2) as otherwise required by the terms of (S) 2.13 of the
Mortgage or (S) 11 hereof;
(d) to the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of Owner Participant of any
interest in the Aircraft or the Trust Estate, except for
out-of-pocket costs and expenses incurred as a result of such
Transfer, if attributable to a Lease Event of Default existing
at the time of such Transfer;
(e) to the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as
defined at the end of this (S) 9.1.2) (other than gross
negligence or willful misconduct imputed to such Person by
reason of its interest in the Aircraft or any Operative
Agreement);
(f) in the case of FSB, to the extent attributable to matters
enumerated in the proviso to (S) 14;
(g) to the extent attributable to the incorrectness or breach of
any representation or warranty of such Indemnitee or any
related Indemnitee contained in or made pursuant to any
Operative Agreement or any Pass-Through Agreement;
(h) to the extent attributable to the failure, by such Indemnitee
or any related Indemnitee, to perform or observe any
agreement, covenant, or condition on its part to be performed
or observed in any Operative Agreement or any Pass-Through
Agreement;
(i) to the extent attributable to the offer or sale by such
Indemnitee or any related Indemnitee of any interest in the
Aircraft, the
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Equipment Notes, the Pass-Through Trust Certificates, the
Trust Estate, or the Trust Agreement, or any similar interest,
in violation of the Securities Act or other applicable
federal, state, or foreign securities Laws (other than any
thereof caused by the acts or omissions of Lessee);
(j) (1) with respect to any Indemnitee other than Mortgagee, to
the extent attributable to Mortgagee's failure to distribute
funds received and distributable by it in accordance with the
Mortgage, (2) with respect to any Indemnitee other than Owner
Trustee, to the extent attributable to Owner Trustee's failure
to distribute funds received and distributable by it in
accordance with the Trust Agreement, (3) with respect to any
Indemnitee other than Subordination Agent, to the extent
attributable to Subordination Agent's failure to distribute
funds received and distributable by it in accordance with the
Intercreditor Agreement, (4) with respect to any Indemnitee
other than the Pass-Through Trustees, to the extent
attributable to a Pass-Through Trustee's failure to distribute
funds received and distributable by it in accordance with the
Pass-Through Trust Agreements, (5) with respect to any
Indemnitee other than Escrow Agent, to the extent attributable
to Escrow Agent's failure to pay funds received and payable by
it in accordance with any Escrow Agreement, (6) with respect
to any Indemnitee other than Paying Agent, to the extent
attributable to Paying Agent's failure to distribute funds
received and distributable by it in accordance with any Escrow
Agreement, (7) to the extent attributable to Depository's
failure to pay funds payable by it in accordance with any
Deposit Agreement, (8) with respect to Mortgagee, to the
extent attributable to its negligence or willful misconduct in
the distribution of funds received and distributable by it in
accordance with the Mortgage, (9) with respect to Owner
Trustee, to the extent attributable to its negligence or
willful misconduct in the distribution of funds received and
distributable by it in accordance with the Trust Agreement,
(10) with respect to Subordination Agent, to the extent
attributable to its negligence or willful misconduct in the
distribution of funds received and distributable by it in
accordance with the Intercreditor Agreement, (11) with respect
to the Pass-Through Trustees, to the extent attributable to
its negligence or willful misconduct in the distribution of
funds received and distributable by it in accordance with the
Pass-Through Trust Agreements, (12) with respect to Escrow
Agent, to the extent attributable to its negligence or willful
misconduct in the payment of funds received and payable by it
in accordance with any Escrow Agreement, and (13) with respect
to
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Paying Agent, to the extent attributable to its negligence or
willful misconduct in the distribution of funds received and
distributable by it in accordance with any Escrow Agreement.
(k) other than during the existence of a Lease Event of Default,
to the extent attributable to the authorization or giving or
withholding of any future amendments, supplements, waivers, or
consents with respect to any Operative Agreement or
Pass-Through Agreement, other than any requested by Lessee or
required by or made pursuant to the terms of the Operative
Agreements or Pass-Through Agreements (unless such requirement
results from the actions of an Indemnitee not required by or
made pursuant to the Operative Agreements or the Pass-Through
Agreements);
(l) to the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees
shall not be paid by or be reimbursed by Lessee;
(m) to the extent that it is an ordinary and usual operating or
overhead expense;
(n) with respect to Owner Participant or Owner Trustee, or any
related Indemnitee, to the extent attributable to the
deregistration of the Aircraft under the Transportation Code
as a result of the failure of Owner Participant or Owner
Trustee (or any related Indemnitee of either) to be a Citizen
of the United States as a result of any act (other than
reregistration of the Aircraft pursuant to (S) 7.1.2 of the
Lease) of Owner Participant or Owner Trustee or any related
Indemnitee of either of the foregoing (not taken at the
request of Lessee);
(o) for any Lessor Lien attributable to such Indemnitee or any
related Indemnitee;
(p) if another provision of an Operative Agreement or a
Pass-Through Agreement specifies the extent of Lessee's
responsibility or obligation with respect to such Expense, to
the extent arising from a cause other than Lessee's failure to
comply with such specified responsibility or obligation;
(q) to the extent constituting principal, Make-Whole Amount, or
interest on the Equipment Notes attributable solely to a
Mortgage Event of Default not constituting a Lease Event of
Default;
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(r) to the extent incurred by or asserted against an Indemnitee as
a result of any "prohibited transaction", within the meaning
of ERISA (S) 406 or Code (S) 4975(c)(1); or
(s) to the extent not included in the definition of Supplemental
Rent as a result of the exception in clause (4) of such
definition.
For purposes of this (S) 9.1, a Person shall be considered a "related
Indemnitee" of an Indemnitee if that Person is an Affiliate or employer of such
Indemnitee, a director, officer, employee, or agent of such Indemnitee or any
such Affiliate, or a successor or permitted assignee of any of the foregoing.
9.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee, and is enforceable directly by each such Indemnitee.
9.1.4 NOTICE
If an Indemnitee makes a claim for any Expense indemnifiable under this
(S) 9.1, such Indemnitee shall give prompt written notice thereof to Lessee.
Notwithstanding the foregoing, any Indemnitee's failure to notify Lessee as
provided in this (S) 9.1.4, or in (S) 9.1.5, shall not release Lessee from any
of its obligations to indemnify such Indemnitee hereunder, except to the extent
that such failure results in an additional Expense to Lessee (in which event
Lessee shall not be responsible for such additional expense) or materially
impairs Lessee's ability to contest such claim.
9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS;
LIMITATIONS
(a) If any action, suit, or proceeding for which Lessee is responsible
under this (S) 9.1 is brought against any Indemnitee, such Indemnitee shall
notify Lessee of the commencement thereof, and Lessee may, at its expense,
participate in and, to the extent that it so desires (subject to the provisions
of the following paragraph), assume and control its defense and, subject to (S)
9.1.5(c), settle or compromise it.
(b) Lessee or its insurer(s) shall have the right, at its or their
expense, to investigate or, if Lessee or its insurer(s) agree not to dispute
liability to the Indemnitee giving notice of such action, suit, or proceeding
under this (S) 9.1.5 for indemnification hereunder or under any insurance
policies pursuant to which coverage is sought, control the defense of, any
action, suit, or proceeding, relating to any Expense for which indemnification
is sought pursuant to this (S) 9.1, and each Indemnitee shall cooperate with
Lessee or its
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insurer(s) with respect thereto; provided, that Lessee shall not be entitled to
control the defense of any such action, suit, or proceeding, or to compromise
any such Expense, while any Lease Event of Default under (S) 14.1 of the Lease
exists. In connection with any such Lessee-controlled action, suit, or
proceeding, such Indemnitee shall have the right to participate therein, at its
sole cost and expense, with counsel reasonably satisfactory to Lessee, provided
that such Indemnitee's participation does not, in the reasonable opinion of the
independent counsel appointed by Lessee or its insurers to conduct such
proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without Lessee's prior written consent
(which shall not be unreasonably withheld or delayed), unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this (S)
9.1.
(d) To the extent that any Expense indemnified by Lessee hereunder may
be covered by insurance maintained by Lessee, at Lessee's expense, each
Indemnitee agrees to cooperate with the insurers in the exercise of their rights
to investigate, defend, or compromise that Expense as may be required to retain
the benefits of the insurance for that Expense.
(e) If an Indemnitee is not a party to this Agreement, Lessee may
require that Indemnitee to agree in writing to the terms of this (S) 9 and (S)
15.8 before making any payment to such Indemnitee under this (S) 9.
(f) Nothing herein shall be deemed to be an assumption by Lessee of
obligations of Owner Trustee with respect to, or a guarantee by Lessee of, any
amounts payable by Owner Trustee upon Equipment Notes or a guarantee of any
residual value of the Aircraft.
(g) Nothing in this (S) 9.1.5 shall require an Indemnitee to contest
any Expense or to assume responsibility for or control of any judicial
proceeding with respect thereto.
9.1.6 INFORMATION
Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee (but in Lessee's control or reasonably
available to Lessee) which such Indemnitee reasonably requests, and will
otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under (S) 9.1.5. The Indemnitee shall supply Lessee with
such information not within the control of Lessee (but in such Indemnitee's
control or reasonably available to such Indemnitee) which Lessee reasonably
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requests to control or participate in any proceeding to the extent permitted by
(S) 9.1.5.
9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER
ASSURANCES
Upon payment in full by or on behalf of Lessee of any indemnity
provided for under this Agreement, without any further action and to the full
extent permitted by Law, Lessee will be subrogated to all rights and remedies of
the Person indemnified (other than with respect to any of such Indemnitee's
insurance policies or in connection with any indemnity claim of such Indemnitee
under (S) 5.03 or Article VII of the Mortgage or (S) 5.3 or (S) 7 of the Trust
Agreement) in respect of the matter as to which such indemnity was paid. Each
Indemnitee will give such further assurances or agreements and cooperate with
Lessee to permit Lessee to pursue any such claims, to the extent reasonably
requested by Lessee and at Lessee's expense.
9.1.8 REFUNDS
If an Indemnitee receives any refund, in whole or in part, with respect
to any Expense paid by or on behalf of Lessee hereunder, that Indemnitee will
promptly pay the amount refunded (but not an amount in excess of the amount
Lessee or any of its insurers has paid in respect of such Expense) over to
Lessee unless a Lease Event of Default exists, in which case such amount shall
be paid over to Owner Trustee (or, if the Mortgage has not been discharged, to
Mortgagee) to hold as security for Lessee's obligations under the Lessee
Operative Agreements or, if requested by Lessee, applied to satisfy those
obligations.
9.2 EXPENSES
9.2.1 INVOICES AND PAYMENT
Each of Owner Trustee, Mortgagee, Owner Participant, Lessee, the
Pass-Through Trustees, and Subordination Agent shall promptly submit to Lessee
for its prompt approval (which shall not be unreasonably withheld) copies of
invoices in reasonable detail of the Transaction Expenses for which it is
responsible for providing information as they are received (and not later than
the 90th day after the Delivery Date). If so submitted and approved, Owner
Participant agrees promptly (and not later than the 105th day after the Delivery
Date) to pay such Transaction Expenses (but not more than ___% of Lessor's
Cost). Notwithstanding the foregoing, Lessee at its sole option shall have the
right to pay directly any and all Transaction Expenses. Lessee shall pay
directly any and all Transaction Expenses in excess of ___% of Lessor's Cost. If
Owner Participant fails to pay any Transaction Expense that it is obligated to
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pay hereunder, Lessee shall pay such Transaction Expense. Any such payment by
Lessee shall not affect Owner Participant's obligations or Lessee's rights
against Owner Participant for its failure to make any such payment.
9.2.2 PAYMENT OF OTHER EXPENSES
Lessee shall pay (a) the ongoing fees and expenses of Owner Trustee and
Mortgagee, and (b) all reasonable out-of-pocket costs and expenses (including
the reasonable fees and disbursements of counsel) incurred by any Participant
attributable to (1) any transfer of title to the Aircraft or any Engine
contemplated by (S) 4.5 of the Lease, or (2) any waiver, amendment, or
modification of any Operative Agreement to the extent requested by Lessee.
9.2.3 PAYMENTS IF TRANSACTIONS DO NOT CLOSE
If the Closing fails to occur as a result of Owner Participant's
failure to comply with its obligations under this Agreement or any breach of a
representation or warranty of Owner Participant made in or pursuant to any
Operative Agreement, in addition to any other rights and remedies that the
parties hereto have against Owner Participant, Owner Participant will be
responsible for all of its fees and expenses, including the fees, expenses, and
disbursements of its special counsel and the fees of the Appraiser referred to
in (S) 5.1.2(l).
9.3 GENERAL TAX INDEMNITY
9.3.1 GENERAL
Except as provided in (S) 9.3.2, Lessee agrees that each payment of
Rent paid by Lessee pursuant to the Lease, and any other payment or indemnity
paid by Lessee to a Tax Indemnitee under any Operative Agreement, shall be free
of all withholdings or deductions with respect to Taxes of any nature, and if
Lessee is required by applicable law to make any such withholding or deduction
for any such payment, (a) Lessee shall make all such withholdings or deductions,
(b) the amount payable by Lessee shall be increased so that, after making all
required withholdings or deductions, such Tax Indemnitee receives the same
amount that it would have received had no such withholdings or deductions been
made, and (c) Lessee shall pay the full amount withheld or deducted to the
relevant Taxing Authority in accordance with applicable law. Lessee further
agrees that, if it is required to withhold from any payment of Basic Rent,
Stipulated Loss Value (and amounts determined by reference thereto), and amounts
payable upon exercise of Lessee's purchase option pursuant to (S) 17.3 of the
Lease, any Tax imposed upon Owner Participant or Owner Trustee (including any
withholding Tax based on income or receipts of Owner Participant or Owner
Trustee), and such Tax is excluded from
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indemnification pursuant to (S) 9.3.2, Lessee shall pay such additional amount
(if any) required so that the total amount paid by Lessee (after making all
required withholdings) is equal to (assuming timely payment of the Equipment
Notes before the relevant Payment Date) the aggregate principal amount of
scheduled installments due on the Equipment Notes outstanding on the relevant
Payment Date, together with accrued and unpaid interest, due on the Equipment
Notes; and Owner Participant or Owner Trustee (as applicable) shall reimburse
Lessee for any such additional amounts within two Business Days after demand
therefor. Except as provided in (S) 9.3.2, and whether or not any of the
Transactions are consummated, Lessee shall pay, indemnify, protect, defend, and
hold harmless each Tax Indemnitee from all Taxes imposed by any Taxing Authority
imposed on or asserted against any Tax Indemnitee or the Aircraft, the Airframe,
any Engine, or any Part, or any interest in any of the foregoing (whether or not
indemnified against by any other Person), upon or with respect to the Operative
Agreements or the transactions or payments contemplated thereby, including any
Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine,
any Part, any Operative Agreement (including any Equipment Notes), any data, or
any other thing delivered or to be delivered under an Operative Agreement, (y)
the purchase, manufacture, acceptance, rejection, sale, transfer of title,
return, ownership, mortgaging, delivery, transport, charter, rental, lease,
re-lease, sublease, assignment, possession, repossession, presence, use,
condition, storage, preparation, maintenance, modification, alteration,
improvement, operation, registration, transfer or change of registration,
reregistration, repair, replacement, overhaul, location, control, imposition of
any Lien (other than a Lessor Lien), financing, refinancing requested by Lessee,
abandonment, or other disposition of the Aircraft, the Airframe, any Engine, any
Part, any data, or any other thing delivered or to be delivered under an
Operative Agreement, or (z) rent, interest, fees, or other income, proceeds,
receipts, or earnings, whether actual or deemed, arising upon, in connection
with, or in respect of any of the Operative Agreements (including the property
or income or other proceeds with respect to property held as part of the Trust
Estate) or the transactions contemplated thereby.
9.3.2 CERTAIN EXCEPTIONS
The provisions of (S) 9.3.1 shall not apply to, and Lessee shall have
no liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the
United States or any Taxing Authority or governmental
subdivision of the United States or therein (including any
state or local Taxing Authority) (1) on, based on, or measured
by gross or net income or gross or net receipts, including
capital gains taxes, excess profits
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taxes, minimum taxes from tax preferences, alternative minimum
taxes, branch profits taxes, accumulated earnings taxes,
personal holding company taxes, succession taxes and estate
taxes, and any withholding taxes on, based on, or measured by
gross or net income or receipts, or (2) on, or with respect
to, or measured by capital or net worth or in the nature of a
franchise tax or a tax for the privilege of doing business
(other than, in the case of clause (1) or (2), sales, use,
license, or property Taxes);
(b) imposed on a Tax Indemnitee by any Taxing Authority or
governmental subdivision thereof or therein outside of the
United States (including any Taxing Authority in or of a
territory, possession, or commonwealth of the United States)
(1) on, based on, or measured by gross or net income or gross
or net receipts, including capital gains taxes, excess profits
taxes, minimum taxes from tax preferences, alternative minimum
taxes, branch profits taxes, accumulated earnings taxes,
personal holding company taxes, succession taxes and estate
taxes, and any withholding taxes on, based on, or measured by
gross or net income or receipts, or (2) on, or with respect
to, or measured by capital or net worth or in the nature of a
franchise tax or a tax for the privilege of doing business
(other than, in the case of clause (1) or (2), (aa) sales,
use, license, or property Taxes, or (bb) any Taxes imposed by
any Taxing Authority (other than a Taxing Authority within
whose jurisdiction such Tax Indemnitee is incorporated or
organized or maintains its principal place of business) if
such Tax Indemnitee would not have been subject to Taxes of
such type by such jurisdiction but for (i) the location, use,
or operation of the Aircraft, the Airframe, any Engine, or any
Part thereof by a Lessee Person within the jurisdiction of the
Taxing Authority imposing such Tax, or (ii) the activities of
any Lessee Person (except for activities of a Lessee Person
who is not an Affiliate, successor, or assign of Lessee, which
activities are unrelated to the transactions contemplated by
the Operative Agreements) in such jurisdiction, including use
of any other aircraft by Lessee in such jurisdiction, (iii)
the status of any Lessee Person as a foreign entity or as an
entity owned in whole or in part by foreign persons, (iv)
Lessee's having made (or having been deemed to have made)
payments to such Tax Indemnitee from the relevant
jurisdiction, or (v) in the case of the Pass-Through Trustees,
any Participant, or any related Tax Indemnitee, Lessee's being
incorporated, organized, maintaining a place of business, or
conducting activities in such jurisdiction);
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(c) on, with respect to, or measured by any trustee fees,
commissions, or compensation received by Owner Trustee,
Pass-Through Trustee, Subordination Agent, or Mortgagee;
(d) on the Trust or the Trust Estate that result from treatment of
the Trust or the Trust Estate as an entity, such as a
corporation, separate and apart from Owner Participant;
(e) that are being contested as provided in (S) 9.3.4;
(f) imposed on any Tax Indemnitee to the extent that such Taxes
result from the gross negligence or willful misconduct of such
Tax Indemnitee or any Affiliate thereof;
(g) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is
imposed on, or is collected from, the transferee) as a result
of a transfer or other disposition (including a deemed
transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of Owner Participant, by Owner
Trustee, or, in the case of Taxes imposed on a transferee, by
the transferor) of any interest in the Aircraft, the Airframe,
any Engine, or any Part, the Rent (other than the assignment
of Rent to Mortgagee pursuant to the Mortgage), the Trust, the
Trust Estate, the Collateral, the Lease, or any interest
arising under the Operative Agreements or any Equipment Note
or a transfer or disposition (including a deemed transfer or
disposition) of any interest in a Tax Indemnitee (other than
(1) a substitution or replacement of the Aircraft, the
Airframe, any Engine or any Part by a Lessee Person that is
treated for Tax purposes as a transfer or disposition, (2) a
transfer pursuant to an exercise of remedies upon a
then-existing Lease Event of Default, or (3) a transfer to
Lessee pursuant to (S) 17.3 of the Lease);
(h) in excess of those that would have been imposed had there not
been a transfer or other disposition by or to such Tax
Indemnitee or a related Tax Indemnitee described in clause (g)
of this (S) 9.3.2;
(i) imposed on Owner Participant and indemnified by Lessee
pursuant to the Tax Indemnity Agreement;
(j) imposed with respect to any period after the expiration or
earlier termination of the Term and, if required pursuant to
the terms of the Lease, the return of possession of the
Aircraft to Lessor or placement in storage at the request of
Lessor in accordance with the Lease (provided, that this
clause (j) shall not apply to Taxes
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imposed after such period arising as a result of payments by
Lessee under the Operative Agreements after such period);
(k) consisting of any interest, penalties, or additions to tax
imposed on a Tax Indemnitee as a result (in whole or in part)
of a failure of such Tax Indemnitee or a related Tax
Indemnitee to file any return properly and timely, unless such
failure is caused by Lessee's failure to fulfill its
obligations, if any, under (S) 9.3.6 with respect to such
return;
(l) resulting from, or that would not have been imposed but for,
any Lessor Liens arising as a result of claims against, or
acts or omissions of, or otherwise attributable to such Tax
Indemnitee or a related Tax Indemnitee;
(m) imposed on any Tax Indemnitee as a result of the breach by
such Tax Indemnitee or a related Tax Indemnitee of any
covenant of such Tax Indemnitee or any Affiliate thereof
contained in any Operative Agreement or the inaccuracy of any
representation or warranty by such Tax Indemnitee or any
Affiliate thereof in any Operative Agreement;
(n) in the nature of an intangible or similar Tax (1) upon or with
respect to the value or principal amount of the interest of
any Loan Participant or any Note Holder in any Equipment Note
or the loan evidenced thereby, or (2) upon or with respect to
the value of the interest of Owner Participant in the Trust
Estate or the Trust, in each case only if such Taxes are in
the nature of franchise Taxes or result from the conduct of
business by such Tax Indemnitee in the taxing jurisdiction and
are imposed because of the place of incorporation or the
activities unrelated to the Transactions in the taxing
jurisdiction of such Tax Indemnitee;
(o) that is included in Lessor's Cost and paid to the appropriate
Taxing Authority;
(p) imposed on a Tax Indemnitee by a Taxing Authority of a
jurisdiction outside the United States, to the extent that
such Taxes would not have been imposed but for a connection
between the Tax Indemnitee or a related Tax Indemnitee and
such jurisdiction imposing such Tax unrelated to the
Transactions; or
(q) relating to ERISA or to Code (S) 4975.
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For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees who
are successors, assigns, agents, or Affiliates of such Tax Indemnitee shall be
related Tax Indemnitees.
9.3.3 PAYMENT
(a) Lessee's indemnity obligation to a Tax Indemnitee under this (S)
9.3 shall be the amount which, after taking into account any Tax imposed upon
the receipt or accrual of the amounts payable under this (S) 9.3 and any tax
benefits actually recognized by such Tax Indemnitee as a result of the
indemnifiable Tax (including any benefits recognized as a result of such Tax
Indemnitee's use of an indemnifiable Tax as a credit against Taxes not
indemnifiable under this (S) 9.3), equals the amount of the Tax indemnifiable
under this (S) 9.3.
(b) At Lessee's request, the computation of the amount of any indemnity
payment owed by Lessee or any amount owed by a Tax Indemnitee to Lessee pursuant
to this (S) 9.3 shall be verified and certified by an independent public
accounting firm selected by such Tax Indemnitee and reasonably satisfactory to
Lessee. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Lessee
unless such verification results in an adjustment in Lessee's favor of 5% or
more of the net present value of the payment as computed by such Tax Indemnitee,
in which case such Tax Indemnitee shall pay those costs.
(c) Each Tax Indemnitee shall provide Lessee with such certifications,
and such information and documentation in such Tax Indemnitee's possession, as
Lessee reasonably requests to minimize any indemnity payment pursuant to this
(S) 9.3; provided, that notwithstanding anything to the contrary in this (S)
9.3.3(c), no Tax Indemnitee shall be required to provide Lessee with any Tax
returns.
(d) Each Tax Indemnitee shall promptly forward to Lessee any written
notice, bill, or advice that such Tax Indemnitee receives from any Taxing
Authority concerning any Tax for which it seeks indemnification under this (S)
9.3. Lessee shall pay any amount for which it is liable pursuant to this (S) 9.3
directly to the appropriate Taxing Authority if legally permissible, or upon
demand of a Tax Indemnitee, to such Tax
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Indemnitee within 30 days of such demand (or, if a contest occurs in accordance
with (S) 9.3.4, within 30 days after a Final Determination (as defined below)),
but in no event more than one Business Day before the related Tax is due. If
requested by a Tax Indemnitee in writing, Lessee shall furnish to the
appropriate Tax Indemnitee the original or a certified copy of a receipt for
Lessee's payment of any Tax paid by Lessee, or such other evidence of payment of
such Tax as is acceptable to such Tax Indemnitee. Lessee shall also furnish
promptly upon written request such data as any Tax Indemnitee reasonably
requires to enable such Tax Indemnitee to comply with the requirements of any
taxing jurisdiction, unless such data are not reasonably available to Lessee or
(unless such data are specifically requested by a Taxing Authority) are not
customarily furnished by domestic air carriers under similar circumstances. For
purposes of this (S) 9.3, a "Final Determination" is (1) a decision, judgment,
decree, or other order by any court of competent jurisdiction that occurs
pursuant to the provisions of (S) 9.3.4, which decision, judgment, decree, or
other order has become final and unappealable, (2) a closing agreement or
settlement agreement entered into in accordance with (S) 9.3.4 that has become
binding and is not subject to further review or appeal (absent fraud,
misrepresentation, etc.), or (3) the termination of administrative proceedings
and the expiration of the time for instituting a claim in a court proceeding.
(e) If any Tax Indemnitee actually realizes a tax savings by reason of
any Tax paid or indemnified by Lessee pursuant to this (S) 9.3 (whether such tax
savings arise by means of a foreign tax credit, depreciation or cost recovery
deduction, or otherwise), and such savings are not otherwise taken into account
in computing such payment or indemnity, such Tax Indemnitee shall pay to Lessee
an amount equal to the lesser of (1) the amount of such tax savings, plus any
additional tax savings recognized as the result of any payment made pursuant to
this sentence, when, as, if, and to the extent realized, and (2) the amount of
all payments pursuant to this (S) 9.3 by Lessee to such Tax Indemnitee (less any
payments previously made by such Tax Indemnitee to Lessee pursuant to this (S)
9.3.3 (e)) (and the excess, if any, of the amount described in clause (1) over
the amount described in clause (2) shall be carried forward and applied to
reduce pro tanto any subsequent obligations of Lessee to make payments to such
Tax Indemnitee pursuant to this (S) 9.3); provided, that such Tax Indemnitee
shall not be required to make any payment pursuant to this sentence so long as a
Lease Event of Default of a monetary nature exists. If a tax benefit is later
disallowed or denied, the disallowance or denial shall be treated as a Tax
indemnifiable under (S) 9.3.1 without regard to the provisions of (S) 9.3.2
(other than (S) 9.3.2(f)). Each such Tax Indemnitee shall in good faith use
reasonable efforts in filing its tax returns and in dealing with Taxing
Authorities to seek and claim any such tax benefit.
9.3.4 CONTEST
(a) If a written claim is made against a Tax Indemnitee for Taxes that
Lessee could be liable to pay or indemnify for hereunder, or if a Tax Indemnitee
determines that a Tax is due and that Lessee could have an indemnity obligation
for that Tax hereunder, such Tax Indemnitee shall promptly notify Lessee in
writing of such claim (provided, that failure so to notify Lessee shall
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not relieve Lessee of its indemnity obligations hereunder unless the failure to
notify effectively forecloses Lessee's rights to require a contest of such
claim), and shall take no action with respect to such claim without Lessee's
prior written consent for 30 days following Lessee's receipt of such notice;
provided, that, if applicable Law requires such Tax Indemnitee to take action
before the end of such 30-day period, such Tax Indemnitee shall, in such notice
to Lessee, so inform Lessee, and such Tax Indemnitee shall take no action for as
long as it is legally able to avoid taking action (and a Tax Indemnitee shall be
entitled to pay the Tax claimed and sue for a refund before the end of such
30-day period if (1)(aa) the failure to pay the Tax would result in substantial
penalties (unless immediately reimbursed by Lessee) and the act of paying the
Tax would not materially prejudice the right to contest, or (bb) the failure to
pay would result in criminal penalties, and (2) such Tax Indemnitee shall take
any action so required in connection with so paying the Tax in a manner that is
the least prejudicial to the pursuit of the contest). In addition, such Tax
Indemnitee shall (provided that Lessee shall have agreed to keep such
information confidential other than to the extent necessary in order to contest
the claim) furnish Lessee with copies of any requests for information from any
Taxing Authority relating to such Taxes with respect to which Lessee may be
required to indemnify hereunder. If requested by Lessee in writing within 30
days after its receipt of such notice, such Tax Indemnitee shall, at Lessee's
expense (including all reasonable costs, expenses, and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law, allow Lessee to contest) through appropriate administrative and
judicial proceedings the validity, applicability, or amount of such Taxes by (x)
resisting payment thereof, (y) not paying the Taxes except under protest if
protest is necessary and proper, or (z) if the payment is made, using reasonable
efforts to obtain a refund thereof in an appropriate administrative or judicial
proceeding. If requested to do so by Lessee, the Tax Indemnitee shall appeal any
adverse administrative or judicial decision, except that the Tax Indemnitee
shall not be required to pursue any appeals to the United States Supreme Court.
If and to the extent that the Tax Indemnitee is able to separate the contested
issue(s) from other issues arising in the same administrative or judicial
proceeding that are unrelated to the Transactions without (in such Tax
Indemnitee's good faith judgment) adversely affecting such Tax Indemnitee, such
Tax Indemnitee shall permit Lessee to control the conduct of any such proceeding
and shall provide to Lessee (at Lessee's cost and expense) with such information
or data in such Tax Indemnitee's control or possession and reasonably necessary
to conduct such contest. If the contest is being controlled by a Tax Indemnitee,
such Tax Indemnitee shall consult with Lessee in good faith regarding the manner
of contesting such claim and shall keep Lessee reasonably informed regarding the
progress of such contest. A Tax Indemnitee shall not fail to take any action
expressly required by this (S) 9.3.4 (including any action regarding any appeal
of an adverse determination with respect to
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any claim) or settle or compromise any claim without Lessee's prior written
consent (except as contemplated by (S) 9.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee
be required to pursue any contest (or to permit Lessee to pursue any contest)
unless (1) Lessee agrees to pay to such Tax Indemnitee on demand all reasonable
costs and expenses that such Tax Indemnitee incurs in connection with contesting
such Taxes, including all reasonable out-of-pocket costs and expenses and
reasonable attorneys' and accountants' fees and disbursements, (2) if such
contest involves the payment of the claim, Lessee advances the amount thereof
(to the extent indemnified hereunder) plus interest, penalties, and additions to
tax with respect thereto that are required to be paid before commencing the
contest on an interest-free after-Tax basis to such Tax Indemnitee (and such Tax
Indemnitee shall promptly pay to Lessee any net realized tax benefits resulting
from such advance, including any tax benefits resulting from making such
payment), (3) such Tax Indemnitee does not reasonably determine that the action
to be taken will result in any material risk of forfeiture, sale, or loss of the
Aircraft (unless Lessee makes provisions to protect the interests of any such
Tax Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee)
(provided, that such Tax Indemnitee shall notify Lessee in writing promptly
after it becomes aware of any such risk), (4) no Lease Event of exists, unless
Lessee has provided security for its obligations hereunder by advancing to such
Tax Indemnitee, before proceeding or continuing with such contest, the amount of
the Tax being contested, plus any interest and penalties and an amount estimated
in good faith by such Tax Indemnitee for expenses, and (5) before commencing any
judicial action controlled by Lessee, Lessee acknowledges its liability for such
claim hereunder, provided, that Lessee shall not be bound by its acknowledgment
if the Final Determination articulates conclusions of law and fact that
demonstrate that Lessee has no liability for the contested amounts hereunder.
Notwithstanding the foregoing, if any Tax Indemnitee releases, waives,
compromises, or settles any claim that may be indemnifiable by Lessee pursuant
to this (S) 9.3 without Lessee's written permission, Lessee's obligation to
indemnify such Tax Indemnitee with respect to such claim (and all
directly-related claims, and claims based on the outcome of such claim) shall
terminate, subject to (S) 9.3.4(c), and subject to (S) 9.3.4(c), such Tax
Indemnitee shall repay to Lessee any amount previously paid or advanced to such
Tax Indemnitee with respect to such claim, plus interest at the rate that would
have been payable by the relevant Taxing Authority on a refund of such Tax.
(c) Notwithstanding anything in this (S) 9.3, a Tax Indemnitee will not
be required to contest the imposition of any Tax, and shall be permitted to
settle or compromise any claim without Lessee's consent, if such Tax Indemnitee
(1) waives its right to indemnity under this (S) 9.3 with respect to such Tax
(and any directly-related claim, and any claim the outcome of which is
determined based upon the outcome of such claim), (2) pays to Lessee any amount
previously paid or advanced by Lessee pursuant to this (S) 9.3 with respect to
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such Tax, plus interest at the rate that would have been payable by the relevant
Taxing Authority on a refund of such Tax, and (3) agrees to discuss with Lessee
the views or positions of any relevant Taxing Authority with respect to the
imposition of such Tax.
9.3.5 REFUND
If any Tax Indemnitee receives a refund of, or becomes entitled to a
credit against other liability for, all or any part of any Taxes paid,
reimbursed, or advanced by Lessee, such Tax Indemnitee shall pay to Lessee
within 30 days of such receipt an amount equal to the lesser of (a) the amount
of such refund or credit plus any net tax benefit (taking into account any Taxes
incurred by such Tax Indemnitee by reason of the receipt of such refund or
realization of such credit) actually realized by such Tax Indemnitee as a result
of any payment by such Tax Indemnitee made pursuant to this sentence (including
this clause (a)), and (b) such tax payment, reimbursement, or advance by Lessee
to such Tax Indemnitee theretofore made pursuant to this (S) 9.3 (and the
excess, if any, of the amount described in clause (a) over the amount described
in clause (b) shall be carried forward and applied to reduce pro tanto any
subsequent obligation of Lessee to make payments to such Tax Indemnitee pursuant
to this (S) 9.3). If, in addition to such refund or credit, such Tax Indemnitee
receives (or is credited with) an amount representing interest on the amount of
such refund or credit, such Tax Indemnitee shall pay to Lessee within 30 days
after receiving or realizing such credit the portion of such interest fairly
attributable to Taxes paid, reimbursed, or advanced by Lessee before the receipt
of such refund or realization of such credit.
9.3.6 TAX FILING
Lessee shall timely file any report, return, or statement that is
required to be filed with respect to any Tax which is subject to indemnification
under this (S) 9.3 (except for any such report, return, or statement which a Tax
Indemnitee has timely notified Lessee in writing that such Tax Indemnitee
intends to file, or for which such Tax Indemnitee is required by law to file, in
its own name); provided, that the relevant Tax Indemnitee shall furnish Lessee
with any information in such Tax Indemnitee's possession or control that is
reasonably necessary to file any such return, report, or statement and that
Lessee reasonably requests in writing (but the Tax Indemnitee shall not be
required to furnish copies of its actual tax returns, although it may be
required to furnish relevant information contained therein). Lessee shall either
file such report, return, or statement and send a copy to such Tax Indemnitee
(and to
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Owner Trustee, if the Tax Indemnitee is not Owner Trustee), or, if Lessee is not
permitted to file such report, return, or statement, it shall notify such Tax
Indemnitee of such requirement and prepare and deliver such report, return, or
statement to such Tax Indemnitee in a manner reasonably satisfactory to such Tax
Indemnitee within a reasonable time before the time such report, return, or
statement is to be filed.
9.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Lessee,
Mortgagee, or such other Person as Lessee or Mortgagee shall designate, at
Lessee's or Mortgagee's request, such duly-executed and properly-completed forms
as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(a) such reduction or exemption is available to such Tax Indemnitee, and (b)
Lessee has provided such Tax Indemnitee with any information necessary to
complete such form not otherwise reasonably available to such Tax Indemnitee.
9.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Lessee may
require the Tax Indemnitee to agree in writing, in a form reasonably acceptable
to Lessee, to the terms of this (S) 9.3 and (S) 15.8 before making any payment
to such Tax Indemnitee under this (S) 9.3.
9.3.9 SUBROGATION
Upon payment of any Tax by Lessee pursuant to this (S) 9.3 to or on
behalf of a Tax Indemnitee, without any further action, Lessee shall be
subrogated to any claims that such Tax Indemnitee may have relating to that Tax.
Such Tax Indemnitee shall cooperate with Lessee (to the extent such cooperation
does not result in any unreimbursed cost, expense, or liability to such Tax
Indemnitee) to permit Lessee to pursue such claims.
9.3.10 FOREIGN TAX ON LOAN PAYMENTS
If an Owner Participant is incorporated or organized, or maintains a
place of business or conducts activities in, a country other than the United
States or in a territory, possession, or commonwealth of the United States
(within the meaning of the tax law of that foreign jurisdiction), and if as a
result thereof any foreign Taxes (including withholding Taxes) are imposed on
the Pass-Through Trustees, Pass-Through Trusts, or Note Holders, then Owner
Participant shall reimburse Lessee for any payments that Lessee is required to
make to or on behalf of any Pass-Through Trustee, Pass-Through Trust, or Note
Holder under this (S) 9.3 as a result of the imposition of such Taxes. The
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amount payable by Owner Participant to Lessee shall be an amount which, after
taking into account any such Taxes, any Tax imposed upon the receipt or accrual
by Lessee of such payment by Owner Participant, and any tax benefits or tax
savings realized by Lessee with respect to the payment of such withholding Tax
or the payment hereunder, shall equal the amount of Lessee's payment to or on
behalf of such Pass-Through Trustee or Note Holder.
9.4 PAYMENTS
Any payments made pursuant to (S) 9.1 or (S) 9.3 shall be due on the
60th day after demand, and shall be made directly to the relevant Indemnitee or
Tax Indemnitee or to Lessee, in immediately available funds at such bank or to
such account as specified by such Indemnitee or Tax Indemnitee or Lessee (as
applicable) in written directives to the payor, or, if no such direction has
been given, by check of the payor payable to the order of, and mailed to, such
Indemnitee or Tax Indemnitee or Lessee (as applicable) by certified mail,
postage prepaid, at its address as set forth in this Agreement.
9.5 INTEREST
If any amount, payable by Lessee, any Indemnitee, or any Tax Indemnitee
under (S) 9.1 or (S) 9.3 is not paid when due, the Person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the Person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the amount is paid, at
the Past-Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.
9.6 BENEFIT OF INDEMNITIES
Lessee's obligations for indemnities, obligations, adjustments, and
payments in (S) 9.1 or (S) 9.3 are expressly made for the benefit of, and shall
be enforceable by, the Indemnitee or Tax Indemnitee entitled thereto, without
declaring the Lease to be in default or taking other action thereunder, and
notwithstanding any provision of the Mortgage.
10. ASSIGNMENT OR TRANSFER OF INTERESTS
10.1 PARTICIPANTS, OWNER TRUSTEE, AND NOTE HOLDERS
10.1.1 OWNER PARTICIPANT
(a) During the Term, Owner Participant shall not Transfer any or all of
its right, title, or interest in the Trust Estate or the Trust Agreement or to
this Agreement unless:
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(1) the Transferee has full power, authority, and legal right
to execute, deliver, and perform the obligations of Owner Participant
under the Owner Participant Agreements and provides reasonably
satisfactory evidence of such power and authority to Lessee, Owner
Trustee, and Mortgagee;
(2) the Transferee enters into one or more legal, valid,
binding, and enforceable agreements effective to confirm that such
Transferee agrees to be bound by all the terms of, and to undertake all
of the obligations arising after such transfer of, the transferring
Owner Participant in the Owner Participant Agreements, and in which it
makes representations and warranties substantially the same as those in
(S) 6.2 of this Agreement;
(3) Lessee shall not be obligated to pay any greater amount or
incur any greater obligation than that which it would have been obliged
to pay or incur under the Lease or other Lessee Operative Agreement if
no transfer or assignment had taken place, and the terms and conditions
of the Lessee Operative Agreements insofar as they relate to the rights
and obligations of Lessee or the Loan Participant are not altered;
(4) Owner Participant shall deliver to Lessee, Owner Trustee,
and Mortgagee an opinion of counsel reasonably satisfactory to each of
them to the effect that such agreement or agreements referred to in (S)
10.1.1(a)(2) and, if applicable, (S) 10.1.1(a)(6) are legal, binding,
and enforceable in accordance with its or their terms and that such
transfer will not violate the Transportation Code, the registration
provisions of the Securities Act, or any other applicable federal law;
(5) the Transfer shall relate to Owner Participant's entire
interest as Owner Participant;
(6) the Transferee is a Citizen of the United States (such
status to be determined without considering FAR (S) 47.9 or any other
provision that may restrict Lessee's use or operation of the Aircraft),
or shall use a voting powers trust or similar arrangement in order to
hold an interest in the Trust Estate such that the Aircraft can be
registered in the United States (without considering FAR (S) 47.9 or
any other provision that may restrict Lessee's use or operation of the
Aircraft); and
(7) the Transferee is a single Person and is either (aa) a
Permitted Institution, or (bb) with Lessee's prior written consent, any
other Person the obligations of whom under the Owner Participant
Agreements are guaranteed by a Permitted Institution pursuant to a
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written guaranty, in form and substance reasonably satisfactory to
Lessee, Owner Trustee, and Mortgagee.
(b) Owner Participant shall give written notice to Lessee, Mortgagee,
and Owner Trustee at least 10 days before any such Transfer, specifying the name
and address of the proposed Transferee, and providing financial statements of
the proposed Transferee evidencing satisfaction of the requirements described in
(S) 10.1.1(a)(7)(aa) or (bb).
(c) Any fees, charges, and expenses, including the reasonable legal
fees, charges, and expenses incurred by Lessee, Owner Participant, Mortgagee,
any Note Holder, or Owner Trustee in connection with any Transfer by Owner
Participant permitted by this (S) 10.1.1, or by the Transferee in any such case,
will be paid for by Owner Participant.
10.1.2 OWNER TRUSTEE
Owner Trustee may transfer its interests in the Trust Agreement
pursuant to (S) 9 thereof.
10.1.3 NOTE HOLDERS
Subject to (S) 7.5.2 hereof and (S) 2.07 of the Mortgage, any Note
Holder may, at any time, Transfer or grant participations in all or any portion
of the Equipment Notes or all or any portion of its beneficial interest in its
Equipment Notes and the Collateral to any Person (the sale or issuance of
Pass-Through Certificates by a Pass-Through Trustee not being considered a
Transfer or participation); provided, that any participant in any such
participations shall not have any direct rights under the Operative Agreements
or any Lien on all or any part of the Aircraft or Collateral, and Lessee shall
not have any increased liability or obligations as a result of any such
participation. In the case of any such Transfer, the Transferee, by acceptance
of Equipment Notes in connection with such Transfer, shall be bound by all of
the covenants of Note Holders in the Operative Agreements.
10.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with (S) 10.1.1, (S) 10.1.2, or (S)
10.1.3 (other than any Transfer by any Note Holder, to the extent it only grants
participations in Equipment Notes or in its beneficial interest therein), the
Transferee shall be deemed "Owner Participant", "Owner Trustee", or a "Note
Holder", respectively, for all purposes of the Operative Agreements and, in the
case of a Transferee of Owner Participant or any Note Holder, shall be deemed to
have paid its ratable portion of Lessor's Cost previously made by Owner
Participant or Loan Participant, respectively, making such conveyance and
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represented by the interest being conveyed, and each reference herein to Owner
Participant, Owner Trustee, or Note Holder, respectively, shall thereafter be
deemed a reference to such Transferee for all purposes, and the transferring
Owner Participant, Owner Trustee, Loan Participant, or Note Holder shall be
released (except, in the case of Owner Participant, to the extent of any
guaranty provided by it under (S) 10.1.1(a)(7)) from all of its liabilities and
obligations under the Operative Agreements to the extent such liabilities and
obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the Transferee; provided, that such
transferring Owner Participant, Owner Trustee, or Note Holder (and its
Affiliates, successors, assigns, agents, representatives, directors, and
officers) will continue to have the benefit of any rights or indemnities under
any Operative Agreement vested or relating to circumstances, conditions, acts,
or events before such Transfer.
11. RE-FUNDING AND CERTAIN OTHER MATTERS
11.1 RE-FUNDING GENERALLY
Subject to (S) 11.2 and (S) 11.4, if at any time Lessee notifies Owner
Participant, Owner Trustee, and Mortgagee that Lessee requests that Owner
Trustee voluntary redeem all (but not less than all) of the outstanding
Equipment Notes (in compliance with (S) 2.11 and (S) 2.12 of the Mortgage) as
part of a re-funding transaction, Owner Participant will negotiate in good faith
and promptly conclude an agreement with Lessee as to the terms of such
re-funding transaction (including the terms of any debt to be issued in
connection with such re-funding transaction and the documentation to be executed
in connection therewith), and after Lessee and Owner Participant shall have
concluded such an agreement:
11.1.1 RE-FUNDING CERTIFICATE
Within 10 Business Days after reaching such agreement, Owner
Participant will deliver a Re-Funding Certificate to Lessee. Within 10 Business
Days after receiving the Re-Funding Certificate, Lessee may demand a
verification (pursuant to (S) 3.2.1(d) of the Lease) of the information in the
Re-Funding Certificate. Upon Lessee's acceptance of the accuracy of the
information in the Re-Funding Certificate or the determination pursuant to such
verification procedures of the Re-Funding Information, the appropriate parties
will take the actions specified in (S) 11.1.2 through (S) 11.1.7.
11.1.2 FINANCING AGREEMENTS
The appropriate parties will enter into appropriate documentation
(which may include an underwriting agreement or similar private placement
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agreement) with the institution or institutions to be named therein providing
for (a) Owner Trustee's issuance and sale of the New Debt to such institution(s)
on the Re-Funding Date, and (b) the application of the proceeds of the sale of
the New Debt to the redemption of all such Equipment Notes on the Re-Funding
Date. Lessee, acting on behalf of Owner Trustee, shall give Mortgagee at least
30 days' revocable prior written notice of the proposed date of the optional
redemption.
11.1.3 LEASE AMENDMENTS
As a condition to the closing of the re-funding transaction, Lessee and
Owner Trustee will amend the Lease, as contemplated by (S) 3.2.1(b) of the
Lease, to provide that (a) Basic Rent for the period from and after the
Re-Funding Date shall be as provided in the Re-Funding Information, and (b)
Stipulated Loss Values, Termination Values, the EBO Date, and the EBO Price,
from and after the Re-Funding Date, shall be as provided in the Re-Funding
Information.
11.1.4 SECURITY AGREEMENTS
Owner Trustee will enter into an agreement to provide for securing the
New Debt similarly to the Equipment Notes, and will enter into such amendments
and supplements to the Mortgage (or such new indenture or other security
agreement) and the other Operative Agreements as are appropriate to effect such
re-funding.
11.1.5 EXPENSES
Whether or not such re-funding transaction is consummated, Lessee shall
pay or reimburse all of the reasonable out-of-pocket expenses of all parties to
such re-funding transaction, including any underwriting or placement fees and
the reasonable fees and expenses of such parties' counsel and any related loan
or commitment fees.
11.1.6 MAKE WHOLE AMOUNT
At the closing of such re-funding, Owner Trustee shall pay to Mortgagee
(for the account of each Note Holder), upon receipt of the same from Lessee
(which Lessee shall pay as Supplemental Rent, as a condition to the closing to
the re-funding transaction), any Make-Whole Amount payable to such Note Holder
under (S) 2.11 of the Mortgage.
11.1.7 RETURN OF EQUIPMENT NOTES
Subject to Owner Trustee's and Lessee's compliance with all applicable
terms and conditions for voluntary prepayment under the Mortgage and this
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Agreement, each Note Holder will transfer to Owner Trustee the Equipment Notes
held by such Note Holder for cancellation (and Owner Trustee shall cancel them),
against receipt by such Note Holder of the then-outstanding principal amount of
such Equipment Notes, accrued and unpaid interest and any Make-Whole Amount
thereon, and all other amounts then payable to such Note Holder and Mortgagee
hereunder or under the Mortgage.
11.2 LIMITATIONS ON OBLIGATION TO REFUND
Notwithstanding the foregoing, Owner Participant shall have no
obligation to proceed with any re-funding transaction as contemplated by this
(S) 11:
(a) if such transaction would have, or creates a material risk of, an
adverse tax consequence to Owner Participant, unless Lessee agrees to indemnify
Owner Participant against such adverse tax consequence;
(b) unless Lessee indemnifies Owner Participant for any liability,
obligation (other than the obligation to pay principal and interest and related
payments in respect of the New Debt), cost, or expense (including reasonable
attorneys' fees) related to or arising out of any such re-funding transaction;
(c) if a Lease Event of Default exists; or
(d) if three re-funding transactions have previously been consummated
at Lessee's request pursuant to this (S) 11.
11.3 EXECUTION OF FACILITATING DOCUMENTS
Lessee, Owner Participant, Owner Trustee, and Mortgagee will execute
any document necessary or advisable to implement this (S) 11 (including
executing, delivering, or providing any appropriate additional or modified
amendment, representation, warranty, certificate, opinion, or other document
that Lessee or any other Person reasonably requests).
11.4 ERISA
Owner Participant shall not be obligated to conclude the proposed
re-funding transaction unless the agreements used to effect it contain an
agreement by the initial holders of the New Debt substantially the same as (S)
7.5.2(b) of this Agreement (unless the New Debt is sold in a public offering
under the Securities Act or a private placement intended for resale pursuant to
Rule 144A under the Securities Act, in which case the holders of the New Debt
shall be subject to the restrictions relating to ERISA substantially the same as
those generally applicable to purchasers of pass-through certificates issued by
U.S. airlines and sold to the public in SEC-registered form).
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11.5 CONSENT TO OPTIONAL REDEMPTIONS
Each of Owner Participant, Owner Trustee, and Mortgagee agrees for
Lessee's benefit not to cause an optional redemption of the Equipment Notes
without Lessee's consent except as set forth in (S) 2.13 of the Mortgage.
11.6 LESSEE'S ASSUMPTION OF EQUIPMENT NOTES
11.6.1 LESSEE'S ELECTION; DOCUMENTATION
If no Special Default exists, upon exercising a purchase option under
(S) 17.5 of the Lease, Lessee may elect to assume and apply as part of the EBO
Price the debt evidenced by all of the outstanding Equipment Notes, subject to
this (S) 11.6 and (S) 2.15 of the Mortgage. Lessee shall notify Owner Trustee,
each Participant, and Mortgagee of such election no later than 30 days before
the effective date of such assumption. Subject to this (S) 11.6 and (S) 2.15 of
the Mortgage, the parties agree to cooperate and to enter into such amendments
or supplemental agreements as may be necessary to effectuate the transaction
contemplated by this (S) 11.6.
If Lessee so elects, then, upon compliance with (S) 17.5 of the Lease,
Owner Trustee will transfer to Lessee, without recourse or warranty (except as
to the absence of Lessor Liens) but subject to the Lien of the Mortgage, all of
Owner Trustee's right, title, and interest in and to the Aircraft, and each of
the parties hereto shall execute and deliver appropriate documentation
permitting Lessee to assume such obligations on the basis of full recourse to
Lessee, maintaining for the benefit of the Note Holders the security interest in
the Aircraft created by the Mortgage, and upon compliance with this (S) 11.6 and
(S) 2.15 of the Mortgage, such documentation shall become effective and Owner
Participant and Owner Trustee shall be released from all obligations in respect
of the Equipment Notes, the Mortgage, and all other Operative Documents, except
any obligations arising (or with respect to events occurring) before such
assumption, and take all such other actions as are reasonably necessary to
permit such assumption by Lessee.
11.6.2 CLOSING CONDITIONS
In connection with such assumption:
(1) Lessee shall execute and deliver an instrument, reasonably
satisfactory in form and substance to Mortgagee and Owner Trustee, (aa) pursuant
to which Lessee irrevocably and unconditionally assumes and undertakes, with
full recourse to Lessee, to pay when due (at the stated maturity thereof, by
acceleration, or otherwise) the principal of, and any Make-Whole Amount,
interest, and other Secured Obligations owing on, all Equipment Notes
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then outstanding in accordance with their terms and punctually to perform and
observe all of the covenants and obligations (monetary or otherwise) hereunder
and under the Mortgage and the Equipment Notes (as amended in connection with
such assumption) to be performed or observed by Owner Trustee, which obligations
shall be secured by a first-priority lien under the Mortgage, and (bb) which
contains amendments to the Mortgage, in form and substance reasonably
satisfactory to Mortgagee and Owner Trustee, that incorporate therein such
provisions from the Lease and this Agreement as are appropriate, including
events of default substantially identical in scope and effect to those in the
Lease but including any such additional defaults as Mortgagee reasonably
requests to provide the same level of protection as in the Mortgage and
covenants substantially identical to the covenants of Lessee hereunder and under
the Lease.
(2) The instrument referred to in clause (1), any Uniform
Commercial Code financing statements relating thereto, and any other documents
that are necessary (or reasonably requested by Mortgagee) to establish Lessee's
title to and interest in the Aircraft or to reflect the substitution of Lessee
for Owner Trustee under the Operative Documents or to continue the perfection of
the security interests in the Aircraft and the other rights and interests of the
registered owners of the Equipment Notes (or Lessee's substituted obligations)
shall be filed in such form, manner, and places as are necessary or, in
Mortgagee's or Owner Trustee's reasonable opinion, advisable for such purpose.
(3) Mortgagee and Owner Trustee shall receive an insurance
report, dated the effective date of such assumption, of an independent insurance
broker, and certificates of insurance, each in form and substance reasonably
satisfactory to such Person, as to the due compliance as of the effective date
of such assumption with (S) 11 of the Lease (as incorporated into the instrument
referred to in (1) of this (S) 11.6.2) as it relates to the Note Holders, each
Certificate Holder, and Mortgagee relating to the insurance with respect to the
Aircraft.
(4) Mortgagee and Owner Trustee shall receive evidence that,
as of the effectiveness of such assumption, the Aircraft is free and clear of
all Liens other than the Lien of the Mortgage and other Permitted Liens (other
than Lessor Liens).
(5) Mortgagee and Owner Trustee shall receive a certificate
from Lessee that no Special Default exists on the effective date of such
assumption.
(6) Mortgagee receives (aa) a Guarantor Confirmation under
which Holdings expressly acknowledges and agrees that each of the Assumed
Obligations constitute Guaranteed Obligations (as defined in the Guarantee) for
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all purposes of the Guarantee, and (bb) restated Equipment Notes showing Lessee
as issuer (which Mortgagee shall also authenticate) evidencing such assumption
and the full recourse nature of Lessee's obligations thereunder.
(7) Mortgagee receives such other documentation or evidence
reasonably requested by Mortgagee to establish the authority of Lessee, Owner
Trustee, and Owner Participant to consummate the transactions contemplated by
the assumption and the taking of all corporate proceedings in connection
therewith.
(8) Each Participant and Certificate Holder shall receive (aa)
an opinion of Troutman Sanders LLP, or other independent tax counsel chosen by
Lessee and reasonably acceptable to such Participant and Certificate Holder as
to the effect that Lessee's assumption of the Equipment Notes will not have an
adverse tax effect on such Participant or Certificate Holder, and (bb) an
indemnity on an After-Tax Basis from Lessee for any adverse tax consequences to
such Participant or Certificate Holder resulting from such assumption that is
reasonably acceptable to such Participant or Certificate Holder; provided, that
Lessee may notify any Note Holder or Certificate Holder, at least 20 days before
the EBO Date, that Lessee will not deliver such opinion and such indemnity, in
which case such Note Holder or Certificate Holder may elect (by delivering
notice to Lessee at least 10 days before the EBO Date) to require that all
outstanding Equipment Notes be prepaid under (S) 2.11 of the Mortgage,
notwithstanding anything to the contrary in this (S) 11.6 or in (S) 2.15 of the
Mortgage.
(9) Each Note Holder, each Certificate Holder, Mortgagee, and
Owner Trustee shall receive: (aa) a legal opinion from counsel for Lessee (which
may be in-house counsel), in form and substance reasonably satisfactory to such
Person, to the effect that the assumption contemplated by this (S) 11.6 does not
contravene Lessee's certificate of incorporation or by-laws, or any agreement or
instrument known to such counsel to which Lessee is a party or by which it is
bound, and as to (x) the compliance of the assumption contemplated by this (S)
11.6 with the terms and conditions of this (S) 11.6 and (S) 2.15 of the
Mortgage, (y) the due authorization, execution, delivery, validity, and
enforceability of the instruments referred to in clauses (1) and (6), and (z)
the continued perfection of the first-priority Lien on the Aircraft for the
benefit of the registered owners of the Equipment Notes, and the due filing of
the Uniform Commercial Code financing statements and the other documents
referred to in clause (2), (bb) from counsel to Mortgagee, counsel to Lessee and
Guarantor, counsel to Owner Trustee, and special aviation counsel, a legal
opinion comparable to the respective opinions delivered on the Delivery Date
(including, in the case of Lessee's counsel, a favorable opinion regarding the
availability of the protections available under Section 1110 of the Bankruptcy
Code), with such changes therein as may be appropriate in light of such
assumption, and (cc) in the case of each opinion
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described in subclause (aa) or (bb) of this clause (9), covering such additional
matters as Mortgagee, Owner Trustee, or any Note Holder reasonably requests.
(10) Each Note Holder, each Certificate Holder, and Mortgagee
receive a copy of the Application for Aircraft Registration filed with the FAA
(or any other registration application filed with the applicable Aviation
Authority) in connection with such assumption.
11.6.3 EXPENSES
Whether or not the assumption referred to in this (S) 11.6 is
accomplished, Lessee shall pay all reasonable expenses (including reasonable
fees and expenses of counsel) of Mortgagee, Owner Trustee, and the Participants
in connection with such assumption.
12. SECTION 1110
Lessee, Owner Participant, Loan Participants, the Note Holders (such
intention being evidenced by each of their acceptance of an Equipment Note),
Owner Trustee, and Mortgagee intend that Owner Trustee, as lessor under the
Lease (and Mortgagee as assignee of Owner Trustee under the Mortgage), shall be
entitled to the benefits of Section 1110 in the event of a case under Chapter 11
of the Bankruptcy Code in which Lessee is a debtor.
13. CHANGE OF CITIZENSHIP
13.1 GENERALLY
Without prejudice to the representations, warranties, or covenants as
to any party's status as a Citizen of the United States:
(a) Each of Lessee, FSB, SSB, and Mortgagee agrees that, immediately
upon obtaining knowledge of any facts that would cast doubt upon its continuing
status as a Citizen of the United States, and promptly upon public disclosure of
negotiations in respect of any transaction which would or might adversely affect
such status, it will notify all parties hereto of all relevant matters in
connection therewith; and
(b) Owner Participant agrees that, if its status is to change or has
changed as a Citizen of the United States, or it makes public disclosure of
circumstances as a result of which it believes that such status is likely to
change, it will notify all the other parties to this Participation Agreement of
(1) such change in status promptly after obtaining Actual Knowledge thereof, and
(2) such belief as soon as practicable after such public disclosure (but in any
event within 10 Business Days after such public disclosure).
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13.2 OWNER PARTICIPANT
Owner Participant agrees, solely for the benefit of Lessee and the Note
Holders, that if, when the Aircraft is registered in the United States, (a)
Owner Participant is not be a Citizen of the United States, and (b) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
Owner Trustee under the Transportation Code and regulations then applicable
thereunder (without considering FAR (S) 47.9 or any other provision that may
restrict Lessee's or any Permitted Sublessee's use or operation of the
Aircraft), then Owner Participant shall as soon as is reasonably practicable
(but in any event within 30 days after obtaining Actual Knowledge of such
ineligibility and of such loss of citizenship), (y) effect voting trust or other
similar arrangements (in which case any provisions contained in the Operative
Agreements restricting Owner Participant's or Owner Trustee's ability to amend
the Trust Agreement shall not apply to the extent necessary to permit the use of
such a voting trust or other similar arrangement) or take any other action
necessary to prevent any deregistration or maintain the United States
registration of the Aircraft, or (z) transfer in accordance with the terms of
this Agreement all its right, title, and interest in and to this Agreement, the
Trust Estate, and the Trust Agreement in accordance with (S) 10.1.
13.3 OWNER TRUSTEE
Upon FSB's giving any notice in accordance with (S) 13.1(a), Owner
Trustee shall, subject to (S) 9.1.1 of the Trust Agreement, resign as Owner
Trustee. Upon its receipt of such notice, Owner Participant shall as promptly as
practicable appoint a Citizen of the United States as successor Owner Trustee
pursuant to (S) 9.1 of the Trust Agreement.
13.4 MORTGAGEE
If SSB gives any notice under (S) 13.1(a), Mortgagee shall (if such
citizenship is necessary under the Transportation Code or, if it is not
necessary, if Mortgagee's citizenship could have any adverse effect on Lessee,
any Participant, or any Note Holder), subject to (S) 8.02 of the Mortgage,
resign as Mortgagee promptly upon its ceasing to be such a citizen.
14. CONCERNING OWNER TRUSTEE
Except as otherwise expressly provided herein, in the Trust Agreement,
or in the Mortgage, Owner Trustee is entering into this Agreement solely in its
capacity as trustee as provided in the Trust Agreement and not in its individual
capacity, and in no case whatsoever will it be liable or accountable in its
individual capacity for any of the statements, representations, warranties,
agreements, or obligations of Owner Trustee hereunder, or for any loss in
73
<PAGE>
respect thereof, as to all of which the parties agree to look solely to the
Trust Estate; provided, that nothing in this (S) 14 shall limit in scope or
substance the personal liability of FSB (a) to Owner Participant as expressly
set forth in the Trust Agreement, (b) in respect of the representations,
warranties, and agreements of FSB expressly made as such herein or in any other
Operative Agreement to which it is a party, and (c) for the consequences of its
own gross negligence, willful misconduct, and, in receiving, handling or
remitting of funds only, its willful misconduct or simple negligence as a
trustee.
15. MISCELLANEOUS
15.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated, or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate, or otherwise vary and is signed by the party against whom the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination, or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination, or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
communication, course of dealing or performance, or other manner not set forth
in writing and signed by the party against whom enforcement of the same is
sought.
15.2 SEVERABILITY
If any provision of this Agreement is held invalid, illegal, or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction, and (b) such invalidity, illegality, or unenforceability
shall not affect the validity, legality, or enforceability of such provision in
any other jurisdiction. If, however, any Law pursuant to which such provisions
are held invalid, illegal, or unenforceable may be waived, the parties hereto
hereby waive that Law to the full extent permitted, to the end that this
Agreement shall be a valid and binding agreement in all respects, enforceable in
accordance with its terms.
15.3 SURVIVAL
The indemnities in this Agreement shall survive the delivery or return
of the Aircraft, the Transfer of any interest of Owner Participant in this
Agreement, the Trust Estate, and the Trust Agreement, the Transfer of any
interest by any Note Holder of its Equipment Note, and the expiration or other
74
<PAGE>
termination of any Operative Agreement, except to the extent otherwise provided
therein.
15.4 REPRODUCTION OF DOCUMENTS
This Agreement (including all annexes, schedules, and exhibits hereto)
and all documents relating hereto, including (a) future consents, waivers, and
modifications, and (b) past and future financial statements, certificates, and
other information furnished to any party hereto, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic, or
other similar process, and any party may destroy any original documents so
reproduced. Any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original exists and whether or not such party made the reproduction in the
regular course of business), and any enlargement, facsimile, or further
reproduction of such reproduction also shall be so admissible in evidence.
15.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents, or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each fully-executed set of
which shall be deemed to be an original.
15.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by
any party hereto in exercising, any of its rights, powers, remedies, or
privileges under this Agreement or otherwise available shall impair, prejudice,
or waive any such right, power, remedy, or privilege or be construed as a waiver
of any breach hereof or default hereunder or as an acquiescence therein, nor
shall any single or partial exercise of any such right, power, remedy, or
privilege preclude any other or further exercise thereof by it or the exercise
of any other right, power, remedy, or privilege by it. No notice to or demand on
any party hereto in any case shall, unless otherwise required under this
Agreement, entitle such party to any other or further notice or demand in
similar or other circumstances, or waive the rights of any party hereto to any
other or further action in any circumstances without notice or demand.
15.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers, and other
communications required or permitted to be made, given, furnished, or filed
hereunder shall be in writing (and the specification of a writing in certain
75
<PAGE>
instances and not in others does not imply an intention that a writing is not
required as to the latter), shall refer specifically to this Agreement, and
shall be personally delivered, sent by fax or telecommunication transmission
(which in either case provides written confirmation to the sender of its
delivery), sent by registered mail or certified mail, return receipt requested,
or sent by next-business-day courier service, in each case to the address or fax
number set forth for such party in Schedule 1, or to such other address or
number as such party hereafter specifies by notice to the other parties hereto.
Each such notice, request, demand, authorization, direction, consent, waiver, or
other communication shall be effective when received or, if made, given,
furnished, or filed by fax or telecommunication transmission, when confirmed.
15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND
PERFORMANCE.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS, AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT, OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THE OPERATIVE AGREEMENTS.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION, OR PROCEEDING MAY BE MADE BY
DELIVERING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT
THE ADDRESS SET FORTH PURSUANT TO (S) 15.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS (S)
15.8(C), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY,
AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO
GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN
ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN
ANY ACTION OR PROCEEDING BASED THEREON.
(D) 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
ANY OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.
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<PAGE>
(E) EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING
OUT OF OR RELATING TO THE OPERATIVE AGREEMENTS.
15.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to provide (and shall not provide) any
Person not a party hereto (other than the Certificate Holders, Liquidity
Provider, Escrow Agent, and Paying Agent, each of which is an intended
third-party beneficiary with respect to the provisions of (S) 9.1) with any
rights of any nature whatsoever againsT any of the parties hereto, and no Person
not a party hereto (other than Certificate Holders, Liquidity Provider, Escrow
Agent, and Paying Agent, with respect to the provisions of (S) 9.1) shall have
any right, power, or privilege in respect of any party hereto, or have any
benefit or interest, arising out of this Agreement.
15.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and as
of the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior understandings or
agreements, whether written or oral, among any of the parties hereto with
respect to such subject matter are hereby superseded in their entireties.
15.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge, and deliver (or cause to
be executed, acknowledged, and delivered) all such further agreements,
instruments, certificates, or other documents, and shall do and cause to be done
such further things, as any other party hereto reasonably requests in connection
with the administration of, or to carry out more effectively the purposes of, or
to assure and confirm better to such other party the rights and benefits to be
provided under, this Agreement and the other Operative Agreements.
[This rest of this page is intentionally left blank]
77
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Participation
Agreement N9__AT.
AIRTRAN AIRWAYS, INC.,
Lessee
By: _______________________________
Name:
Title:
__________________________________,
Owner Participant
By: _______________________________
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as Owner
Trustee
By:________________________________
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as Mortgagee
By: _______________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as Pass-
Through Trustee under the Pass-
Through Trust Agreement for
the AirTran Airways Pass-Through
Trust, 1999-1A
By: ________________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as Pass-
Through Trustee under the Pass-
Through Trust Agreement for the
<PAGE>
AirTran Airways Pass-Through
Trust, 1999-1B
By:________________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as Pass-
Through Trustee under the Pass-
Through Trust Agreement for the
AirTran Airways Pass-Through
Trust, 1999-1C
By: _______________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION,
not in its individual capacity
(except as expressly provided
herein), but solely as
Subordination Agent
By: ______________________________
Name:
Title:
<PAGE>
--------------------
SCHEDULE 1
TO
PARTICIPATION
AGREEMENT
--------------------
ACCOUNTS; ADDRESSES
<TABLE>
<CAPTION>
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
------------------------------ ---------------------------
<S> <C> <C>
AIRTRAN ____________________ Bank AirTran Airways, Inc.
AIRWAYS, INC. New York, NY 100__ 9955 AirTran Blvd.
account no.: ______________ Orlando, FL 32807
ABA#: _______________ Attention: ______________
Attention: _________________ fax: (407) ____________
voice: (212) _______________
fax: (212) ______________
Reference: AirTran Lease N9__AT
OWNER ____________________ Bank ______________________
PARTICIPANT New York, NY 100__
account no.: ______________
ABA#: _______________ Attention: __________________
Attention: _________________ fax: ______________
voice: (212) _______________
fax: (212) ______________
Reference: AirTran Lease N9__AT
THE BOEING The Chase Manhattan Bank The Boeing Company
COMPANY New York, NY 10081 P.O. Box 3707
account no.: 910-1-012764 Seattle, WA 98124-3707
ABA#: 021-000021 Attention: Treasurer
Attention: Paul Trupia M/S 68-34
voice: 212-552-2829 fax: (206) 237-8746
fax: 212-552-0107
Reference: AirTran Lease N9__AT
FIRST SECURITY First Security Bank, N.A. First Security Bank, N.A.
BANK, NATIONAL 79 South Main Street 79 South Main Street
ASSOCIATION Salt Lake City, UT 84111 Salt Lake City, UT 84111
account no.: 051-0922115 Attention: Corporate Trust Department
Corporate Trust Department fax: (801) 246-5053
ABA#: 124-0000-12
Reference: AirTran Lease N9__AT
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATE STREET State Street Bank and Trust Co. State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: _______________ 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011 000 028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-____
MORTGAGEE
STATE STREET ____________________ Bank State Street Bank and Trust Company of
BANK AND TRUST New York, NY 100__ Connecticut, National Association
COMPANY OF account no.: _______________ 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: _______________ Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-____
SUBORDINATION
AGENT
STATE STREET ____________________ Bank State Street Bank and Trust Company of
BANK AND TRUST New York, NY 100__ Connecticut, National Association
COMPANY OF account no.: _______________ 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: _______________ Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-____
PASS-THROUGH
TRUSTEE FOR THE
1999-1A PASS-
THROUGH TRUST
STATE STREET ____________________ Bank State Street Bank and Trust Company of
BANK AND TRUST New York, NY 100__ Connecticut, National Association
COMPANY OF account no.: _______________ 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: _______________ Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-____
PASS-THROUGH
TRUSTEE FOR THE
1999-1B PASS-
THROUGH TRUST
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
STATE STREET State Street Bank and Trust Co. State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: _______________ 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011 000 028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-____
PASS-THROUGH
TRUSTEE FOR THE
1999-1C PASS-
THROUGH TRUST
</TABLE>
<PAGE>
--------------------
SCHEDULE 2
TO
PARTICIPATION
AGREEMENT
--------------------
COMMITMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PARTICIPANT PERCENTAGE OF LESSOR'S COST DOLLAR AMOUNT
----------- --------------------------- -------------
OWNER PARTICIPANT OWNER PARTICIPANT'S
PERCENTAGE
PASS-THROUGH TRUSTEE LOAN PARTICIPANT'S PTT
PERCENTAGE
1999-1A Pass-Through Trustee
1999-1B Pass-Through Trustee
1999-1C Pass-Through Trustee
TOTAL 100%
</TABLE>
<PAGE>
----------------------
SCHEDULE 3
TO
PARTICIPATION
AGREEMENT
-----------------------
CERTAIN TERMS
DEFINED TERM DEFINITION
Commitment Termination Date _______________, ____
Lessor's Cost
Lessee's Advisor(s) Babcock & Brown
Morgan Stanley
Donaldson Lufkin & Jenrette
OP Jurisdiction
Owner Participant's Special Counsel
<PAGE>
Exh. A-2 to
Note Purchase Agr
-------------------------------------------------------------------
CONFIDENTIAL: ANNEXES B, C, AND D AND SCHEDULES 1, 2, 3, AND 4 OF
THIS LEASE AGREEMENT ARE SUBJECT TO RESTRICTIONS ON DISSEMINATION
SET FORTH IN(S) 8 OF THE PARTICIPATION AGREEMENT
-------------------------------------------------------------------
___________________________________________________________________
LEASE AGREEMENT N9__AT
dated as of _______________, ____
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee,
Lessor
and
AIRTRAN AIRWAYS, INC.,
Lessee
--------------------------------------------------------
One Boeing model 717-200 aircraft bearing United States registration no.
N9__AT and manufacturer's serial no. 550__, including two BMW Rolls-Royce
model BR715 engines bearing manufacturer's serial nos. ______ and ______
_____________________________________________________________
CERTAIN OF 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, STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, AS MORTGAGEE
UNDER TRUST INDENTURE AND MORTGAGE N9__AT, DATED AS OF THE DATE OF THIS LEASE.
THIS LEASE HAS BEEN EXECUTED IN COUNTERPARTS; SEE (S) 18.5 FOR INFORMATION
CONCERNING THE RIGHTS OF HOLDERS OF THE VARIOUS COUNTERPARTS.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS AND CONSTRUCTION..........................................................................1
2. DELIVERY AND ACCEPTANCE...............................................................................1
2.1 Delivery and Lease of Aircraft...................................................................1
2.2 Acceptance by Lessee.............................................................................1
3. TERM AND RENT.........................................................................................1
3.1 Term.............................................................................................1
3.2 Rent.............................................................................................1
3.3 Payments.........................................................................................5
4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION
1110 MATTERS.....................................................................................6
4.1 Disclaimer of Warranties.........................................................................6
4.2 Certain Agreements of Lessor.....................................................................6
4.3 Quiet Enjoyment..................................................................................6
4.4 Investment of Funds Held as Security.............................................................7
4.5 Title Transfers by Lessor........................................................................7
4.6 Lessor's Interest in Certain Engines.............................................................8
4.7 Lease For U.S. Federal Income Tax Law Purposes; Section
1110 of Bankruptcy Code.........................................................................8
5. RETURN OF AIRCRAFT....................................................................................9
5.1 Compliance with Annex B..........................................................................9
5.2 Storage and Related Matters......................................................................9
5.3 Return of Other Engines..........................................................................9
5.4 Fuel.............................................................................................9
6. LIENS................................................................................................10
7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING...................................................11
7.1 Registration and Operation......................................................................11
7.2 Possession......................................................................................12
7.3 Certain Limitations on Subleasing or Other Relinquishment
of Possession.................................................................................18
7.4 Security Assignment of Subleases................................................................18
8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS;
ALTERATIONS, MODIFICATIONS, AND ADDITIONS;
OTHER LESSEE COVENANTS...........................................................................19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
Modifications, and Additions...................................................................19
8.2 Information, Certificates, Notices, and Reports.................................................19
9. VOLUNTARY TERMINATION UPON OBSOLESCENCE..............................................................21
9.1 Right of Termination............................................................................21
9.2 Election by Lessor to Sell......................................................................21
9.3 Retention of Aircraft by Lessor.................................................................24
10. LOSS, DESTRUCTION, REQUISITION, ETC.................................................................25
10.1 Event of Loss to the Aircraft..................................................................25
10.2 Event of Loss to an Engine; Engine Exchanges...................................................28
10.3 Conditions to any Replacement..................................................................29
10.4 Conveyance to Lessee...........................................................................32
10.5 Application of Payments........................................................................32
10.6 Requisition of Aircraft for Use................................................................33
10.7 Requisition of an Engine for Use...............................................................33
10.8 Application of Payments........................................................................34
10.9 Application of Payments During Default.........................................................34
11. INSURANCE...........................................................................................34
11.1 Lessee's Obligation to Insure..................................................................34
11.2 Insurance for Own Account......................................................................34
11.3 Indemnification by Government in Lieu of Insurance.............................................35
11.4 Application of Insurance Proceeds..............................................................35
11.5 Application of Payments During Default.........................................................35
12. INSPECTION..........................................................................................36
13. ASSIGNMENT; MERGER; SUCCESSOR LESSOR................................................................36
13.1 In General.....................................................................................36
13.2 Merger of Lessee...............................................................................37
13.3 Assignment Security for Lessor's Obligations...................................................38
13.4 Successor Lessor...............................................................................38
14. LEASE EVENTS OF DEFAULT.............................................................................38
14.1 Payments.......................................................................................39
14.2 Insurance......................................................................................39
14.3 Other Covenants................................................................................39
14.4 Representations and Warranties.................................................................40
14.5 Bankruptcy and Insolvency......................................................................40
14.6 Failure of Guarantee...........................................................................41
14.7 Loss of Priority of Mortgage Lien..............................................................41
14.8 Breach of Side Agreements......................................................................41
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
15. REMEDIES AND WAIVERS................................................................................41
15.1 Remedies.......................................................................................41
15.2 Limitations Under CRAF.........................................................................45
15.3 Right to Perform for Lessee....................................................................46
15.4 Determination of Fair Market Rental Value and Fair Market
Sales Value..................................................................................46
15.5 Remedies Cumulative............................................................................46
16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC..................................................47
17. RENEWAL AND PURCHASE OPTIONS........................................................................48
17.1 Notices Generally..............................................................................48
17.2 Renewal Options................................................................................48
17.3 Purchase Option................................................................................50
17.4 Appraisals.....................................................................................50
17.5 Early Buy-Out Option...........................................................................51
18. MISCELLANEOUS.......................................................................................53
18.1 Amendments.....................................................................................53
18.2 Severability...................................................................................53
18.3 Third-Party Beneficiary........................................................................53
18.4 Reproduction of Documents......................................................................53
18.5 Counterparts...................................................................................54
18.6 Notices........................................................................................54
18.7 Governing Law..................................................................................54
18.8 No Waiver......................................................................................54
18.9 Entire Agreement...............................................................................55
</TABLE>
ANNEXES, EXHIBITS, AND SCHEDULES
- --------------------------------
ANNEX A Definitions
ANNEX B Return Conditions
ANNEX C Maintenance
ANNEX D Insurance
EXHIBIT A Aircraft Description
EXHIBIT B Form of Return Acceptance Supplement
SCHEDULE 1 Certain Terms
SCHEDULE 2 Basic Rent
SCHEDULE 3 Stipulated Loss Value Schedule
iii
<PAGE>
SCHEDULE 4 Termination Value Schedule
SCHEDULE 5 Permitted Countries
SCHEDULE 6 Placards
iv
<PAGE>
LEASE AGREEMENT N9__AT
This Lease Agreement N9__AT (this "Lease") is entered into as of
_______________, ____, between (1) First Security Bank, National Association, a
national banking association, not in its individual capacity (except as
expressly provided herein) but solely as Owner Trustee ("Lessor"), and (2)
AirTran Airways, Inc. ("Lessee"), a Delaware corporation.
Lessor and Lessee agree as follows:
1. DEFINITIONS AND CONSTRUCTION
The terms defined in Annex A, when capitalized as in Annex A, have the
same meanings when used in this Lease. Annex A also contains rules of usage that
control construction in this Lease.
2. DELIVERY AND ACCEPTANCE
2.1 DELIVERY AND LEASE OF AIRCRAFT
Lessor hereby leases the Aircraft to Lessee for the Term, and Lessee
hereby leases the Aircraft from Lessor for the Term.
2.2 ACCEPTANCE BY LESSEE
Lessee hereby confirms to Lessor that Lessee has duly and irrevocably
accepted delivery of the Aircraft for all purposes of this Lease and the other
Operative Agreements.
3. TERM AND RENT
3.1 TERM
The Aircraft shall be leased hereunder for the Term, unless this Lease
or the leasing of the Aircraft is earlier terminated in accordance with any
provision of this Lease.
3.2 RENT
3.2.1 BASIC RENT; ADJUSTMENTS TO BASIC RENT AND CERTAIN
OTHER AMOUNTS
(a) Lessee shall pay to Lessor, on the last day of the Interim
Term, Basic Rent equal to the Interim Rent, which shall be allocated to the
Interim Term. During the Base Term, Lessee shall pay to Lessor, on each Payment
1
<PAGE>
Date, Basic Rent in the amount equal to the percentage of Lessor's Cost
specified in Schedule 2 for such Payment Date, which shall be allocated to the
Payment Period ending on such Payment Date, if designated as a payment in
arrears, or allocated to the Payment Period commencing on such Payment Date, if
designated as a payment in advance, in each case as specified in Schedule 2, as
such amount may be adjusted pursuant to (S) 3.2.1(b). During any Renewal Term,
Lessee shall pay to Lessor, on each Payment Date, Basic Rent equal to the
Renewal Rent for that Renewal Term, determined pursuant to (S) 17.2.2.
(b) Basic Rent, Stipulated Loss Values, Termination Values, EBO
Date, and EBO Price shall be subject to adjustment as follows:
(1) If Transaction Expenses paid by Lessor pursuant to (S) 9.2
of the ParticipatioN Agreement are determined to be other than ___% of
Lessor's Cost, then the Basic Rent percentages in Schedule 2, the
Stipulated Loss Value percentages in Schedule 3, the Termination Value
percentages in Schedule 4, and the EBO Date and EBO Price shall be
recalculated (upwards or downwards) by the Owner Participant, on or
before the 120th day after the Delivery Date using the same methods and
assumptions used to calculate the original Basic Rent, Stipulated Loss
Value, Termination Value percentages, and the EBO Date and EBO Price,
in order (aa) to maintain the Owner Participant's Net Economic Return,
and (bb) to minimize the Net Present Value of Rents to Lessee to the
extent possible consistent with clause (aa) of this (S) 3.2.1(b)(1).
(2) In the event of a refinancing as contemplated by (S) 11 of
the ParticipatioN Agreement, then the Basic Rent percentages in
Schedule 2, the Stipulated Loss Value percentages in Schedule 3, and
the Termination Value percentages in Schedule 4 shall be recalculated
(upwards and downwards) by the Owner Participant as contemplated by
such (S) 11 (aa) to maintain the OwneR Participant's Net Economic
Return, and (bb) to the extent possible consistent with clause (aa) of
this (S) 3.2.1(b)(2), to minimize the Net Present Value of Rents to
Lessee.
(3) If Lessee is required to indemnify the Owner Participant
under the Tax Indemnity Agreement, then the Stipulated Loss Value
percentages in Schedule 3 and the Termination Value percentages in
Schedule 4, shall be recalculated (upwards or downwards) by Owner
Participant, using the same methods and assumptions (except to the
extent such assumptions shall be varied to take into account the Tax
Loss or Foreign Tax Credit Loss (as each such term is defined in the
Tax Indemnity Agreement) that is the subject of such indemnification,
and any prior or contemporaneous Tax Loss or Foreign Tax Credit Loss)
used
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to calculate the Basic Rent percentages, the Stipulated Loss Value
percentages, and the Termination Value percentages on the Delivery
Date, in order (aa) to maintain the Owner Participant's Net Economic
Return, and (bb) to the extent possible consistent with clause (aa) of
this (S) 3.2.1(b)(3), to minimize the Net Present Value of Rents to
Lessee.
(c) All adjustments pursuant to (S) 3.2.1(b) shall be made as promptly
as practicable after eitheR Owner Participant or Lessee gives notice to the
other that an event has occurred that requires an adjustment. Owner Participant
and Lessee shall give prompt notice to the other of any event requiring an
adjustment. Any recalculation of the percentages of Basic Rent, Stipulated Loss
Value, and Termination Value, and of EBO Date and EBO Price, shall be prepared
by Owner Participant, subject to verification at the request of Lessee in
accordance with this (S) 3.2.1(c), on the basis of the same methodology and
assumptions used by Owner Participant iN determining the percentages of Basic
Rent, Stipulated Loss Value, and Termination Value, and the EBO Date and EBO
Price, as of the Delivery Date, except as such assumptions have been modified to
reflect the events giving rise to adjustments hereunder. Promptly after an
adjustment is made hereunder, Owner Participant shall deliver to Lessee a
description of such adjustment, setting forth in reasonable detail the
calculation thereof. All adjustments (1) shall be made so as to avoid
characterization of the Lease as a "disqualified leaseback or long-term
agreement" within the meaning of Code (S) 467, unless such adjustments are made
in a manner that reflectS the effect of such characterization, and (2) shall be
in compliance with the requirements of (S)(S) 4.02(5), 4.07(L), and (on a
prospective basis) 4.08(1) of Revenue Procedure 75-28, except to the extent that
on the Delivery Date the Lease constituted a "disqualified leaseback or
long-term agreement" or was not in compliance with the regulations referred to
in clause (2). All adjustments required pursuant to (S) 3.2.1(b) shall be set
forth in aN amendment to this Lease, and promptly after execution thereof by
Lessor and Lessee, Lessee shall give a copy thereof to Mortgagee.
(d) If Lessee believes that any calculations by Owner Participant
pursuant to (S) 3.2.1(c) are iN error, and if, after consultation, Lessee and
Owner Participant do not agree on an adjustment, then a nationally-recognized
firm of accountants selected by Lessee and reasonably satisfactory to Owner
Participant shall verify such calculations. Owner Participant will make
available to such firm (but not to Lessee or any representative of Lessee) the
methodology and assumptions referred to in (S) 3.2.1(c) and any modifications
thereto made to reflect the events giving rise to adjustments hereunder (subject
to the execution by such firm of a confidentiality agreement, reasonably
acceptable to Owner Participant, prohibiting disclosure of such methodology and
assumptions to any third party). The determination by such firm of accountants
shall be final. Lessee will pay the reasonable costs and expenses
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of such further verification by such accountants, except that if it results in a
decrease in Basic Rent which decreases the remaining Net Present Value of Rents
by ten or more basis points from the remaining Net Present Value of Rents as
recalculated by the Owner Participant, then the Owner Participant will pay such
costs and expenses.
(e) Notwithstanding anything to the contrary in any Operative
Agreement, (1) the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes before such Date), the
aggregate principal amount of scheduled installments due on the Equipment Notes
outstanding on such Payment Date, together with the accrued and unpaid interest
thereon, due on such Payment Date in respect of the Equipment Notes, and (2) the
amount of the payment of Stipulated Loss Value, Termination Value, or EBO Price
due and payable on any date (or, if the EBO Price is payable in installments,
the date that the first installment is due) shall be at least sufficient to pay
in full, as of such date (assuming timely payment of the Equipment Notes before
such date), the aggregate principal amount of scheduled installments due on the
Equipment Notes outstanding on such date, together with the accrued and unpaid
interest thereon, due on such date in respect of the Equipment Notes; provided,
that no installment of Basic Rent, and no payment of Stipulated Loss Value,
Termination Value, or EBO Price, shall be increased to the extent such increase
would be based upon (1) any attachment or diversion of Rent on account of Lessor
Liens, (2) any modification of the payment terms of the Equipment Notes, other
than as required or permitted by any Operative Agreement (including as permitted
upon the occurrence of a Lease Event of Default), or (3) the acceleration of any
Equipment Note(s) due solely to the existence of a Mortgage Event of Default
that does not constitute a Lease Event of Default.
3.2.2 SUPPLEMENTAL RENT
Lessee shall pay to Lessor, or to whomever is entitled to it, any and
all Supplemental Rent when and as it becomes due and owing. Lessee will also pay
to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the extent
permitted by applicable Law, interest at the Past-Due Rate on any part of any
amount of Rent (including Supplemental Rent) not paid by 11:00 a.m., New York
time, on the date when due (so long as, in the case of any Person not a party to
the Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made), for the period from and including
the date on which the same was due to (but excluding) the date of payment in
full. Lessee also shall pay, as Supplemental Rent, on the date provided, (a) any
Make-Whole Amount coming due under any Operative Agreement (except any
Make-Whole Amount payable solely as a result of the
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existence of a Mortgage Event of Default that does not constitute a Lease Event
of Default, and (b) any amount payable under (S) 1 of the KfW Agreement or (S) 1
of the Boeing Agreement.
3.3 PAYMENTS
(a) Payments of Rent by Lessee shall be paid by wire transfer of
immediately available Dollars, not later than 11:00 a.m., New York City time, on
the date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement (or to such other account in the United States as Lessor
specifies to Lessee in writing at least 10 Business Days before such payment of
Rent is due), or, in the case of any payment of Supplemental Rent expressly
payable to a Person other than Lessor, to the Person that shall be entitled
thereto, to such account in the United States as such Person specifies from time
to time to Lessee at least 10 Business Days before such payment of Rent is due.
(b) Except as otherwise expressly provided herein, whenever any payment
of Rent shall be due on a day that is not a Business Day, such payment shall be
made on the next day that is a Business Day, and, if such payment is made on
such next Business Day, no interest shall accrue on the amount of such payment
during such extension.
(c) So long as Lessee has not received written notice from the
Mortgagee that the Lien of the Mortgage has been discharged, and notwithstanding
(S) 3.3(a), Lessor hereby directs, and Lessee agrees, that all payments of Rent
payable by Lessee, other than Excluded Payments, shall be paid directly to
Mortgagee on behalf of Lessor by wire transfer of immediately available Dollars
to the account of Mortgagee specified in Schedule 1 to the Participation
Agreement (or to such other account in the United States as Mortgagee specifies
by written notice to Lessor and Lessee at least 10 Business Days before such
payment of Rent is due).
(d) Excluded Payments shall be paid by wire transfer of immediately
available Dollars to the account of the Person specified in the Participation
Agreement or, if not so specified, to such account in the United States such
Person specifies by written notice to Lessor and Lessee from time to time at
least 10 Business Days before such payment is required to be made.
(e) All computations of interest under this Lease shall be made on the
basis of a year of 360 days composed of twelve 30-day months.
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4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS
4.1 DISCLAIMER OF WARRANTIES
LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS." LESSEE
ACKNOWLEDGES AND AGREES THAT, AS BETWEEN LESSEE AND EACH OF LESSOR, MORTGAGEE,
AND ANY PARTICIPANT, (A) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER
THEREOF, AND (B) NEITHER LESSOR NOR MORTGAGEE NOR ANY PARTICIPANT MAKES, HAS
MADE, OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:
(1) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY, OR FITNESS FOR USE OR FOR ANY PARTICULAR
PURPOSE OF THE AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;
(2) THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;
(3) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME, ANY
ENGINE, OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;
(4) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR
COPYRIGHT, OR THE LIKE; OR
(5) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT,
OR ANY OTHER IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER
WITH RESPECT TO THE AIRFRAME, ANY ENGINE, OR ANY PART THEREOF.
4.2 CERTAIN AGREEMENTS OF LESSOR
Unless a Lease Event of Default exists, Lessor agrees to make available
to Lessee such rights as Lessor may have under any warranty with respect to the
Aircraft made, or made available, by Airframe Manufacturer or Engine
Manufacturer, or any of their subcontractors or suppliers, pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.
4.3 QUIET ENJOYMENT
So long as no Lease Event of Default exists, Lessor shall not interfere
with Lessee's rights hereunder to continued possession, use, and operation of,
and quiet enjoyment of, the Aircraft during the Term.
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4.4 INVESTMENT OF FUNDS HELD AS SECURITY
4.4.1 INVESTMENT
Any money required to be paid to or retained by Lessor that are
required to be paid to Lessee or applied as provided herein shall, until paid to
Lessee as provided herein or applied as provided herein, be invested by Lessor
from time to time as directed in writing by Lessee (or, if Lessee does not so
direct, by or as directed by Lessor in its sole discretion) and at Lessee's risk
and expense in Cash Equivalents so long as such Cash Equivalents specified by
Lessee or Lessor (as applicable) can be acquired by Lessor using its best
efforts; provided, that so long as the Lien of the Mortgage has not been
discharged, such money shall be invested and held by Mortgagee, as assignee of
Lessor, in accordance with this Lease, and upon discharge of such Lien,
Mortgagee shall pay any such money held by it to Lessor to be held and invested
in accordance with this (S) 4.4.1.
4.4.2 PAYMENT OF GAIN OR LOSS
Any net gain (including interest received) realized as the result of investments
pursuant to (S) 4.4.1 (net of any fees, commissions, and other reasonable
expenses incurred in connection with such investment) shall be held and applied
in the same manner as the principal amount is to be held and applied hereunder.
Lessee will promptly pay to Lessor (or, so long as the Lien of the Mortgage has
not been discharged, Mortgagee), on demand, the amount of any loss realized as
the result of any such investment (together with any fees, commissions, and
other reasonable expenses incurred in connection with such investment), such
amount so paid to be held and applied by Lessor (or, so long as the Lien of the
Mortgage has not been discharged, Mortgagee) as contemplated in (S) 4.4.1.
4.4.3 LIMITATION OF LIABILITY
All investments under this (S) 4.4 shall be at Lessee's risk and expense, and
Lessor and Mortgagee shall not be liable for any loss resulting from any
investment made under this (S) 4.4 other than by reason of its willfuL
misconduct or gross negligence. Any such investment may be sold (without regard
to its maturity) by Lessor (or, so long as the Lien of the Mortgage has not been
discharged, Mortgagee) without instructions whenever such sale is necessary to
make a distribution required by this Lease.
4.5 TITLE TRANSFERS BY LESSOR
If Lessor shall be required to transfer title to the Aircraft, the
Airframe, or any Engine to Lessee or any other Person pursuant to this Lease,
then (a)
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Lessor shall (1) transfer to Lessee or such other Person (as applicable) all of
Lessor's right, title and interest in and to the Aircraft, the Airframe, or such
Engine (as applicable), free and clear of all Lessor Liens, (2) so long as the
Lien of the Mortgage has not been discharged, comply with the Mortgage relating
to the release of the Aircraft, the Airframe, or such Engine, (3) assign to
Lessee or such other Person (as applicable), if and to the extent permitted
under the Purchase Agreement, all warranties of Airframe Manufacturer and Engine
Manufacturer with respect to the Aircraft, the Airframe, or such Engine, and (4)
assign to Lessee or such other Person (as applicable), if and to the extent
permitted, all claims, if any, for damage to the Aircraft, the Airframe, or such
Engine, in each case free of Lessor Liens, and without recourse or warranty of
any kind whatsoever (except as to the transfer described in clause (1) above and
as to the absence of such Lessor Liens), and (b) Lessor shall promptly deliver
to Lessee or such other Person (as applicable), a bill of sale and agreements of
assignment, evidencing such transfer and assignment, and such other instruments
of transfer, all in form and substance reasonably satisfactory to Lessee (or
such other Person, as applicable), as Lessee (or such other Person, as
applicable) may reasonably request.
4.6 LESSOR'S INTEREST IN CERTAIN ENGINES
Lessor hereby agrees for the benefit of each lessor, conditional
seller, or secured party of any engine leased, purchased, or owned by Lessee or
any Permitted Sublessee subject to a lease, conditional sale, or other security
agreement that Lessor will not acquire or claim, as against such lessor,
conditional seller, 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, conditional sale, or other
security agreement and owned by such lessor or conditional seller or subject to
a security interest in favor of such secured party.
4.7 LEASE FOR U.S. FEDERAL INCOME TAX LAW PURPOSES; SECTION 1110
OF BANKRUPTCY CODE
(a) Lessee and Lessor agree that this Lease is, and shall be treated
as, a lease for U.S. federal income tax purposes of the Aircraft, Airframe,
Engines, and Parts.
(b) Lessee and Lessor intend that Lessor (and Mortgagee as assignee of
Lessor under the Mortgage) shall be entitled to the benefits of Section 1110
with respect to the right to take possession of the Aircraft, Airframe, Engines,
and Parts as provided in this Lease.
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5. RETURN OF AIRCRAFT
5.1 COMPLIANCE WITH ANNEX B
Lessee shall comply with each of the provisions of Annex B, which
provisions are hereby incorporated by this reference as if set forth in full
herein.
5.2 STORAGE AND RELATED MATTERS
If Lessor gives written notice to Lessee, not less than 60 days nor
more than 120 days before the end of the Term, requesting storage of the
Aircraft upon its return hereunder, Lessee will provide Lessor (or cause Lessor
to be provided) with outdoor parking facilities for the Aircraft for a period up
to 30 days, starting on the date of such return, and upon Lessor's request to
Lessee made at least 10 days before the end of such initial 30-day period, for
an additional 30-day period commencing upon expiration of such initial period,
at such storage facility in the 48 contiguous states of the United States as
Lessee selects. At Lessor's written request, Lessee shall maintain insurance (if
available) for the Aircraft during such storage period, provided, that Lessor
shall reimburse Lessee for Lessee's out-of-pocket cost of providing such
insurance. Such storage shall be at Lessor's risk, and Lessor shall pay all
applicable storage fees, except that Lessee shall pay the parking fees for the
initial 30-day storage period; provided, that Lessee's obligation to provide
parking shall be subject to Lessor's entering into an agreement with the storage
facility, before the storage period begins, providing that Lessor shall bear all
maintenance charges and other costs incurred (other than parking fees for the
initial 30-day period).
5.3 RETURN OF OTHER ENGINES
If any Engine owned by Lessor is not installed on the Airframe at the
time of return hereunder, Lessee shall return the Airframe hereunder with a
Replacement Engine meeting the requirements of, and in accordance with, (S) 10
and Annex B. Thereupon, Lessor will transfer to Lessee the Engine constituting
part of the AircrafT but not installed on the Airframe at the time of the return
of the Airframe.
5.4 FUEL
Upon the return of the Airframe upon any termination of this Lease,
Lessor shall pay Lessee, as compensation for any fuel or oil contained in the
fuel or oil tanks of such Airframe, the value of such fuel or oil at the price
paid by Lessee for such fuel or oil. However, if the Aircraft is being returned
in
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connection with the exercise of remedies pursuant to (S) 15, Lessor shall have
no obligation to make such payment to Lessee.
6. LIENS
Lessee shall not, directly or indirectly, create, incur, assume, or
suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any
Engine, or any Part, title to any of the foregoing, or any interest of Lessee
therein, or the Lessee's rights in and to this Lease or any Permitted Sublease,
except (a) the rights of Lessor, Mortgagee, the Participants, and Lessee under
the Operative Agreements, and of any Permitted Sublessee under any Permitted
Sublease; (b) Lessor Liens; (c) the rights of others under agreements or
arrangements to the extent permitted by (S) 7.2, (S) 7.3, or Annex C; (d) Liens
for Taxes either not yet due or being contested in gOod faith by appropriate
proceedings if such Liens and such proceedings do not involve any material risk
of the sale, forfeiture, or loss of the Aircraft, the Airframe, any Engine, or
the interest of Lessor, Mortgagee, or any Participant therein, or impair the
Lien of the Mortgage; (e) materialmen's, mechanics', workers', repairers',
employees', or other like Liens arising in the ordinary course of business for
amounts the payment of which either is not yet delinquent for more than 60 days
or is being contested in good faith by appropriate proceedings, if such Liens
and such proceedings do not involve any material risk of the sale, forfeiture,
or loss of the Aircraft, the Airframe, any Engine, or the interest of Lessor,
Mortgagee, or any Participant therein, or impair the Lien of the Mortgage; (f)
Liens arising out of any judgment or award against Lessee or any Permitted
Sublessee, if, within 60 days after the entry thereof, that judgment or award is
discharged or vacated, or has its execution stayed pending appeal, or is
discharged, vacated, or reversed within 60 days after the expiration of such
stay, and if during any such 60-day period there is not, or any such judgment or
award does not involve, any material risk of the sale, forfeiture, or loss of
the Aircraft, the Airframe, any Engine, or the interest of Lessor, Mortgagee, or
any Participant therein, or impairment of the Lien of the Mortgage; and (g) any
other Lien with respect to which Lessee or any Permitted Sublessee provides a
bond, cash collateral, or other security adequate in the reasonable opinion of
Lessor. Lessee shall promptly take or cause to be taken such action as may be
necessary duly to discharge (by bonding or otherwise) any Lien not excepted
above that arises in respect of the Aircraft, the Airframe, any Engine, or any
Part during the Term.
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7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING
7.1 REGISTRATION AND OPERATION
7.1.1 REGISTRATION AND RECORDATION
Subject to Lessor's and Owner Participant's compliance with their
obligations under (S) 13 of the Participation Agreement, Lessee shall cause the
Aircraft to be, and at all times during the Term to remain, duly registered with
the FAA under the Transportation Code or with such other country of registry as
shall be permitted under (S) 7.1.2 hereof, in the name of Lessor as owner and
lessor (except to the extent that sucH registration under the Transportation
Code is prevented or lost because of Lessor's or Owner Participant's failure to
comply with the citizenship requirements for registration of the Aircraft under
the Transportation Code). Lessor shall execute and deliver all such documents as
Lessee or any Permitted Sublessee reasonably requests for the purpose of
effecting and continuing such registration. Unless Mortgagee has given Lessee
notice that the Mortgage has been discharged, Lessee shall also cause the
Mortgage to be duly recorded and at all times maintained of record as a
first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe, and each of the Engines (except to the extent such perfection or
priority cannot be maintained solely as a result of the failure by Lessor or
Mortgagee to execute and deliver any necessary documents).
7.1.2 REREGISTRATION
If no Special Default exists, Lessee may, by written notice to Lessor,
request to change the country of registration of the Aircraft. Any such change
in registration shall be effected only in compliance with, and subject to all of
the conditions set forth in, (S) 7.6.11 of the Participation Agreement.
7.1.3 MARKINGS
If permitted by applicable Law, on or reasonably promptly after the
Delivery Date, Lessee will cause to be affixed to, and maintained in, the
cockpit of the Airframe and on each Engine, in each case in a clearly visible
location, a placard of a reasonable size and shape bearing the legend set forth
in Schedule 6. Such placards may be removed temporarily, if necessary, in the
course of maintenance of the Airframe or Engines. If any such placard is damaged
or becomes illegible, Lessee shall promptly replace it with a placard complying
with the requirements of this (S) 7.1.3.
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7.1.4 COMPLIANCE WITH LAWS
Lessee shall not, and shall not allow any other Person to, operate,
use, maintain, service, repair, or overhaul the Aircraft (a) in violation of any
Law binding on or applicable to the Aircraft, the Airframe, or any Engine, or
(b) in violation of any airworthiness certificate, license, or registration of
any Government Entity relating to the Aircraft, the Airframe, or any Engine,
except (1) immaterial or non-recurring violations with respect to which
corrective measures are taken promptly by Lessee or a Permitted Sublessee (as
applicable) upon discovery thereof, and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement relating to any such certificate, license, or registration in good
faith in any reasonable manner which does not involve any material risk of the
sale, forfeiture, or loss of the Aircraft, the Airframe, any Engine or the
interest of Lessor, Mortgagee, or any Participant therein, any risk of criminal
liability or of material civil penalty against Lessor, Mortgagee, or any
Participant or impair the lien of the Mortgage.
7.1.5 OPERATION
Lessee agrees not to operate, use, or locate the Aircraft, the
Airframe, or any Engine, or allow the Aircraft, the Airframe, or any Engine to
be operated, used, or located, (a) in any area excluded from coverage by any
insurance required by the terms of (S) 11, except in the case of a requisition
by the U.S. Government where the U.S. Government provides an indemnity in lieu
of such insurance, or insurance from the U.S. Government, covering such area, in
accordance with (S) 11.3, or (b) in any recognized area of hostilities unless
fully covered iN accordance with Annex D by war-risk insurance as required by
the terms of (S) 11 (including (S) 11.3), unless in Any case referred to in this
(S) 7.1.5 the Aircraft is only temporarily operated, used, or located in such
area as A result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition, or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.
7.2 POSSESSION
Lessee will not, without the prior written consent of Lessor, sublease
or otherwise in any manner deliver, transfer, or relinquish possession of the
Aircraft, the Airframe, or any Engine, or install any Engine, or permit any
Engine to be installed, on any airframe other than the Airframe; provided, that,
subject to the provisions of (S) 7.3, Lessee may, without such prior written
consent:
7.2.1 INTERCHANGE AND POOLING
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subject or permit any Permitted Sublessee to subject (a) the Airframe
to normal interchange agreements, or (b) any Engine to normal
interchange agreements or pooling agreements or arrangements, in each
case customary in the commercial airline industry and entered into by
Lessee or such Permitted Sublessee in the ordinary course of business;
provided, that if Lessor's title to any such Engine is divested under
any such agreement or arrangement, then such Engine shall be deemed to
have suffered an Event of Loss as of the date of such divestiture, and
Lessee shall be required to replace such Engine with a Replacement
Engine meeting the requirements of, and in accordance with, (S) 10.
7.2.2 TESTING AND SERVICE
deliver or permit any Permitted Sublessee to deliver possession of the
Aircraft, Airframe, any Engine or any Part (a) to the manufacturer
thereof or to any third-party maintenance provider, for testing,
service, repair, maintenance, or overhaul work on the Aircraft,
Airframe, any Engine, or any Part, or, to the extent required or
permitted by the terms of Annex C, for alterations or modifications in
or additions to the Aircraft, the Airframe, or any Engine, or (b) to
any Person for the purpose of transport to a Person referred to in the
preceding clause (a).
7.2.3 TRANSFER TO U.S. GOVERNMENT
transfer or permit any Permitted Sublessee to transfer possession of
the Aircraft, the Airframe, or any Engine to the U.S. Government, in
which event Lessee shall promptly notify Lessor and Mortgagee in
writing of any such transfer of possession (and, in the case of any
transfer pursuant to CRAF, in such notification shall identify by name,
address, and telephone numbers the Contracting Office Representative(s)
for the Military Airlift Command of the United States Air Force to whom
notices must be given and to whom requests or claims must be made to
the extent applicable under CRAF).
7.2.4 INSTALLATION OF ENGINES ON OWNED AIRFRAMES
install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, free and clear of
all Liens except (a) Permitted Liens, (b) Liens those that do not (at
any time) apply to the Engines, and (c) the rights of third parties
under normal interchange or pooling agreements and arrangements of the
type permitted under (S) 7.2.1.
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7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES
install or permit any Permitted Sublessee to install an Engine on an
airframe leased to Lessee or such Permitted Sublessee, or purchased or
owned by Lessee or such Permitted Sublessee subject to a security
agreement, conditional sale, or other secured financing arrangement,
but only if (a) such airframe is free and clear of all Liens except (1)
the rights of the parties to such lease or secured financing
arrangement, covering such airframe, and (2) Liens of the type
permitted by clauses (a) and (b) of (S) 7.2.4, and (b) Lessee or such
Permitted Sublessee has received from the lessor, secured party, or
conditional seller, in respect of such airframe, a written agreement
(which may be a copy of the lease, security agreement, conditional sale
agreement, or other agreement covering such airframe), whereby such
Person agrees that it will not acquire or claim any right, title, or
interest in, or Lien on, such Engine by reason of the installation of
such Engine on such airframe at any time while such Engine is subject
to this Lease or is owned by Lessor.
7.2.6 INSTALLATION OF ENGINES ON FINANCED AIRFRAMES
install or permit any Permitted Sublessee to install an Engine on an
airframe owned by Lessee or such Permitted Sublessee, leased to Lessee
or such Permitted Sublessee, or purchased or owned by Lessee or such
Permitted Sublessee subject to a conditional sale or other security
agreement under circumstances where neither (S) 7.2.4 nor (S) 7.2.5
applies; provided, that any such installation shall be deemed an EvEnt
of Loss with respect to such Engine, and Lessee shall comply with (S)
10.2 in respect thereof.
7.2.7 SUBLEASING
with respect to the Aircraft, the Airframe, or any Engine, if no
Special Default exists, enter into a sublease with any Permitted Air
Carrier, or Permitted Manufacturer but only if:
(a) Lessee provides written notice to Lessor and Mortgagee
(such notice in the event of a sublease to a U.S. Air Carrier to be
given promptly after entering into any such sublease, and, in the case
of a sublease to any other Permitted Air Carrier or to a Permitted
Manufacturer, 10 days in advance of entering into such sublease);
(b) at the time that Lessee enters into such sublease, such
Permitted Air Carrier or Permitted Manufacturer shall not be subject to
any bankruptcy, insolvency, liquidation, reorganization, dissolution,
or similar proceeding, and shall not have substantially all of its
property in the possession of any liquidator, trustee, receiver, or
similar Person;
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(c) any such sublease (1) shall not extend beyond the
expiration of the Base Term or any Renewal Term then in effect or
irrevocably committed to by Lessee unless Lessee irrevocably commits to
purchase the Aircraft, (2) shall include provisions for the
maintenance, operation, possession, inspection, and insurance of the
Aircraft that are the same in all material respects as the applicable
provisions of this Lease, and (3) shall be expressly subject and
subordinate to all the terms of this Lease and to Lessor's rights,
powers, and remedies hereunder, including Lessor's rights under (S) 15
to repossess the Aircraft and to terminate such sublease if a Lease
Event of Default exists;
(d) in connection with a sublease to a Permitted Foreign Air
Carrier or non-U.S. Permitted Manufacturer, Lessee furnishes to Lessor
and Mortgagee a favorable opinion, in form and substance reasonably
satisfactory to Lessor and Mortgagee, of counsel, selected by Lessee
and reasonably satisfactory to Lessor and Mortgagee, located in the
country of domicile of such Permitted Foreign Air Carrier or non-U.S.
Permitted Manufacturer, that (aa) the terms of such sublease are legal,
valid, and binding obligations of the parties thereto, enforceable
under the laws of such jurisdiction, (bb) it is not necessary for any
Participant, Lessor, or Mortgagee to register or qualify to do business
in such jurisdiction, if not already so registered or qualified, as a
result of the proposed sublease, (cc) Lessor's title to, and the
validity, perfection, and priority of Mortgagee's Lien in respect of,
the Aircraft, Airframe, and Engines will be recognized and enforceable
in such jurisdiction, (dd) the Laws of such jurisdiction of domicile
require fair compensation by the government of such jurisdiction,
payable in a currency freely convertible into Dollars, for the loss of
title to the Aircraft, Airframe, or Engines in the event of the
requisition by such government of such title (unless Lessee provides
insurance in the amounts required with respect to hull insurance under
(S) 11 covering the requisition of title to the Aircraft, Airframe, or
Engines by the government of such jurisdiction so long as the Aircraft,
Airframe, or Engines are subject to such sublease), (ee) such Permitted
Air Carrier's or Permitted Manufacturer's agreement that its rights
under the sublease are subject and subordinate to all the terms of this
Lease is enforceable against such Permitted Air Carrier or Permitted
Manufacturer under applicable law, (ff) the courts of such jurisdiction
would provide substantially equivalent protection to Lessor and
Mortgagee as provided under U.S. Law in respect of the exercise of
remedies, including that there are no possessory rights in favor of
Lessee, any Permitted Sublessee, or any third party (including any
Government Entity) which would, upon bankruptcy or other default by
Lessee or any Permitted Sublessee, prevent the return of the Aircraft
to Lessor in accordance with and when permitted by the terms of this
Lease upon Lessor's (or
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Mortgagee's) exercise of its remedies thereunder, or, if such
possessory rights exist, they are not materially greater than those
available to lessees and sublessees under United States Law and there
are no procedural impediments to the return of the Aircraft to Lessor
greater than under United States Law, and upon termination of any
Sublease, registration shall be terminable without material burden or
delay and there is no material impediment under the laws of such
country of registration to the enforceability (other than immaterial
differences in procedures of enforcement) of the rights and remedies of
Lessor and Mortgagee provided for under the Operative Agreements (it
being understood that, in the absence of restrictions similar to those
imposed under (S)(S) 362 and 363 of the Bankruptcy Code, rights and
remedies similar to those available under Section 1110 of the
Bankruptcy Code are not required), (gg) there is no strict tort
liability imposed on passive lenders or lessors, except such tort
liability not of materially greater scope or magnitude than might be
imposed on such passive lender or lessor under the prevailing rule
among the states of the United States, and except liabilities that
Lessee or a Permitted Sublessee has agreed to insure against at its
expense to the reasonable satisfaction of the Participants, and (hh)
neither Lessor, nor Mortgagee, nor any Participant, nor any Certificate
Holder shall be subjected to any adverse tax consequences as a result
of such sublease for which Lessee is not required to indemnify such
Person, unless Lessee agrees to indemnify such Person therefor by means
of an indemnity agreement reasonably satisfactory to such Person (and
Holdings guarantees such indemnity pursuant to the Guarantee);
(e) Lessee furnishes to Lessor, Mortgagee, and Owner
Participant evidence reasonably satisfactory to Lessor that the
insurance required by (S) 11 remains in effect;
(f) all necessary documents are duly filed, registered, or
recorded in such public offices as are required fully to preserve the
title of Lessor, and the first-priority security interest (subject to
Permitted Liens) of Mortgagee, in the Aircraft, Airframe, and Engines;
(g) no Sublessee may sub-sublease the Airframe or any Engine,
except that a Permitted Manufacturer may sub-sublease to any Permitted
Sublessee to whom a sublease would be permitted under this (S) 7.2;
provided, that (i) such sub-sublease shall not permit any
sub-sub-subleasing of the Aircraft, the Airframe, or any Engine (and
Lessee shall ensure that the same does not occur), (ii) such
sub-sublease shall be assigned to Lessee to secure such Permitted
Manufacturer's obligations under its sublease, and (iii) Lessee shall
comply, and shall cause such
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sub-sublease to comply, with all requirements of this (S) 7.2 as if
such sub-sublease were a direct sublease from Lessee to the
sub-sublessee;
(h) the Permitted Sublessee shall not be eligible to assert,
or shall have effectively waived, any right to sovereign immunity;
(i) Lessor and Mortgagee receive evidence that: all necessary
approvals from any Government Entity required for the Airframe or any
Engine or engine (as applicable) to be imported and, to the extent
reasonably obtainable and reasonably requested, exported from the
applicable country of domicile upon repossession of such equipment by
Lessor or Mortgagee (as Lessor's assignee) shall have been obtained
prior to the importation of the imported item(s) under any such
Sublease;
(j) Lessee shall reimburse Lessor, Mortgagee, and each
Participant for all of their reasonable out-of-pocket fees and expenses
(including reasonable fees and disbursements of counsel) incurred in
connection with any such sublease; and
(k) no such sublease shall be made to a Permitted Foreign Air
Carrier or non-U.S. Permitted Manufacturer before the end of the Tax
Attribute Period, unless Lessee prepays on a lump-sum basis any
liability due under the Tax Indemnity Agreement as a result of such
sublease based upon the assumption that such sublease were to continue
for the remainder of the term of such sublease.
In addition to the foregoing requirements, before the commencement of
any Permitted Sublease, Lessee shall deliver to Lessor and Mortgagee: (i) a
notice stating the identity of the sublessee and a copy of the sublease
agreement, (ii) an Officer's Certificate stating that no Special Default exists
and that such sublease complies with this (S) 7.2, (iii) the consent of the
Permitted Sublessee to the assignment of its Permitted Sublease pursuant to (S)
7.4, in a form reasonably satisfactory to Lessor, and (iv) if required by (S)
7.4, The sublease assignment referred to therein and a supplement to the
Mortgage and financing statements or similar documents under the applicable Laws
of the country of the Permitted Sublessee confirming the perfected
first-priority security interest of Mortgagee in such Permitted Sublease, duly
executed and delivered and duly filed or recorded in all appropriate places.
Lessee shall pay all reasonable out-of-pocket costs and expenses (including
reasonable counsel fees and disbursements) of Lessor, Mortgagee, and each
Participant in connection with any subleasing pursuant to this (S) 7.2. No
relinquishment of possession of any Airframe, Engine, or Part shall in any way
discharge or diminish any of Lessee's obligations.
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7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF
POSSESSION
Notwithstanding anything to the contrary in (S) 7.2:
(a) The rights of any Person who receives possession of the Aircraft in
accordance with (S) 7.2 shall be subject and subordinate to all the terms of
this Lease, and to Lessor's rights, powers, and remedies hereunder, including
(1) Lessor's right to repossess the Aircraft pursuant to (S) 15, (2) Lessor's
right to terminate and avoid such sublease, delivery, transfer, or
relinquishment of possession if a Lease Event of Default exists, and (3) the
right to require such Person to deliver the Aircraft, the Airframe, and Engines
subject to such transfer forthwith if a Lease Event of Default exists.
(b) Lessee shall remain primarily liable hereunder for the performance
of all the terms of this Lease to the same extent as if such transfer had not
occurred, and no transfer of possession of the Aircraft, the Airframe, any
Engine, or any Part shall in any way discharge or diminish any of Lessee's
obligations to Lessor hereunder or under any other Operative Agreement.
(c) Lessee shall ensure that no sublease, delivery, transfer, or
relinquishment permitted under (S) 7.2 shall affect the United States
registration of the Aircraft, unless also made in accordance with the provisions
of (S) 7.1.2.
(d) Any event that constitutes or would, with the passage of time,
constitute an Event of Loss under clause (3), (4), or (5) of the definition of
such term (as set forth in Annex A) shall not be deemed to violate the
provisions of (S) 7.2.
(e) No Wet Lease shall constitute a delivery, transfer, or
relinquishment of possession for purposes of (S) 7.2, nor shall it be prohibited
by the terms hereof.
7.4 SECURITY ASSIGNMENT OF SUBLEASES
As security for Lessee's due and punctual payment of all Rent and
performance of all of its other covenants and obligations in the Operative
Agreements, Lessee hereby grants to Lessor a first-priority security interest in
all of Lessee's right, title, and interest in and to each Permitted Sublease of
any Aircraft, Airframe, or Engine, and all payments, including payments of rent,
insurance proceeds (other than public liability insurance proceeds), and other
amounts due or to become due thereunder. Lessee shall enter into a "Sublease
Assignment", in form and substance reasonably satisfactory to Lessor, with
respect to each Sublease of the Airframe having a term of one or more years.
Lessee hereby (1) acknowledges and consents to Lessor's assignment of all
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Lessor's right, title, and interest in and to Lessee's right, title, and
interest in and to each sublease of any such item, and all payments, including
rent, insurance proceeds, and other amounts due or to become due thereunder
(excluding Excepted Payments), to Mortgagee under and pursuant to the Mortgage,
and (2) acknowledges that so long as Mortgagee has not notified Lessee and
Lessor that the Lien of the Mortgage has been discharged in accordance with its
terms, all Lessor's rights in respect of such Permitted Sublease shall be
exercisable exclusively by Mortgagee, as assignee under the Mortgage. In
furtherance of the provisions of this (S) 7.4; Lessee agrees that each Permitted
Sublease for more than one year of the Airframe (x) shall contain A provision to
the effect that the Permitted Sublessee agrees to pay all amounts due under the
Permitted Sublease to Mortgagee after the Permitted Sublessee receives written
notice from Mortgagee to such effect (until the Permitted Sublessee receives
written notice from Mortgagee to contrary effect) and stating that a Special
Default exists under the Lease, and (y) shall be accompanied by such Uniform
Commercial Code financing statements, FAA filings, and other filings and
documentations as shall, in Lessor's reasonable opinion, be required to perfect
and protect the security interests of Lessor and Mortgagee in such Permitted
Sublease.
8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS
8.1 MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
MODIFICATIONS, AND ADDITIONS
At all times during the Term, Lessee shall comply with (or cause to be
complied with) each of the provisions of Annex C, which provisions are hereby
incorporated by this reference as if set forth in full herein.
8.2 INFORMATION, CERTIFICATES, NOTICES, AND REPORTS
8.2.1 FINANCIAL INFORMATION
Lessee will furnish to Lessor and Mortgagee:
(a) within 90 days after the end of each of the first three
fiscal quarters in each fiscal year of Holdings, a consolidated balance
sheet of Holdings (covering, among others, Lessee) as of the end of
such quarter, and related statements of income and cash flows for the
period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth in each case in comparative
form the corresponding figures for the corresponding period in the
preceding fiscal year, prepared in accordance with GAAP; provided, that
while Holdings is
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subject to the reporting requirements of the Securities Exchange Act of
1934, a copy of Holdings's report on Form 10-Q for such fiscal quarter
(excluding exhibits) will satisfy this clause (a).
(b) within 120 days after the end of each fiscal year of
Holdings, a consolidated balance sheet of Holdings (covering, among
others, Lessee) as of the end of such fiscal year and related
statements of income and cash flows of Holdings for such fiscal year,
in comparative form with the preceding fiscal year, prepared in
accordance with GAAP, together with a report of Holdings's independent
certified public accountants with respect to their audit of such
financial statements; provided, that while Holdings is subject to the
reporting requirements of the Securities Exchange Act of 1934, a copy
of Holdings's report on Form 10-K for such fiscal year (excluding
exhibits) will satisfy this clause (b).
8.2.2 ANNUAL CERTIFICATE
Within 120 days after the close of each fiscal year of Lessee, Lessee
shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee to the
effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements, and that such officer does not have knowledge of the existence as at
the date of such certificate of any Lease Default (or, if any Lease Default
exists, specifying the nature and period of existence thereof and the action
Lessee has taken or is taking or proposes to take with respect thereto).
8.2.3 INFORMATION FOR FILINGS
Lessee shall promptly furnish to Owner Participant or Lessor such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's possession, or reasonably
available to or obtainable by Lessee or such Permitted Sublessee, as may be
required to enable Lessor to file in a timely manner any reports required to be
filed by it as lessor under the Lease or to enable Owner Participant to file in
a timely manner any reports required to be filed by it as the beneficiary of the
Trust Estate, in either case, with any Government Entity because of, or in
connection with, the interest of Owner Participant or Lessor in the Aircraft,
this Lease, or any other part of the Trust Estate; provided, that, with respect
to any such information which Lessee reasonably deems commercially sensitive or
confidential, Owner Participant or Lessor (as applicable) shall afford Lessee a
reasonable opportunity to seek from any such Government Entity a waiver of the
obligation of Owner Participant or Lessor to file any such information, or shall
consent to the filing of such information directly by Lessee in lieu of filing
by Owner Participant or Lessor, and if any
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such waiver or consent is evidenced to the reasonable satisfaction of Owner
Participant or Lessor (as applicable), then Lessee shall not be required to
furnish such information to Owner Participant or Lessor.
8.2.4 OTHER INFORMATION
Lessee shall promptly furnish to Lessor or Mortgagee such information
with respect to Lessee, Holdings, or the Aircraft as either party reasonably
requests.
9. VOLUNTARY TERMINATION UPON OBSOLESCENCE
9.1 RIGHT OF TERMINATION
(a) If no Lease Event of Default exists, Lessee shall have the right at
its option to terminate this Lease during the Base Term, effective only on a
Termination Date occurring on or after the fifth anniversary of the Delivery
Date, if:
(1) Lessee makes a good faith determination that the Aircraft
either has become economically obsolete or is surplus to Lessee's
requirements, and Lessee's Chief Financial Officer or Treasurer so
certifies in writing to Lessor and Mortgagee; and
(2) Lessee provides Lessor and Mortgagee with written notice
of Lessee's exercise of such termination option not less than 90 days
before the proposed Termination Date specified in such notice.
(b) Lessor shall notify Lessee and Mortgagee of Lessor's intention to
sell or retain the Aircraft, as provided in this (S) 9, within 30 days after
Lessee gives Lessor written notice pursuant to (S) 9.1(a)(2). Any failure by
Lessor to give such notice of its election shall be deemed to be an election to
sell the Aircraft, as provided in this (S) 9.
(c) Any termination pursuant to this (S) 9 shall become effective on
the date of the sale, if any, pursuant to (S) 9.2 or upon the date of
termination and payment by Lessee and Lessor in accordance with (S) 9.3 if
Lessor elects to retain the Aircraft.
9.2 ELECTION BY LESSOR TO SELL
9.2.1 BIDS; CLOSING OF SALE
Unless Lessor has notified Lessee of Lessor's election to retain the
Aircraft, Lessee, as agent for Lessor, shall, until the date ten Business Days
before the proposed Termination Date, use commercially reasonable efforts to
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obtain bids for a cash purchase of the Aircraft, and Lessor may, if it desires
to do so, also seek to obtain such bids. If Lessee receives any bid, Lessee
shall promptly, and in any event at least ten Business Days before the proposed
date of sale, certify to Lessor in writing the amount and terms of such bid, the
proposed date of such sale, and the name and address of the Person (who shall
not be Lessee or any Affiliate of Lessee or any Person with whom Lessee or any
such Affiliate has an arrangement for the future use of the Aircraft by Lessee
or any such Affiliate) submitting such bid. If Lessor receives any bid on or
before the date ten Business Days before the proposed Termination Date, Lessor
shall, at least ten Business Days before the proposed date of sale, certify to
Lessee in writing the amount and terms of such bid, the proposed date of such
sale, and the name and address of the Person submitting such bid.
9.2.2 CLOSING OF SALE
(a) On the proposed Termination Date (1) Lessee shall deliver the
Airframe and Engines or engines constituting part of the Aircraft to the bidder
(if any) who shall have submitted the highest cash bid (net of any brokerage
commissions and similar expenses payable to any Person(s) retained by Lessee) on
or before the date ten Business Days before such Termination Date, in the same
manner as if delivery were made to Lessor pursuant to (S) 5 and Annex B and in
full compliance with the terms thereof, and shall duly transfer to Lessor title
to any such engines not owned by Lessor, all in accordance with the terms of (S)
5 and Annex B, and (2) Lessor shall simultaneously therewith transfer the
Airframe and Engines or engines to such bidder, in the manner described in (S)
4.5, against cash paid to Lessor (or Mortgagee if Mortgagee has not notified
Lessee that the Lien of the Mortgage has been duly discharged) in the amount of
such highest bid (net of any brokerage commissions and similar expenses payable
to any Person(s) retained by Lessee, and all reasonable out-of-pocket fees and
expenses (excluding brokerage commissions and similar expenses payable to any
Person(s) not retained by Lessee) incurred by Lessor, Mortgagee, and Owner
Participant in connection with such sale and the related termination of this
Lease (collectively, the "Expenses of sale")) and in the manner and in funds of
the type specified in (S) 3.3.
(b) All proceeds of any sale described in (S) 9.2.2(a) (net of the
Expenses of Sale) shall be paid to and retained by Lessor (or Mortgagee if
Mortgagee has not notified Lessee that the Lien of the Mortgage has been duly
discharged) and, on such Termination Date, and as a condition precedent to such
sale and the delivery of the Aircraft and Engines or engines to such bidder,
Lessee shall pay to Lessor (or Mortgagee if Mortgagee has not notified Lessee
that the Lien of the Mortgage has been duly discharged), in the manner and in
funds of the type specified in (S) 3.3:
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(1) all unpaid Basic Rent due at any time before such
Termination Date and all Basic Rent due on such Termination Date to the
extent payable in arrears with respect to the Payment Period then
ended; plus
(2) the excess (if any) of the Termination Value for the
Aircraft, computed as of such Termination Date, over the proceeds of
such sale (net of the Expenses of Sale); plus
(3) as provided in (S) 3.2.2, interest on the amounts
specified in the foregoing clause (1) at the Past-Due Rate from and
including the date on which any such amount was due to the date of
payment of such amount in full.
As a further condition precedent to such sale and delivery, Lessee
shall pay all Supplemental Rent due by Lessee to Lessor, Mortgagee, or the
Participants under this Lease (including (aa) Supplemental Rent in respect of
Make-Whole Amount (if any) payable pursuant to (S) 2.10(b) of the Mortgage in
connection with a prepayment of the Equipment Notes upon such sale, (bb) all
interest charges provided for hereunder or under any other Lessee Operative
Agreement with respect to the late payment of any amounts so payable, and (cc)
to the extent not taken into account in clause (2) of this (S) 9.2.2(b), the
Expenses of Sale).
(c) Upon and subject to any such sale and receipt of proceeds by Lessor
(or Mortgagee if Mortgagee has not notified Lessee that the Lien of the Mortgage
has been duly discharged), and full and final payment of all amounts described
in (S) 9.2.2(b), and compliance by Lessee with all the other provisions of this
(S) 9.2,
(1) Lessor will transfer to Lessee, in accordance with (S)
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(2) the obligation of Lessee to pay Basic Rent, on or after
the Payment Date with reference to which Termination Value is computed,
shall cease, and the Term shall end effective as of the date of such
sale.
(d) A sale of the Aircraft pursuant to this (S) 9.2.2 shall take place
only on a Termination Date. Subject to (S) 9.3, if no sale shall have occurred
on or as of the proposed Termination Date, this Lease shall continue in full
force and effect, and all of Lessee's obligations shall continue, including its
obligation to pay Rent, in each case, as if the notice under (S) 9.1 shall not
have been given and, subject to (S) 9.2.3(b), Lessee may give another notice
pursuant to (S) 9.1.
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9.2.3 WITHDRAWAL OF NOTICE OF TERMINATION
(a) Lessee may withdraw any notice given pursuant to (S) 9.1 at any
time on or before the date ten Business Days before the proposed Termination
Date, whereupon this Lease shall continue in full force and effect and all of
Lessee's obligations shall continue, including its obligation to pay Rent, in
each case as if the notice under (S) 9.1 were not given, and Lessee may give
another notice pursuant to (S) 9.1; provided, that Lessee shall not be entitled
to give more than five notices pursuant to (S) 9.1.
(b) Lessee shall pay all reasonable out-of-pocket fees and expenses of
Lessor, Mortgagee, and each Participant in connection with any notice of
termination withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.
9.3 RETENTION OF AIRCRAFT BY LESSOR
(a) If Lessor elects to retain the Aircraft in accordance with (S) 9.1,
on the proposed Termination Date:
(1) Lessor shall pay or cause to be paid, in the manner and in
funds of the type specified in (S) 3.3, to the Mortgagee, an amount
sufficient to prepay all outstanding Equipment Notes pursuant to (S)
2.10(b) of the Mortgage, including accrued interest thereon and any
Make-Whole Amount payable pursuant to such (S) 2.10(b);
(2) subject to Mortgagee's receipt of the funds described in
clause (1) of this (S) 9.3(a), Lessee shall deliver the Airframe and
Engines or engines constituting part of the Aircraft to Lessor pursuant
to (S) 5 and Annex B and in full compliance with the terms thereof, and
shall duly transfer to Lessor title to any such engines not owned by
Lessor, all in accordance with the terms of (S) 5 and Annex B;
(3) Lessee shall pay to Lessor (or Mortgagee if Mortgagee has
not notified Lessee that the Lien of the Mortgage has been duly
discharged), in the manner and in funds of the type specified in (S)
3.3:
(aa) all unpaid Basic Rent due at any time before
such Termination Date and all Basic Rent due
on such Termination Date to the extent
payable in arrears for the Payment Period
then ended; plus
(bb) as provided in (S) 3.2.2, interest on the
amounts specified in the foregoing clause
(aa) at the Past-Due Rate from and including
the date on which any such
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amount was due to the date of payment of
such amount in full; and
(4) Lessee shall also pay all Supplemental Rent due and
payable by Lessee to Lessor, Mortgagee, or any Participant under this
Lease (other than any Supplemental Rent in respect of Make-Whole
Amount, if any, payable pursuant to (S) 2.10(b) of the Mortgage in
connection with a prepayment of the Equipment Notes upon such sale),
including all interest charges provided for hereunder or under any
other Lessee Operative Agreement with respect to the late payment of
any amounts so payable, and the reasonable out-of-pocket fees and
expenses incurred by Lessor, Mortgagee, and each Participant in
connection with such termination and sale (excluding brokerage
commissions and similar expenses payable to any Person(s) not retained
by Lessee).
(b) Upon full and final payment to Lessor, Mortgagee, and the
Participants of the amounts described in (S) 9.3(a)(1) and (3), and compliance
by Lessee with all the applicable provisions of (S) 9.3(a)(2),
(1) Lessor will transfer to Lessee, in accordance with (S)
4.5, any Engines constituting part of the Aircraft but which were not
then installed on the Airframe and sold therewith; and
(2) Lessee's obligation to pay Basic Rent otherwise due on or
after the Termination Date shall cease, and the Term for the Aircraft
shall end effective as of such Termination Date.
(c) If Lessor or Lessee fails to pay all amounts due on the Termination
Date, this Lease shall, subject to (S)(S) 14 and 15, continue in full force and
effect, and all of Lessee's obligations shall continue, including its obligation
to pay Rent, in each case as if the notices of Lessee and Lessor under (S) 9.1
were not given.
10. LOSS, DESTRUCTION, REQUISITION, ETC.
10.1 EVENT OF LOSS TO THE AIRCRAFT
10.1.1 NOTICE AND ELECTION
(a) If an Event of Loss to the Airframe (and any Engine(s) installed
thereon) occurs, Lessee shall promptly (and in any event within 10 days after
such occurrence, or, if later, within 10 days after the determination that an
Event of Loss has occurred) notify Lessor and Mortgagee of such Event of Loss.
Within 45 days after such occurrence, Lessee shall give to Lessor and Mortgagee
written notice of Lessee's election to make payment in respect of
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such Event of Loss, as provided in (S) 10.1.2, or to replace the Airframe and
any such Engine(s) as provided in (S) 10.1.3.
(b) Lessee's failure to give the notice of election described in (S)
10.1.1(a) shall be deemed to be an election of the option set forth in (S)
10.1.2. In addition, Lessee shall not be entitled to elect the option set forth
in (S) 10.1.3 if, at the time Lessor or Mortgagee receives such notice from
Lessee, a Special Default exists.
(c) For purposes of (S) 10.1.2, an Event of Loss to the Airframe shall
be deemed to constitute an Event of Loss to the Aircraft. For purposes of (S)
10.1.3, any Engine not actually suffering an Event of Loss shall not be required
to be replaced.
10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE
(a) If Lessee elects, in accordance with (S) 10.1.1, to make payment in
respect of any such Event of Loss, then Lessee shall pay, in the manner and in
funds of the type specified in (S) 3.3, the following amounts:
(1) on or before the Business Day following the earlier of (x)
the 180th day following the date of the occurrence of such Event of
Loss, and (y) the fourth Business Day following the receipt of the
insurance proceeds with respect to such occurrence (but in any event
not earlier than the date of Lessee's election under (S) 10.1.1 to make
payment under this (S) 10.1.2), Lessee shall pay to Lessor (or
Mortgagee if Mortgagee has not notified Lessee that the Lien of the
Mortgage has been duly discharged):
(aa) all unpaid Basic Rent due at any time before the SLV
Date that is on the Loss Payment Date or (if the SLV
Date does not fall on a Loss Payment Date)
immediately preceding the Loss Payment Date; plus
(bb) the Stipulated Loss Value of the Aircraft computed as
of the SLV Date used in the foregoing clause (aa) for
the computation of unpaid Rent; plus
(cc) if the SLV Date used in the foregoing clause (aa) is
a Payment Date on which Basic Rent payable in arrears
is due, the amount of such Basic Rent; plus
(dd) as provided in (S) 3.2.2, interest on the amount
specified in the foregoing clause (aa) at the
Past-Due Rate from and
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including the date on which any such amount was due
to the date of payment of such amount in full; plus
(ee) interest on the amounts specified in the foregoing
clauses (bb) and (cc) at the SLV Rate from and
including the SLV Date used in the foregoing clause
(aa) for the computation of unpaid Rent to the date
such amount is due, and thereafter at the Past-Due
Rate to the date of payment of such amounts in full;
and
(2) on or before the date required for payment of the amounts
specified in clause 10.1.2(a)(1), Lessee shall also pay to Lessor,
Mortgagee, and the Participants all other amounts due and payable by
Lessee to Lessor, Mortgagee, and the Participants under this Lease, the
Participation Agreement, or any other Lessee Operative Agreement.
(b) Upon payment in full of all amounts described in the foregoing (S)
10.1.2(a)(1), Lessee'S obligation to pay Basic Rent hereunder with respect to
the Aircraft shall terminate. Upon payment in full of all amounts described in
the foregoing (S) 10.2(a), the Term for the Aircraft shall end, and Lessor will
transfer the Aircraft to Lessee, as-is and where-is, and subject to any
insurer's salvage rights, but otherwise in the manner described in (S) 4.5.
10.1.3 REPLACEMENT OF AIRFRAME AND ENGINES
(a) If Lessee elects, in accordance with (S) 10.1.1, to replace the
Airframe and any Engine(s) suffering the Event of Loss, then Lessee shall, as
promptly as possible and in any event within 180 days after the occurrence of
such Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
(S) 10.3 and as replacement for the Airframe and any such Engine(s), title to a
Replacement Airframe (which shall comply with (S) 10.1.3(b)), and for each such
Engine a Replacement Engine, in each case free and clear of all Liens other than
Permitted Liens not of record. If Lessee makes such election, but for any reason
does not effect such replacement within such time period and in compliance with
the requirements set forth in (S) 10.3, then Lessee shall be deemed to have
initially made the election set forth in (S) 10.1.2 with the effect that Lessee
shall pay, in the manner and in funds of the type specified in (S) 3.3, the
amounts required under, and in accordance with, (S) 10.1.2.
(b) Any such Replacement Airframe shall be an airframe that is the same
model as the Airframe to be replaced thereby, or an improved model, and that has
a value, utility, and remaining useful life (without regard to hours or cycles
remaining until the next regular maintenance check) at least equal to the
Airframe to be replaced thereby (assuming that such Airframe had been maintained
in accordance with the Lease). Any such Replacement Engine shall
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meet the requirements of, and be conveyed by Lessee to Lessor in accordance
with, (S) 10.2 (other than the notice requirement set forth in (S) 10.2.1).
(c) If Lessee elects the replacement option in (S) 10.1.1 and has not
effected such replacement within 60 days after the Event of Loss occurred, then
Lessee shall immediately pay to Lessor the amounts required pursuant to (S)
10.1.2(a)(1), to be held as security for Lessee's obligations under (S) 10.1.1.
If Lessee elects The replacement option in (S) 10.1.1, and pays the deposit
required by the preceding sentence, and has not effected such replacement within
180 days after the Event of Loss occurred, then such deposit shall be applied to
Lessee's obligations under (S) 10.1.2, and Lessee shall pay any remaining
amounts due under (S) 10.1.2.
10.2 EVENT OF LOSS TO AN ENGINE; ENGINE EXCHANGES
10.2.1 NOTICE
If an Event of Loss to an Engine occurs under circumstances in which no
Event of Loss to the Airframe occurs, Lessee shall promptly (and in any event
within 15 days after such occurrence) notify Lessor and Mortgagee of such Event
of Loss.
10.2.2 REPLACEMENT OF ENGINE
Lessee shall, promptly and in any event within 60 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with (S) 10.3 and as replacement for the Engine with respect to which
any Event of Loss occurred, title to a Replacement Engine, free and clear of all
Liens other than Permitted Liens not of record. Such Replacement Engine shall be
an engine manufactured by Engine Manufacturer that is the same model as the
Engine to be replaced thereby, or an improved model (but, in either event, the
same model as the other Engine then subject to this Lease), and that is suitable
for installation and use on the Airframe, and that has a value, utility, and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with the Lease).
10.2.3 ENGINE EXCHANGE
Upon not less than five Business Days' prior written notice to Lessor
and Mortgagee, Lessee may replace any Engine leased hereunder with another
engine (the "Exchanged Engine") meeting the requirements of (S) 10.2.2. Such
Exchanged Engine shall be deemed to be a "Replacement Engine", and Lessor
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and Lessee shall comply with the provisions of (S) 10.3 with regard to the
Exchanged Engine and the Engine so replaced.
10.3 CONDITIONS TO ANY REPLACEMENT
10.3.1 DOCUMENTS
Before or at the time of conveyance of title to any Replacement
Airframe or Replacement Engine to Lessor, Lessee shall take each of the
following actions:
(a) furnish Lessor with an FAA bill of sale (in the case of a
Replacement Airframe) and a full warranty (as to title) bill of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in form and
substance reasonably satisfactory to Lessor, and cause such Replacement Airframe
to be duly registered in the name of Lessor pursuant to the Transportation Code
(or such other applicable law of the jurisdiction other than the United States
where the related aircraft is registered in accordance with (S) 7.1.2);
(b) cause (1) a supplement to this Lease, in form and substance
reasonably satisfactory to Lessor and Mortgagee, subjecting such Replacement
Airframe or Replacement Engine to this Lease, duly executed by Lessee, to be
delivered to Lessor for execution, and, upon such execution, to be filed for
recordation with the FAA pursuant to the Transportation Code (or such other
applicable law referred to in clause (a)), (2) a supplement to the Mortgage, in
form and substance reasonably satisfactory to Lessor and Mortgagee, subjecting
such Replacement Airframe or Replacement Engine to the Mortgage, to be delivered
to Lessor for execution, and, upon execution, to be filed for recordation with
the FAA pursuant to the Transportation Code (or such other applicable law
referred to in clause (a)), and (3) such Financing Statements and other filings,
as Lessor or Mortgagee reasonably request, in form and substance reasonably
satisfactory to Lessor and Mortgagee, duly executed by Lessee and (to the extent
applicable) Lessor and Mortgagee (and Lessor and Mortgagee shall execute and
deliver the same), to be filed in such locations as any such party reasonably
requests;
(c) furnish such evidence of compliance with the insurance provisions
of (S) 11 with respect to sucH Replacement Airframe or Replacement Engine as
Lessor reasonably requests;
(d) furnish an opinion or opinions of Lessee's counsel (which may be
Lessee's legal department) reasonably satisfactory to Lessor and Mortgagee and
addressed to Lessor and Mortgagee to the effect that (1) such full warranty bill
of sale referred to in (S) 10.3.1(a) constitutes an effective instrument for the
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conveyance of title to the Replacement Airframe or Replacement Engine, (2) the
Guarantee and Guarantor Confirmation are in full force and effect, (3) assuming
the matters covered by the opinion in the following clause (e), all necessary
action has been taken to perfect the Lien of the Mortgage on the Aircraft and
other then-existing Collateral, and (4) in the case of a Replacement Airframe,
Lessor and Mortgagee, as assignee of Lessor, will be entitled to the benefits of
Section 1110 with respect to the Replacement Airframe, provided that such
opinion referred to in this clause (4) need not be delivered to the extent that,
immediately before such replacement, the benefits of Section 1110 were not,
solely by reason of a change in law or court interpretation thereof, available
to Lessor or Mortgagee, as assignee of Lessor;
(e) furnish an opinion of Lessee's aviation law counsel reasonably
satisfactory to Lessor and Mortgagee and addressed to Lessor and Mortgagee as to
the due registration of any such Replacement Airframe, the absence of Liens of
record at the FAA as to any such Replacement Airframe and Replacement Engine(s),
and the due filing for recordation of each supplement to this Lease and each
supplement to the Mortgage with respect to such Replacement Airframe or
Replacement Engine under the Transportation Code (or such other applicable law
referred to in clause (a)) and the due filing of any Financing Statements or
other filings reasonably requested by Lessor or Mortgagee with respect to such
Replacement Airframe or Replacement Engine under applicable Law;
(f) with respect to the replacement of the Airframe and any Engine(s)
installed thereon at the time of the Event of Loss, if requested by Lessor or
Mortgagee furnish Lessor and Mortgagee with evidence reasonably satisfactory to
each of them of the value, utility, remaining useful life, and estimated
residual value of, and good title to, such Replacement Airframe and any such
Replacement Engine(s) (including an appraisal by a qualified independent
appraiser selected by Lessor of such value, utility, remaining useful life and
estimated residual value);
(g) assign to Lessor the benefit of all assignable manufacturers, and
vendors, warranties with respect to such Replacement Airframe and such
Replacement Engine(s);
(h) furnish Lessor and Mortgagee with a Guarantor Confirmation, duly
executed and delivered by Holdings;
(i) furnish Lessor and Mortgagee an Officer's Certificate of Lessee
certifying compliance with this (S) 10.1 and to the effect that, upon
consummation of such replacement, no Special Default will exist;
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(j) furnish Lessor with all documents, certificates, and other opinions
necessary to enable Lessor to comply with the requirements of (S) 5.06 of the
Mortgage; and
(k) take such other action as Lessor or Mortgagee reasonably requests
in order that such Replacement Airframe and any such Replacement Engine(s) be
properly titled in Lessor free and clear of all Liens (except Permitted Liens
not of record), leased hereunder, and subjected to the Lien of the Mortgage to
the same extent as the Airframe and any Engine(s) replaced thereby (including
Lessor's execution and delivery of a Mortgage supplement with respect to such
Replacement Airframe and any such Replacement Engine(s)).
Lessee shall cause an airworthiness certificate, with respect to such
Replacement Airframe, to be duly issued under the Transportation Code promptly
after such substitution.
Lessor and Lessee understand and agree that if, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this (S) 10, the
Airframe was registered in a jurisdiction other than the United States, then the
requirements set forth above in this (S) 10.3.1 relating to compliance with the
requirements of the Transportation Code or the FAA shall be deemed to refer to
the comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.
10.3.2 OTHER OBLIGATIONS
(a) Lessor and Lessee agree that, when and after any Replacement
Airframe becomes the Airframe hereunder, and when and after any Replacement
Engine becomes an Engine hereunder, this Lease shall continue to be, and shall
be treated as, a lease for U.S. federal income tax purposes of such Replacement
Airframe and such Replacement Engine. Without limiting the foregoing, Lessee and
Lessor intend that Lessor and Mortgagee, as assignee of Lessor, shall, in all
events, be entitled to the benefits of Section 1110 with respect to any
Replacement Airframe or Replacement Engine, and Lessee and Lessor shall
cooperate and take such action as the other may reasonably request so as to
ensure that Lessor and Mortgagee, as assignee of Lessor, shall be entitled to
such benefits.
(b) No Event of Loss to an Engine, or to an Airframe, shall result in,
or otherwise allow or permit (other than as provided in (S) 10.1.2(b)), any
reduction, deferral, discharge, or other change in the timing or amount of any
Rent payable by Lessee hereunder, and (subject to such (S) 10.1.2(b)) Lessee
shall pay all such Rent and other amounts as though such Event of Loss had not
occurred.
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10.4 CONVEYANCE TO LESSEE
Upon compliance by Lessee with the applicable terms of (S)(S) 10.1.3,
10.2, and 10.3.1, Lessor will transfer to Lessee the Airframe or Engine(s), as
applicable, with respect to which such Event of Loss occurred, in accordance
with (S) 4.5.
10.5 APPLICATION OF PAYMENTS
Any amounts, other than insurance proceeds in respect of damage or loss
not constituting an Event of Loss (the application of which is provided for in
(S) 11), received at any time by Lessor, Lessee, or any Permitted Sublessee from
any Government Entity or any other Person in respect of any Event of Loss will
be paid over to and held by Lessor (or Mortgagee if Mortgagee has not notified
Lessee that the Lien of the Mortgage has been duly discharged) and applied as
follows:
10.5.1 REPLACEMENT OF AIRFRAME AND ENGINES
If such amounts are received with respect to the Airframe or any
Engine(s) installed thereon at the time of such Event of Loss, upon Lessee's
compliance with the applicable terms of (S) 10.1.3 with respect to the Event of
Loss for which such amounts are received, such amounts shall be paid over to, or
(if received by Lessee after such compliance) retained by, Lessee.
10.5.2 LOSS OF ENGINE
If such amounts are received with respect to an Engine (other than an
Engine installed on the Airframe when the Airframe suffers an Event of Loss),
upon Lessee's compliance with the applicable terms of (S) 10.2.2 with respect to
the Event of Loss for which such amounts are received, such amounts shall be
paid over to, or (if received by Lessee after such compliance) retained by,
Lessee.
10.5.3 PAYMENT OF LOSS
If such amounts are received, in whole or in part, with respect to the
Airframe, and Lessee makes, has made or is deemed to have made the election set
forth in (S) 10.1.2, such amounts shall be applied as follows:
(a) first, if the sum described in (S) 10.1.2 has not then been paid in
full by Lessee, such amounts shall be applied by Lessor (or by Mortgagee if
Mortgagee has not notified Lessee that the Lien of the Mortgage has been duly
discharged, except with respect to Excluded Payments) to the extent necessary to
pay in full such sum; and
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(b) second, the remainder, if any, shall be paid to Lessee.
10.6 REQUISITION OF AIRCRAFT FOR USE
If any Government Entity requisitions the use of the Airframe and the
Engines or engines installed thereon, and if the requisition does not constitute
an Event of Loss, Lessee shall promptly notify Lessor and Mortgagee of such
requisition, and all of Lessee's obligations under this Lease shall continue to
the same extent as if such requisition had not occurred; provided, that, if the
Airframe and Engines or engines installed thereon are not returned to Lessor by
Lessee at the end of the Term or within 30 days thereafter, then Lessee shall be
deemed to have made the election set forth in (S) 10.1.2 with the effect that
Lessee shall be obligated to pay the Stipulated Loss Value and all other amounts
payable pursuant to (S) 10.1.2 with respect to the Aircraft as if an Event of
Loss had occurred as of the end of the Term. If such requisition does not
constitute an Event of Loss, Lessee shall be obligated to return the Airframe
and Engine(s) or engine(s) to Lessor pursuant to, and in all other respects to
comply with the provisions of, (S) 5 promptly upon their return by such
Government Entity, and Lessee shall pay to Lessor upon such return an amount
equal to the average daily Basic Rent payable by Lessee during the Term for each
day after the end of the Term to but excluding the day of such return, up to a
maximum of 30 days.
10.7 REQUISITION OF AN ENGINE FOR USE
If any Government Entity requisitions for use any Engine but not the
Airframe, Lessee will replace such Engine by complying with (S) 10.2 and (S)
10.3 to the same extent as if an Event of Loss that that Engine Had occurred,
and any payments received by Lessor or Lessee from such Government Entity with
respect to such requisition shall be paid or retained in accordance with (S)
10.5.2.
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10.8 APPLICATION OF PAYMENTS
All payments received by Lessor or Lessee, or any Permitted Sublessee,
from any Government Entity for the use of the Airframe and Engine(s) or
engine(s) installed thereon during the Term shall be paid over to, or retained
by, Lessee, and all payments received by Lessor or Lessee from any Government
Entity for the use of the Airframe and Engine(s) or engine(s) installed thereon
after the Term shall be paid over to, or retained by, Lessor; provided, that, if
such requisition constitutes an Event of Loss, then all such payments shall be
paid over to Lessor (or to Mortgagee if Mortgagee has not notified Lessee that
the Lien of the Mortgage has been discharged), and held as provided in (S) 10.5.
10.9 APPLICATION OF PAYMENTS DURING DEFAULT
Any amount described in this (S) 10 that is payable or creditable to,
or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if a Special Default exists when such payment, credit, or retention would
otherwise occur, but shall instead be held by or paid over to Lessor (or to
Mortgagee if Mortgagee has not notified Lessee that the Mortgage has been
discharged) as security for Lessee's obligations under this Lease and the other
Lessee Operative Agreements, and shall be invested pursuant to (S) 4.4 hereof,
unless and until such amount is applied, at the option of Lessor, from time to
time during the existence of a Lease Event of Default, to Lessee's obligations
under this Lease as and when due (any such application shall be made to such
Lessee obligations as Lessor determines in its sole discretion). If and when no
Special Default exists, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this (S) 10.9.
11. INSURANCE
11.1 LESSEE'S OBLIGATION TO INSURE
Lessee shall comply with, or cause to be complied with, each of the
provisions of Annex D, which provisions are hereby incorporated by this
reference as if set forth in full herein.
11.2 INSURANCE FOR OWN ACCOUNT
Nothing in this (S) 11 shall limit or prohibit (a) Lessee from
maintaining the policies of insurancE required under Annex D with higher limits
than those specified in Annex D, or (b) Lessor, Mortgagee, or any Participant
from obtaining insurance for its own account (and any proceeds payable under
such separate insurance shall be payable as provided in the policy relating
thereto); provided, that no insurance may be obtained or maintained that would
limit or
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otherwise adversely affect the coverage of or increase the cost of any insurance
required to be obtained or maintained by Lessee pursuant to this (S) 11 and
Annex D.
11.3 INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE
During any period of requisition or transfer of the Aircraft by the
U.S. Government or any other Government Entity, Lessor, Mortgagee, each
Certificate Holder, and each Participant shall accept, in lieu of insurance
against any risk with respect to the Aircraft described in Annex D,
indemnification from, or insurance provided by, the U.S. Government, or upon
Owner Participant's and Mortgagee's written consent, other Government Entity,
against such risk in an amount that, when added to the amount of insurance
(including permitted self-insurance), if any, against such risk that Lessee (or
any Permitted Sublessee) may continue to maintain, in accordance with this (S)
11, during the period of such requisition or transfer, shall be at least equal
to the amount of insurance against such risk otherwise required by this (S) 11.
11.4 APPLICATION OF INSURANCE PROCEEDS
As between Lessor and Lessee, all insurance proceeds received as a
result of the occurrence of an Event of Loss to the Aircraft or any Engine under
policies required to be maintained by Lessee pursuant to this (S) 11 will be
applied in accordance with (S) 10.5. All proceeds of insurance required to be
maintained by Lessee, iN accordance with (S) 11 and (S) B of Annex D, in respect
of any property damage or loss not constituting an Event of Loss to the
Aircraft, the Airframe, or any Engine will be paid over to, and held by, Lessor
(or Mortgagee if Mortgagee has not notified Lessee that the Lien of the Mortgage
has been duly discharged), and applied to pay (or to reimburse Lessee) for
repairs or for replacement property, and any balance remaining after such
repairs or replacement with respect to such damage or loss shall be paid over
to, or retained by, Lessee.
11.5 APPLICATION OF PAYMENTS DURING DEFAULT
Any amount described in this (S) 11 that is payable or creditable to,
or retainable by, Lessee shall not be paid or credited to, or retained by,
Lessee if a Special Default exists when such payment, credit, or retention would
otherwise occur, but shall instead be held by or paid over to Lessor (or to if
Mortgagee has not notified Lessee that the Lien of the Mortgage has been
discharged) as security for Lessee's obligations under this Lease, and shall be
invested pursuant to (S) 4.4 unless and until such amount is applied, at
Lessor's option, from time to time during the existence of a Lease Event of
Default, to Lessee's obligations under this Lease and the other Lessee Operative
Agreements as and when due (any such application to be made to such obligations
of Lessee as
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Lessor determines in its sole discretion). If and when no Special Default
exists, such amount shall be paid to Lessee to the extent not previously applied
in accordance with this (S) 11.5.
12. INSPECTION
(a) At all reasonable times Lessor, Mortgagee, any Owner Participant, a
single representative for each class of Pass-Through Certificates or any initial
Class A Certificate Holder holding at least 5% of the principal amount of the
Class A Certificates issued under the related Pass-Through Trust Agreement, or
their authorized representatives (the "Inspecting Parties") may (not more than
once every 12 months, unless a Lease Event of Default exists, then such
inspection right shall not be so limited) inspect the Aircraft and the Aircraft
Documents, and any such Inspecting Party may make copies of the Aircraft
Documents not reasonably deemed confidential by Lessee or a Permitted Sublessee.
(b) Any inspection of the Aircraft hereunder shall be limited to a
visual, walk-around inspection, and shall not include the opening of any panels,
bays, or other components of the Aircraft, and no such inspection shall
interfere with Lessee's or any Permitted Sublessee's maintenance or operation of
the Aircraft, the Airframe, or any Engine.
(c) Neither Lessor, nor any Participant, nor any Certificate Holder,
nor Mortgagee shall have any duty or liability to make, or any duty or liability
by reason of not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection
with any such inspection (including the cost of any copies made in accordance
with (S) 12(a)), unless a Lease Event of Default exists, theN any such
inspection (including the cost of such copies) shall be at Lessee's expense.
13. ASSIGNMENT; MERGER; SUCCESSOR LESSOR
13.1 IN GENERAL
This Lease and the other Lessee Operative Agreements shall bind and
benefit Lessor and Lessee and their successors and permitted assigns. Except as
otherwise expressly permitted by the terms of the Lease or any other Lessee
Operative Agreement, Lessee will not, without the prior written consent of
Lessor and Mortgagee, assign any of its rights under this Lease. Except as
otherwise provided herein (including under the provisions of (S) 15) or in
connection with the appointment of a successor Mortgagee pursuant to the
Mortgage, neither Lessor nor Mortgagee shall assign or convey any of its right,
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title, and interest in and to this Lease or the Aircraft without Lessee's prior
written consent, such consent not to be unreasonably withheld.
13.2 MERGER OF LESSEE
13.2.1 IN GENERAL
Lessee shall not consolidate with or merge into any other Person under
circumstances in which Lessee is not the surviving corporation, or convey,
transfer, or lease in one or more transactions all or substantially all of its
assets to any other Person, unless:
(a) such Person is organized, existing, and in good standing under the
Laws of the United States, any state of the United States, or the District
Columbia, and, upon consummation of such transaction, such Person will be a U.S.
Air Carrier;
(b) such Person executes and delivers to Lessor and Mortgagee a duly
authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Lessor and Mortgagee, containing an
effective assumption by such Person of the due and punctual performance and
observance of each covenant, agreement, and condition in the Lessee Operative
Agreements to be performed or observed by Lessee;
(c) such Person makes such filings and recordings with the FAA pursuant
to the Transportation Code as shall be necessary to evidence such consolidation
or merger;
(d) immediately after giving effect to such consolidation or merger, no
Lease Event of Default exists;
(e) Holdings issues a Guarantor Confirmation with respect to such
Person; and
(f) such Person delivers to Lessor and Mortgagee an opinion of counsel
as to the authorization and enforceability of the agreement referred to in
clause (b) above, the filings described in clause (c) above, and such other
matters as may be reasonably requested, reasonably satisfactory to Lessor and
Mortgagee.
13.2.2 EFFECT OF MERGER
Upon any such consolidation or merger of Lessee with or into, or the
conveyance, transfer, or lease by Lessee of all or substantially all of its
assets to, any Person in accordance with this (S) 13.2, such Person will succeed
to, and be substituted for, and may exercise every right and power of, Lessee
under the
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Lessee Operative Agreements with the same effect as if such Person had been
named as "Lessee" therein. No such consolidation, merger, conveyance, transfer,
or lease shall have the effect of releasing Lessee or such Person from any of
Lessee's obligations, liabilities, covenants, or undertakings under this Lease.
13.3 ASSIGNMENT SECURITY FOR LESSOR'S OBLIGATIONS
In order to secure the indebtedness evidenced by the Equipment Notes,
Lessor agrees in the Mortgage to assign this Lease to Mortgagee and to mortgage
the Aircraft to Mortgagee, subject to the reservations and conditions therein
set forth. Lessee hereby accepts and consents to the assignment of Lessor's
right, title, and interest in and to this Lease and the mortgaging of the
Aircraft pursuant to the terms of the Mortgage. In accordance with (S) 3.3(c),
Lessee agrees to pay directly to Mortgagee (or, after receipt by Lessee of
notice from Mortgagee of the discharge of the Lien of the Mortgage, to Lessor),
all amounts of Rent (other than Excluded Payments) due or to become due
hereunder and assigned to Mortgagee, and Lessee agrees that Mortgagee's right to
such payments hereunder shall be absolute and unconditional and shall not be
affected by any circumstance, including the circumstances set forth in (S) 16
hereof. References in some provisions of this Lease to amounts payable to
Mortgagee shall not limit the generality of the foregoing assignment in other
provisions where the foregoing assignment also applies. Notwithstanding the
foregoing assignment of this Lease, Lessee's obligations to Lessor to perform
the terms and conditions of this Lease shall remain in full force and effect.
13.4 SUCCESSOR LESSOR
If any successor is appointed to serve as Owner Trustee pursuant to the
terms of the Participation Agreement and the Trust Agreement, such successor
shall, upon written notice by such successor to Lessee, succeed to all the
rights, powers, and title of Lessor hereunder, and shall be deemed to be
"Lessor" and the owner of the Aircraft and the other assets of the Trust Estate
for all purposes hereof, without the need for any consent or approval by Lessee
and without in any way altering the terms of this Lease or Lessee's obligations
hereunder. An appointment and designation of a successor as Owner Trustee shall
not exhaust the right to appoint and designate further successors or additional
trustees as Owner Trustees pursuant to the Participation Agreement and the Trust
Agreement, and such right may be exercised repeatedly as long as this Lease
shall be in effect.
14. LEASE EVENTS OF DEFAULT
The existence of any one or more of the following circumstances,
conditions, acts, or events, for any reason whatsoever and whether any such
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circumstance, condition, act, or event is voluntary or involuntary or comes
about or is effected by operation of Law or pursuant to or in compliance with
any judgment, decree, order, rule, or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:
14.1 PAYMENTS
Lessee fails to pay any amount of Basic Rent, Stipulated Loss Value,
Termination Value, or EBO Price within 10 days after it becomes due; or Lessee
fails to pay any Supplemental Rent (other than Stipulated Loss Value,
Termination Value, or EBO Price) when due and such failure continues for a
period in excess of 10 Business Days from and after the date of any written
notice to Lessee of the failure to make such payment when due; provided, that
any such failure to pay any Excluded Payment shall not constitute a Lease Event
of Default until Owner Participant gives written notice to Lessee and Mortgagee
that such failure constitutes a Lease Event of Default and such failure has
continued for a period in excess of ten Business Days after such notice.
14.2 INSURANCE
Lessee fails to carry and maintain, or cause to be carried and
maintained, insurance on and in respect of the Aircraft in accordance with the
provisions of (S) 11.
14.3 OTHER COVENANTS
Lessee or Holdings fails to observe or perform (or cause to be observed
and performed) in any material respect any other covenant, agreement, or
obligation of Lessee or Holdings in any Operative Agreement (other than the
covenants, agreements, and obligations in the Tax Indemnity Agreement), and such
failure continues unremedied for a period of 30 days from and after the date of
written notice thereof to Lessee or Holdings from Lessor, Mortgagee, or any
Certificate Holder (or, if earlier, 30 days after a Responsible Officer of
Lessee or Holdings is aware of such default), unless, in the case of a breach of
(S) 8.1, such failure is capable of being correcteD and creates no material risk
of loss, forfeiture, or damage to the Aircraft, and Lessee or Holdings is
diligently proceeding to correct such failure, in which case there shall be no
Lease Event of Default unless and until such failure continues unremedied for a
period of 180 days after receipt of such notice or such awareness.
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14.4 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by Lessee or Holdings in any
Operative Agreement (other than Lessee's representations and warranties in the
Tax Indemnity Agreement) (a) proves to have been untrue or inaccurate in any
material respect as of the date made, (b) is material at the time in question,
and (c) if the effect of such incorrectness is curable (incorrectness of a
representation as to financial condition being incurable), remains uncured (to
the extent of the adverse impact of such incorrectness on the interest of the
Participants, Mortgagee or Lessor) for a period in excess of 30 days from and
after the date of written notice thereof from Lessor, Mortgagee, or any
Certificate Holder to Lessee or Holdings or (if earlier) the date that a
Responsible Officer of Lessee or Holdings is aware of the incorrectne(S)
14.5 BANKRUPTCY AND INSOLVENCY
(a) Lessee or Holdings consents to the appointment of or the taking of
possession by a receiver, trustee, or liquidator of itself or of substantially
all of its property, or Lessee or Holdings admits in writing its inability to
pay its debts generally as they come due, or does not pay its debts generally as
they become due or makes a general assignment for the benefit of creditors, or
Lessee or Holdings files a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization, liquidation or other relief in a
case under any bankruptcy Laws or other insolvency Laws (as in effect at such
time), or Lessee or Holdings seeks relief by voluntary petition, answer, or
consent under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect at
such time); or
(b) an order, judgment, or decree is entered by any court of competent
jurisdiction appointing, without Lessee's or Holdings's consent, a receiver,
trustee, or liquidator of Lessee or Holdings or of substantially all of its
property, or substantially all of Lessee's or Holdings's property is
sequestered, and any such order, judgment, or decree of appointment or
sequestration remains in force undismissed, unstayed, and unvacated for a period
of 60 days after the date of entry thereof; or
(c) a petition against Lessee or Holdings in a case under any
bankruptcy Laws or other insolvency Laws (as in effect at such time) is filed
and not withdrawn or dismissed within 60 days thereafter, or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that applies to Lessee or Holdings, any court of competent jurisdiction assumes
jurisdiction, custody, or control of Lessee or Holdings or of substantially all
of the property of Lessee or Holdings, and such jurisdiction, custody or control
remains in force unrelinquished, unstayed, and unterminated for a period of 60
days.
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14.6 FAILURE OF GUARANTEE
The Guarantee is repudiated, is determined to be invalid, or becomes
unenforceable for any reason.
14.7 LOSS OF PRIORITY OF MORTGAGE LIEN
Mortgagee fails to have a perfected first-priority security interest in
the Aircraft so long as any Equipment Note is outstanding, subject only to
Permitted Liens, unless such failure is the fault solely of Lessor or Owner
Participant.
14.8 BREACH OF SIDE AGREEMENTS
(a) A Lease Event of Default would exist as a result of a default under
the November 3, 1999 Supplemental Agreement (the "KFW AGREEMENT") among Lessee,
Holdings and Kreditanstalt fur Wiederaufbau ("KFW"), if the KfW Agreement were
an Operative Agreement, but only if (1) KfW is then a Certificate Holder holding
one or more Class B Pass-Through Trust Certificate(s), and (2) KfW gives written
notice to Lessee and Mortgagee that such default constitutes a Lease Event of
Default.
(b) A Lease Event of Default would exist as a result of a default under
the November 3, 1999 Supplemental Agreement (the "BOEING AGREEMENT") among
Lessee, Holdings and The Boeing Company ("BOEING"), if the Boeing Agreement were
an Operative Agreement, but only if (1) Boeing is then a Certificate Holder
holding one or more Class C Pass-Through Trust Certificate(s), and (2) Boeing
gives written notice to Lessee and Mortgagee that such default constitutes a
Lease Event of Default.
15. REMEDIES AND WAIVERS
15.1 REMEDIES
If any Lease Event of Default exists, Lessor may, at its option and at
any time and from time to time, exercise any one or more of the following
remedies as Lessor in its sole discretion shall elect:
15.1.1 RETURN AND REPOSSESSION
Lessor may cause Lessee, upon giving written notice to Lessee, to
return promptly, and Lessee shall return promptly, the Airframe and Engines as
Lessor shall so demand, to Lessor or its order in the manner and condition
required by, and otherwise in accordance with, all the provisions of (S) 5, as
if the Airframe or Engine were being returned at the end of the Term or Lessor,
at its option, may enter upon the premises where the Airframe or any Engine, or
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any Part thereof, is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability accruing to
Lessor for or by reason of such entry or taking of possession, whether for the
restoration of damage to property caused by such taking or otherwise.
15.1.2 SALE AND USE
Lessor may sell the Airframe or any Engine at public or private sale,
at such time(s) and place(s), and to such Person(s) (including Mortgagee or any
Participant), as Lessor determines; or Lessor may otherwise dispose of, hold,
use, operate, lease to others, or keep idle the Airframe or any Engine, as
Lessor, in its sole discretion, shall determine, all free and clear of any
rights of Lessee and without any duty to account to Lessee with respect to such
action or inaction or for any proceeds with respect thereto, except as
hereinafter set forth in this (S) 15, and except to the extent that such
proceeds would constitute, under applicable Law, a mitigation of Lessor's
damages suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give to Lessee at least 15 days' prior written notice of the date
fixed for any public sale of the Airframe or any Engine or of the date on or
after which will occur the execution of any contract providing for any private
sale.
15.1.3 CERTAIN LIQUIDATED DAMAGES
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under (S) 15.1.1 or (S) 15.1.2 with respect to
the Airframe or any Engine, or any Part thereof, Lessor, by written notice to
Lessee specifying a payment date (which shall be the first SLV Date occurring
not less than 10 days after the date of such notice), may demand that Lessee to
pay to Lessor, and Lessee shall pay to Lessor, on the payment date so specified
and in the manner and in funds of the type specified in (S) 3.3, as liquidated
damageS for loss of a bargain and not as a penalty (in lieu of the Basic Rent
(as applicable) for the Aircraft in respect of all periods commencing on or
after the date specified for payment in such notice), the following amounts:
(a) all unpaid Basic Rent due at any time before the SLV Date specified
in such notice; plus
(b) whichever of the following amounts Lessor, in its sole discretion
specifies in such notice:
(1) an amount equal to the excess (if any) of the present
value, computed as of the SLV Date specified in such notice, discounted
to such date at a rate equal to the Debt Rate, compounded semiannually,
of all unpaid Basic Rent during the then-remaining portion of the Base
Term (or, if a Renewal Term has commenced, of all unpaid Basic Rent
during
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the remaining portion of such Renewal Term) over the Fair Market
Rental Value of the Aircraft for the remainder of the Term, after
discounting such Fair Market Rental Value to present value (at a rate
per annum equal to the Debt Rate, compounded semiannually) as of the
SLV Date specified in such notice, or
(2) an amount equal to the excess (if any) of the Stipulated
Loss Value for the Aircraft, computed as of the SLV Date specified in
such notice, over the Fair Market Sales Value of the Aircraft, as of
the SLV Date specified in such notice; plus
(c) interest on the amounts specified in the foregoing clause (a) at
the Past-Due Rate from and including the date on which any such amount was due
to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause (b)(1) or
(b)(2), according to Lessor's election, at the Past-Due Rate from and including
the SLV Date specified in such notice to the date of payment of such amount;
plus
(e) all other amounts due pursuant to (S) 15.1.7.
15.1.4 LIQUIDATED DAMAGES UPON SALE
If, pursuant to (S) 15.1.2 or applicable Law, Lessor has sold the
Airframe or any Engine, then, in lieu of exercising its rights under (S) 15.1.3
with respect to the Aircraft, the Airframe, or any Engine (as applicable),
Lessor may, if Lessor so elects, upon giving written notice to Lessee, demand
that Lessee to pay to Lessor, and Lessee shall pay to Lessor, on the date of
such sale and in the manner and in funds of the type specified in (S) 3.3, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for the Aircraft in respect of all periods commencing on or after the
date of such sale), the following amounts:
(a) all unpaid Basic Rent due at any time before the SLV Date on
or immediately preceding the date of such sale; plus
(b) an amount equal to the excess, if any, of (1) the Stipulated
Loss Value of the Aircraft, computed as of the SLV Date used
in the foregoing clause (a) for the computation of unpaid
Rent, over (2) the proceeds of such sale, minus all reasonable
costs of Lessor and Mortgagee in connection with the sale;
plus
(c) if the date of such sale is not an SLV Date, an amount equal
to interest on the outstanding principal amount of the
Equipment
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Notes at the rate per annum borne thereby from and including
the SLV Date used in the foregoing clause (a) for the
computation of unpaid Rent to the date of such sale; plus
(d) interest on the amounts specified in the foregoing clause (a)
at the Past-Due Rate from and including the date on which any
such amount was due to the date of payment of such amount;
plus
(e) interest on the sum of the amounts specified in the foregoing
clause (b) at the Past-Due Rate from and including the date of
such sale to the date of payment of such amounts; plus
(f) all other amounts due pursuant to (S) 15.1.7.
15.1.5 SALE TO LESSEE
Whether or not Lessor shall have exercised, or shall thereafter at any
time exercise, any of its rights under (S) 15.1.1 or (S) 15.1.2 with respect to
the Airframe or any Engine, or any Part thereof, Lessor, by written notice to
Lessee specifying a purchase date (the "Default Purchase Date"), which shall be
the first SLV Date occurring not less than 10 days after the date of such
notice, may cause Lessee to pay to Lessor, and Lessee in such event shall pay to
Lessor, on the Default Purchase Date, in the manner and in funds of the type
specified in (S) 3.3, as liquidated damages for loss of a bargain and not as a
penalty (in lieu of the Basic Rent (as applicable) for the Aircraft in respect
of all periods commencing on or after the Default Purchase Date), the following
amounts:
(a) all unpaid Basic Rent due at any time before the SLV Date specified
in such notice; plus
(b) the Stipulated Loss Value of the Aircraft as of the Default
Purchase Date; plus
(c) interest on the amounts specified in the foregoing clause (a) at
the Past-Due Rate from and including the date on which any such amount was due
to the date of payment of such amount; plus
(d) interest on the amount specified in the foregoing clause (b) at the
Past-Due Rate from and including the SLV Date specified in such notice to the
date of payment of such amount; plus
(e) all other amounts due pursuant to (S) 15.1.7.
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Upon Lessee's payment in full of the foregoing amounts and all other Rent then
due and payable, Lessor shall execute and deliver to Lessee, or to Lessee's
assignee or nominee, a bill of sale, without representations or warranties,
express or implied (except as the absence of Lessor 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 Lessee
or such assignee or nominee, and Mortgagee shall execute and deliver a Mortgage
release for the Aircraft, all in such form as Lessee reasonably requests and all
at Lessee's expense.
15.1.6 RESCISSION
Lessor may (a) at its option, rescind or terminate this Lease as to the
Aircraft, the Airframe, or any Engine, or any Part thereof, or (b) exercise any
other right or remedy that may be available to it under applicable Law or
proceed by appropriate court action to enforce the terms hereof.
15.1.7 OTHER REMEDIES
In addition to the foregoing remedies (but without duplication of
amounts otherwise paid under this (S) 15), Lessee shall be liable for any and
all unpaid Rent due hereunder before, during, or after (except as otherwise
provided herein) the exercise of any of the foregoing remedies and for all
reasonable attorneys' fees and other costs and expenses of Lessor, Mortgagee,
Owner Participant, and the Note Holders, including interest on overdue Rent at
the rate as herein provided, incurred by reason of the existence of any Lease
Event of Default or the exercise of Lessor's remedies with respect thereto,
including all reasonable costs and expenses incurred in connection with the
return of the Airframe or any Engine in accordance with the terms of (S) 5, or
in placing the Airframe or any Engine in the condition and airworthiness
required by (S) 5.
15.2 LIMITATIONS UNDER CRAF
Notwithstanding the provisions of (S) 15.1, during any period that the
Aircraft, the Airframe, or any Engine is subject to CRAF in accordance with the
provisions of (S) 7.2.3 and in the possession of the U.S. Government, Lessor
shall not, as a result of any Lease Event of Default, exercise its remedies
hereunder in such manner as to limit Lessee's control under this Lease (or any
Permitted Sublessee's control under any Permitted Sublease) of the Aircraft, the
Airframe, or such Engine, unless Lessor or Mortgagee gives at least 30 days' (or
such other period as may then apply under CRAF) written notice of default
hereunder by registered or certified mail to Lessee (and any Permitted
Sublessee) with a copy to the Contracting Officer Representative or
Representatives for the Military Airlift Command of the United States Air Force
to whom notices must be given under the contract governing Lessee's (or any
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Permitted Sublessee's) participation in CRAF with respect to the Aircraft most
recently identified by notice from Lessee to Lessor and Mortgagee pursuant (S)
7.2.3, the Airframe, or any Engine.
15.3 RIGHT TO PERFORM FOR LESSEE
If Lessee (a) fails to make any payment of Rent required to be made by
it hereunder or (b) fails to perform or comply with any of its agreements
contained herein , then, after giving reasonable advance notice (if practicable)
to Lessee of its intent to do so (with the understanding that, in certain
circumstances, the absence of any advance notice may be reasonable), Lessor or
Mortgagee may (but shall not be obligated to) make such payment or perform or
comply with such agreement, and the amount of such payment and the amount of the
expenses of Lessor or Mortgagee incurred in connection with such payment or the
performance of or compliance with such agreement (as applicable), together with
interest thereon at the Past-Due Rate, shall be deemed Supplemental Rent,
payable by Lessee upon demand by Lessor or Mortgagee, whichever is entitled
thereto. No such payment, performance, or compliance shall be deemed to waive
any Lease Default or otherwise relieve Lessee of its obligations with respect
thereto.
15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE AND FAIR MARKET
SALES VALUE
For the purpose of this (S) 15, the Fair Market Rental Value or the
Fair Market Sales Value of the Aircraft, the Airframe, or any Engine shall be
determined on an "as is, where is" basis and shall take into account customary
brokerage and other out-of-pocket fees and expenses which typically would be
incurred in connection with a re-lease or sale of such an aircraft, airframe, or
engine. Any such determination shall be made by an Appraiser selected by Lessor,
and the costs and expenses associated therewith shall be borne by Lessee;
provided, that, if Lessor does not obtain possession of the Aircraft pursuant to
this (S) 15 within A commercially reasonable period, an Appraiser shall not be
appointed, and Fair Market Rental Value and Fair Market Sales Value for purposes
of this (S) 15 shall be zero.
15.5 REMEDIES CUMULATIVE
Nothing contained in this Lease shall be construed to limit in any way
any right, power, remedy, or privilege of Lessor hereunder or under any other
Operative Agreement or now or hereafter existing at law or in equity. Each and
every right, power, remedy, and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in limitation of every
other right, power, remedy, and privilege given under the Operative Agreements
or now or hereafter existing at law or in equity. Each and every right, power,
remedy,
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and privilege of Lessor under this Lease and any other Operative Agreement may
be exercised from time to time or simultaneously and as often and in such order
as may be deemed expedient by Lessor. All such rights, powers, remedies, and
privileges shall be cumulative and not mutually exclusive, and the exercise of
one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.
16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.
(a) This Lease is a net lease, and (except as otherwise provided in the
Operative Agreements) it is intended that Lessee shall pay all costs and
expenses of every character, whether foreseen 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. Lessee's obligation to pay all Rent payable hereunder and to perform all
its other obligations hereunder shall be absolute and unconditional, and shall
not be affected by any event or circumstance, including: (1) any setoff,
counterclaim, recoupment, defense, or other right that Lessee may have against
Lessor, Mortgagee, any Participant, any Note Holder, or any other Person for any
reason whatsoever; (2) any defect in the title, airworthiness, condition,
design, operation, or fitness for use of, or any damage to or loss or
destruction of, the Aircraft, the Airframe, or any Engine, or any interruption
or cessation in the use or possession thereof by Lessee for any reason
whatsoever; (3) any insolvency, bankruptcy, reorganization, or similar
proceedings by or against Lessee or any other Person; or (4) any other
circumstance, happening, or event whatsoever, whether or not similar to any of
the foregoing.
(b) If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein, Lessee nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms hereof had this Lease not been terminated in whole or in part.
Lessee hereby waives, to the extent permitted by applicable law, any and all
rights that it may now have or that at any time hereafter may be conferred upon
it, by statute or otherwise, to terminate, cancel, quit, or surrender this
Lease, except in accordance with the express terms hereof.
(c) Nothing set forth in this (S) 16 shall be construed to prohibit
Lessee from separately pursuinG any claim that it may have from time to time
against Lessor or any other Person with respect to any matter (other than the
absolute and unconditional nature of Lessee's obligations hereunder to pay Rent,
and other than the matters specified in paragraphs (a) and (b) above).
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17. RENEWAL AND PURCHASE OPTIONS
17.1 NOTICES GENERALLY
(a) At least 120 days before the Scheduled Expiration Date or, if a
Renewal Term is then in effect, before the Scheduled Renewal Term Expiration
Date of such Renewal Term, Lessee may provide notice to Lessor that Lessee may
exercise either the option to extend the leasing of the Aircraft for a Renewal
Term pursuant to (S) 17.2 or the option to purchase the Aircraft on the
Scheduled Expiration Date or Scheduled Renewal Term Expiration Date of such
Renewal Term (as applicable) pursuant to (S) 17.3 (a "Preliminary Notice").
(b) If Lessee gives any such Preliminary Notice, then Lessee may
provide a further notice specifying which option it intends to elect, with
respect to the relevant period, pursuant to (S) 17.2.1 or (S) 17.3.1 (as
applicable).
17.2 RENEWAL OPTIONS
17.2.1 RENEWAL NOTICE
(a) If Lessee has given a Preliminary Notice, as specified in (S) 17.1,
and subject to the terms and conditions of this (S) 17.2, Lessee may exercise
its option to extend the leasing of the Aircraft hereunder untiL the next
Scheduled Renewal Term Expiration Date, on the same terms (except as
contemplated by this (S) 17) as iN the Lessee Operative Agreements with respect
to the Base Term, by delivering a notice (a "Renewal Notice") to Lessor not less
than 90 days before (1) if the Base Term is then in effect, the Scheduled
Expiration Date, or (2) if a Renewal Term is then in effect, the Scheduled
Renewal Term Expiration Date for such Renewal Term.
(b) Notwithstanding anything to the contrary in any Operative
Agreement:
(1) No Preliminary Notice or Renewal Notice shall be binding
on Lessor or oblige Lessor to extend the leasing of the Aircraft
hereunder for a Renewal Term if any Lease Event of Default exists on
and as of the date that such Renewal Term would otherwise commence.
(2) Any Renewal Notice shall be revocable by Lessee until 10
Business Days after the Renewal Rent is determined in accordance with
(S) 17.2.2, and unless revoked by written notice by LesseE to Lessor
shall thereafter become irrevocable and shall constitute an
unconditional obligation of Lessee to extend the leasing of the
Aircraft hereunder for the Renewal Term to which such Renewal Notice
relates.
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(3) Lessee shall not be entitled to give any Renewal Notice if
it (aa) has not delivered a Preliminary Notice to Lessor, or (bb) has
delivered a Purchase Notice to Lessor.
17.2.2 RENEWAL RENT
(a) During the Renewal Term, Lessee shall pay to Lessor on each Payment
Date, in the manner and in the funds of the type specified in (S) 3.3, Renewal
Rent in arrears.
(b) The Renewal Rent payable by Lessee on each Payment Date during any
Fixed Renewal Term shall be the lower of (1) the Renewal Rent Limit and (2) the
Fair Market Rental Value of the Aircraft for such Renewal Term. The Renewal Rent
payable by Lessee on each Payment Date during any Subsequent Renewal Term shall
be the Fair Market Rental Value of the Aircraft for such Renewal Term. Any such
Fair Market Rental Value shall be determined not more than 120 days and not less
than 100 days before the first day of such Renewal Term by mutual agreement of
Lessor and Lessee or, if they do not agree, by an appraisal in accordance with
(S) 17.4. Notwithstanding the foregoing, (aa) on the first Payment Date of a
Renewal Term, Lessee shall pay to Lessor a pro-rated amount of Renewal Rent
equal to (x) the Renewal Rent applicable to such Renewal Term divided by 180
multiplied by (y) the actual number of days elapsed in such Payment Period, and
(bb) on the last Payment Date in such Renewal Term Lessee shall pay to Lessor an
amount equal to the Renewal Rent minus the amount referred to in the preceding
clause (aa).
17.2.3 STIPULATED LOSS AND TERMINATION VALUES
(a) For any Renewal Term, SLV Dates and Termination Value Dates shall
be extended throughout such Renewal Term on the same days and for the same
months as during the Base Term.
(b) Stipulated Loss Value and Termination Value amounts that are
payable during any such Renewal Term shall be determined at the same time that
the Renewal Rent for such Renewal Term is determined under (S) 17.2.2.
Stipulated Loss Values and Termination Values for any such Renewal Term shall,
commencing on the firsT day of such Renewal Term, be equal to such values as of
the day before such Renewal Term, and shall decline ratably on a monthly basis
to the salvage value of the Aircraft as of the last day of its useful life.
(c) For purposes of calculating Stipulated Loss Value and Termination
Value amounts applicable during any Renewal Term, the "salvage value" and
"useful life" shall be determined by mutual agreement of Lessor and Lessee, or,
if they do not agree, by an appraisal in accordance with (S) 17.4.
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17.3 PURCHASE OPTION
17.3.1 PURCHASE NOTICE
(a) Subject to (S) 17.1 and this (S) 17.3, Lessee may elect to purchase
the Aircraft, on any PurchAse Date, at a purchase price equal to the lesser of
50% of Lessor's Cost and the Fair Market Sales Value of the Aircraft computed as
of the Purchase Date.
(b) Lessee may exercise such option to purchase the Aircraft, by
delivery of a notice (a "Purchase Notice") to Lessor not less than 90 days
before the Purchase Date specified in such Purchase Notice.
(c) Notwithstanding anything to the contrary in any Operative
Agreement:
(1) Any Purchase Notice (whether delivered or deemed to have
been delivered) shall be revocable until 10 Business Days after the
determination of the Fair Market Sales Value in accordance with (S)
17.3.2, and unless revoked by written notice by Lessee to Lessor shall
thereafter becomE irrevocable and shall constitute an unconditional
obligation of Lessee to purchase the Aircraft under this (S) 17.3.
(2) Lessee shall not be entitled to give any Purchase Notice
in respect of any Purchase Date if it has delivered a Renewal Notice
for a Renewal Term that would begin after that Purchase Date.
17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE
The Fair Market Sales Value of the Aircraft shall be determined not
more than 120 days and not less than 100 days before the applicable Purchase
Date by mutual agreement of Lessor and Lessee, or, if they shall be unable to
agree, by an appraisal in accordance with (S) 17.4.
17.3.3 TITLE
Upon full and final payment by Lessee of (a) the applicable purchase
price of the Aircraft, (b) all unpaid Rent due and payable through and including
the Purchase Date, and (c) all other amounts then due and payable by Lessee
under this Lease, Lessor will transfer to Lessee title to the Aircraft in
accordance with (S) 4.5.
17.4 APPRAISALS
Whenever Fair Market Rental Value or Fair Market Sales Value of the
Aircraft is required to be determined by an appraisal under this (S) 17, Lessee
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and Lessor shall appoint a mutually-satisfactory Appraiser to conduct such
appraisal. If Lessee and Lessor fail to agree upon a satisfactory Appraiser,
then each shall promptly appoint a separate Appraiser, and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor does not so appoint an
Appraiser, the determination of the single Appraiser appointed shall be final.
If two Appraisers are appointed and within seven days after the appointment of
the latter of such two Appraisers, they do not agree upon such amount, such two
Appraisers shall, within eight days after such latter appointment, appoint a
third Appraiser, and such amount shall be determined by such three Appraisers,
who shall make their separate appraisals within seven days following the
appointment of the third Appraiser, and any determination so made shall be
conclusive and binding upon Lessor and Lessee. If no such third Appraiser is
appointed within such eight-day period, either Lessor or Lessee may apply to the
American Arbitration Association to make such appointment, and both parties
shall be bound by such appointment. The foregoing appraisal procedure shall in
any event be completed no less than 125 days before the end of the Base Term or
the current Renewal Term, as applicable. If three Appraisers are appointed and
the difference between the determination which is further from the middle
determination and the middle determination is more than 125% of the difference
between the middle determination and the third determination, then such further
determination shall be excluded, the remaining two determinations shall be
averaged, and such average shall be final and binding upon Lessor and Lessee.
Otherwise, the average of all three determinations shall be final and binding
upon Lessor and Lessee. The fees and expenses of all such Appraisers and such
appraisal procedure shall be borne equally by Lessee and Lessor.
17.5 EARLY BUY-OUT OPTION
17.5.1 ELECTION; PURCHASE
Provided that this Lease has not been previously cancelled or
terminated, Lessee shall have the option to purchase the Aircraft on the EBO
Date as shown on Schedule 1, for the EBO Price as shown on Schedule 1. If Lessee
elects to exercise such purchase option, it shall do so by providing to Lessor
and to Mortgagee an irrevocable written notice of Lessee's election at least 30
days and not more than 365 days before the purchase date. Thereafter, on the EBO
Date, Lessee shall purchase the Aircraft from Lessor and Lessor shall sell the
Aircraft to 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 Liens), for immediately available funds (U.S. dollars). Upon payment
to Lessor (or Mortgagee if Mortgagee has not notified Lessee that the Lien of
the Mortgage has been duly discharged) of (1) such purchase price or, if less,
the
51
<PAGE>
portion of the purchase price due on such purchase date, (2) all
Supplemental Rent then due and owing (including any Make-Whole Amount payable as
a result of the prepayment of the Equipment Notes), (3) all Basic Rent due to
and including the purchase date (excluding any Basic Rent specified as being "in
advance" and due on the purchase date), and (4) if the EBO Price is payable in
installments, satisfaction of the final two sentences of (S) 17.5.2, Lessor
shall execute and deliver to Lessee, or to Lessee's assignee or nominee, a bill
of sale, without representations or warranties, express or implied (except as to
the absence of Lessor 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 Lessee or such assignee or nominee,
and Mortgagee shall execute and deliver a Mortgage release for the Aircraft, all
in such form as Lessee reasonably requests and all at Lessee's expense
(including any Tax in the nature of a transfer tax resulting or arising from any
such purchase). If Lessee fails to pay all amounts due on the EBO Date, this
Lease shall, subject to (S)(S) 14 and 15, continue in full force and effect,
and all of Lessee's obligations shall continue, including its obligation to pay
Rent, in each case as if Lessee's notice under (S) 17.5.1 were not given.
17.5.2 INSTALLMENT PAYMENTS; ASSUMPTION OF DEBT
Lessee and Lessor acknowledge that (at Lessee's election) the EBO Price
is payable in installments as provided in Schedule 1. If Lessee does not assume
the Equipment Notes pursuant to (S) 11.6 of the ParticipatioN Agreement, but
elects to pay the EBO Price in installments, then this Lease shall, upon payment
of the initial installment of the EBO Price and discharge of the Mortgage in
accordance with its terms, cease to constitute a true lease but shall,
immediately and without further act, constitute a lease that creates a
first-priority (subject to Permitted Liens) perfected security interest under
UCC (S) 1-201(37) and evidence a Lien on the Aircraft granted by Lessee to
Lessor to secure the remaining unpaid balance of the EBO Price and all other
amounts owing to Owner Trustee or Owner Participant, and, in connection
therewith, Lessee shall deliver to Owner Participant an opinion of counsel
reasonably satisfactory to Owner Participant confirming that this Lease will
thereafter constitute a first-priority (subject to Permitted Liens) perfected
security interest in the Aircraft. So long as any such balance remains unpaid,
all provisions of this Lease shall continue to be in effect, mutatis mutandis,
in favor of Lessor, as a secured party, except for (S)(S) 2.1, 3.1, 3.2.1, 5,
9, and 17, and (S) 10 Shall require immediate payment of the EBO Price balance
(rather than Stipulated Loss Value) upon the occurrence of an Event of Loss, and
(S) 11 shall require property insurance only in the amount of the unpaid balance
of the EBO Price. In addition, the indemnities set forth in (S) 9 of the
Participation Agreement shall continue until the EBO Price is paid in full.
52
<PAGE>
18. MISCELLANEOUS
18.1 AMENDMENTS
No provision of this Lease may be amended, supplemented, waived,
modified, discharged, terminated, or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this Lease
that it purports to amend, supplement, waive, modify, discharge, terminate, or
otherwise vary and is signed by Lessor and Lessee. Each such amendment,
supplement, waiver, modification, discharge, termination, or variance shall be
effective only in the specific instance and for the specific purpose for which
it is given. No provision of this Lease shall be varied or contradicted by oral
communication, course of dealing or performance, or other manner not set forth
in an agreement, document, or instrument in writing and signed by Lessor and
Lessee.
18.2 SEVERABILITY
If any provision hereof shall be held invalid, illegal, or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction, and (b) such invalidity, illegality, or unenforceability
shall not affect the validity, legality, or enforceability of such provision in
any other jurisdiction. If, however, any Law pursuant to which such provisions
are held invalid, illegal, or unenforceable may be waived, Lessor and Lessee
hereby waive such Law to the full extent permitted, to the end that this Lease
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.
18.3 THIRD-PARTY BENEFICIARY
This Lease is not intended to provide, and shall not provide, any
Person not a party hereto (other than Mortgagee, the Participants, the Mortgage
Indemnitees, the Certificate Holders, and the Persons referred to in (S) 4.6)
with any rights of any nature whatsoever against either of the parties hereto,
and no Person not a partY hereto (other than Mortgagee, the Participants, the
Mortgage Indemnitees, the Certificate Holders, and the Persons referred to in
(S) 4.6) shall have any right, power, or privilege in respect of this Lease, or
have any benefit or interest arising out of this Lease.
18.4 REPRODUCTION OF DOCUMENTS
This Lease (including all annexes, schedules, and exhibits hereto) and
all agreements, instruments, and documents relating hereto, including (a)
consents, waivers, and modifications that may hereafter be executed, and
53
<PAGE>
(b) financial statements, certificates, and other information previously or
hereafter furnished to any party hereto, may be reproduced by such party by any
photographic, photostatic, microfilm, micro-card, miniature photographic, or
other similar process, and such party may destroy any original documents so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by such
party in the regular course of business), and any enlargement, facsimile, or
further reproduction of such reproduction likewise is admissible in evidence.
18.5 COUNTERPARTS
This Lease and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate signature pages
bound together into one or more counterparts), each fully-executed set of which
when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument. The
single fully-executed original of this Lease marked "Original" on the signature
page hereof is the original for chattel paper purposes, and all other
counterparts are duplicates for chattel paper purposes and are marked
"duplicate" on the signature page hereof. No security interest in this Lease may
be perfected by the possession of any counterpart other than the "Original".
18.6 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers, and other
communications required or permitted to be made, given, furnished, or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in (S) 15.7 of the Participation Agreement.
18.7 GOVERNING LAW
THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE.
THIS LEASE IS BEING DELIVERED IN THE STATE OF NEW YORK.
18.8 NO WAIVER
No failure on the part of Lessor to exercise, and no delay by Lessor in
exercising, any of its rights, powers, remedies, or privileges under this Lease
or provided at Law, in equity or otherwise shall impair, prejudice, or
constitute a waiver of any such right, power, remedy, or privilege or be
construed as a waiver of any breach hereof or default hereunder or as an
acquiescence
54
<PAGE>
therein, nor shall any single or partial exercise of any such right, power,
remedy, or privilege preclude any other or further exercise thereof by Lessor or
the exercise of any other right, power, remedy, or privilege by Lessor. No
notice to or demand on Lessee in any case shall, unless otherwise required under
this Lease, entitle Lessee to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of Lessor to any
other or further action in any circumstances without notice or demand.
18.9 ENTIRE AGREEMENT
This Lease, together with the other Operative Agreements, on and as of
the date hereof constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and thereof, and all prior understandings
or agreements, whether written or oral, between the parties hereto with respect
to such subject matter are hereby superseded in their entirety.
[The rest of this page is intentionally left blank.]
55
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease
Agreement N9__AT.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
trustee under the Trust Agreement, as
Lessor
By:____________________________________
Name:
Title:
AIRTRAN AIRWAYS, INC.,
as Lessee
By:___________________________________
Name:
Title:
[This is the ORIGINAL counterpart of the Lease for chattel paper purposes.]
[or]
[This is a DUPLICATE executed counterpart, and is NOT the
original counterpart, of the Lease, for chattel paper purposes.]
<PAGE>
-----------------------------------
EHXIBIT A - AIRCRAFT DESCRIPTION
LEASE AGREEMENT [N9__AT]
-----------------------------------
AIRCRAFT DESCRIPTION
The Aircraft is a Boeing model 717-200 aircraft, consisting of (1) an airframe
bearing FAA registration no. N9__AT and manufacturer's serial no. 550__, (2) two
BMW Rolls-Royce model BR715 engines (each of which has 750 or more rated takeoff
horsepower or its equivalent), bearing manufacturer's serial nos. __________ and
__________, and (3) all appliances, parts, instruments, appurtenances,
accessories, furnishings, and other equipment or property incorporated in such
airframe and engines.
A-1
<PAGE>
-----------------------------------
EXHIBIT B - RETURN ACCEPTANCE
SUPPLEMENT
LEASE AGREEMENT [N9__AT]
-----------------------------------
RETURN ACCEPTANCE SUPPLEMENT N9__AT
This Supplement, dated __________, ____, is entered into between First
Security Bank, National Association, a national banking association, not in its
individual capacity but solely as Owner Trustee under Trust Agreement N9__AT,
dated as of __________________, ____, with the Owner Participant named therein
(such Owner Trustee, in its capacity as trustee, being referred to as "Lessor"),
and AirTran Airways, Inc. ("Lessee"), a Delaware corporation.
Lessor and Lessee have entered into Lease Agreement N9__AT (the
"Lease"), dated as of [_____________, ____], relating to the Boeing model
717-200 aircraft described below. Terms defined in the Lease have the same
meanings when used in this Supplement.
Lessor and Lessee hereby agree as follows:
1. Lessor and Lessee are executing this Return Acceptance Supplement to
confirm that, on the date hereof, Lessee returned the following Airframe and
Engines to Lessor:
Airframe: U.S. registration no. N9__AT; manufacturer's serial no.
550__; and
Engines: two BMW Rolls-Royce engines, bearing manufacturer's serial
nos. __________ and __________.
2. This Return Acceptance Supplement is being delivered in
_____________________.
3. Lessor and Lessee agree that the return of the Aircraft complies
with (S) 5 and Annex B of the Lease, except as set forth below:
4. Lessor and Lessee agree that the Lease is terminated, except for the
provisions thereof that expressly survive termination.
B-1
<PAGE>
------------------------------
EXHIBIT B - RETURN ACCEPTANCE
SUPPLEMENT
LEASE AGREEMENT [N9_AT]
-----------------------------
IN WITNESS WHEREOF, Lessor and Lessee have executed this Return
Acceptance Supplement N9__AT.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
trustee under the Trust Agreement, as
Lessor
By:___________________________________
Name:
Title:
AIRTRAN AIRWAYS, INC.,
as Lessee
By:________________________________
Name:
Title:
B-2
<PAGE>
--------------------------------
SCHEDULE 1 - CERTAIN TERMS
LEASE AGREEMENT [N9_AT]
--------------------------------
CERTAIN TERMS
<TABLE>
<CAPTION>
<S> <C>
DEFINED TERM DEFINITION
- ----------------- -----------
Commencement Date _______________, ____
EBO Date _______________, 201_
EBO Price ________% of Lessor's Cost (________% of Lessor's Cost payable on the
EBO Date, ________% of Lessor's Cost payable on ____________, 201_
(or, at Lessee's election, on the EBO Date), and ________% of
Lessor's Cost payable on ____________, 201_ (or, at Lessee's
election, on the EBO Date) [I.E., $__________ ($__________ on the
EBO Date, $__________ on ____________, 201_ (or the EBO Date), and
$__________ on ____________, 201_ (or the EBO Date))].
Interim Rent The percentage of Lessor's Cost specified in Schedule 2 for [_______]
Minimum Liability Insurance Amount $550,000,000
Past-Due Rate The Debt Rate plus 2% (not to exceed the maximum rate permitted under
applicable Law)
Renewal Rent Limit 50% of the average of the
semiannual Basic Rent amounts payable
during the Base Term.
Scheduled Expiration Date The 18th anniversary of the Delivery Date
SLV Rate The Debt Rate (not to exceed the maximum rate permitted under
applicable Law)
Similar Aircraft Boeing model 717-200 aircraft (other than the Aircraft)
Threshold Amount $2,000,000
</TABLE>
<PAGE>
---------------------------
SCHEDULE 2 - BASIC RENT
LEASE AGREEMENT [N9__AT]
---------------------------
BASIC RENT
PERCENTAGE OF
PAYMENT DATE LESSOR'S COST
------------ -------------
<PAGE>
----------------------------------
SCHEDULE 3 - STIPULATED LOSS VALUE
LEASE AGREEMENT [N9__AT]
----------------------------------
STIPULATED LOSS VALUE
<TABLE>
<S> <C> <C> <C>
PERCENTAGE OF PERCENTAGE OF
DATE LESSOR'S COST DATE LESSOR'S COST
- -------------------------- ----------------------- ---------------- ------------------------
</TABLE>
<PAGE>
-----------------------------------
SCHEDULE 4 - TERMINATION VALUE
LEASE AGREEMENT [N9__AT]
----------------------------------
TERMINATION VALUE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
DATE LESSOR'S COST DATE LESSOR'S COST
- -------------------------- ----------------------- ---------------- ------------------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
-----------------------------------
SCHEDULE 5 - PERMITTED COUNTRIES
LEASE AGREEMENT [N9__AT]
----------------------------------
PERMITTED COUNTRIES
Argentina Malta
Australia Mexico
Austria Morocco
Bahamas Netherlands
Belgium New Zealand
Brazil Norway
Canada Paraguay
Chile Peoples Republic of China
Denmark Philippines
Egypt Portugal
Ecuador Republic of China (Taiwan)
Finland Singapore
France South Africa
Germany South Korea
Greece Spain
Hungary Sweden
Iceland Switzerland
India Thailand
Indonesia Tobago
Ireland Trinidad
Italy United Kingdom
Japan Uruguay
Luxembourg Venezuela
Malaysia
<PAGE>
--------------------------
SCHEDULE 6 - PLACARDS
LEASE AGREEMENT [N9__AT]
--------------------------
PLACARDS
Leased from
First Security Bank, N. A.,
as trustee
and mortgaged to
State Street Bank and Trust Company
of Connecticut, National Association,
as trustee
<PAGE>
ANNEX B
RETURN CONDITIONS
This Annex B shall apply to the return of the Aircraft by or on behalf
of Lessee under the Lease, whether at the Scheduled Expiration Date, at the end
of the Renewal Term, upon the exercise of Lessee's rights under (S) 9 of the
Lease, upon the exercise of Lessor's remedies following the occurrence of a
Lease Event of Default, or otherwise. However, this Annex B shall not apply (1)
if an Event of Loss to the Aircraft occurs (unless the Aircraft is replaced
under (S) 10.1.3 of the Lease), or (2) if Lessee buys the Aircraft in accordance
with (S) 17 of the Lease.
The terms defined in Annex A to Lease Agreement N9__AT, when
capitalized as in Annex A, have the same meanings when used in this "Return
Conditions" Annex. Annex A also contains rules of usage that control
construction in this "Return Conditions" Annex.
A. General Condition upon Return.
Upon the expiration or termination of this Lease, Lessee will return
the Aircraft to Lessor or its designee at such location in the continental
United States chosen by Lessee and reasonably satisfactory to Lessor, and Lessee
will give to Lessor and, if the Aircraft is then subject to the Lien of the
Mortgage, Mortgagee at least 15 days' prior written notice of the place of such
return. At the time of return of the Aircraft to Lessor, Lessor and Lessee shall
execute a Return Acceptance Supplement. At the time of such return, (1) the
Aircraft shall be registered with the FAA (except for a failure caused by the
Lessor being ineligible to be the registered owner of an aircraft registered
with the FAA), (2) the Aircraft shall have and be in compliance with a
currently-valid standard airworthiness certificate issued by the FAA , (3) the
Aircraft shall be free and clear of all Liens (other than Lessor Liens) and
rights of Persons not party to any Operative Agreement under pooling,
interchange, overhaul, repair, or similar agreements or arrangements, (4) the
Aircraft shall be in as good operating condition as when originally delivered to
Lessee, ordinary wear and tear excepted, and be fully equipped with two Engines
or other engines meeting the requirements of Replacement Engines, (5) the
Aircraft shall have Lessee's logo removed or painted over and shall be clean by
major United States commercial airline operating standards, (6) the Aircraft
will be in compliance with the maintenance provisions of the Lease, (7) the
Aircraft shall be returned in a passenger configuration with all Parts installed
therein as of the Delivery Date, excepting modifications, alterations,
additions, replacements, substitutions, and removals made in accordance with the
terms of the Lease, (8) the Aircraft shall comply with the corrosion control
program in accordance
B-1
<PAGE>
with the Maintenance Program, and (9) the Aircraft shall comply with all
outstanding Airworthiness Directives issued by the FAA applicable to the
Aircraft that by their terms require compliance at or before the time of return
of the Aircraft.
B. Return of Other Engines.
If any engine not owned by Lessor is installed on the Airframe returned
in accordance with (S) A of this Annex B, Lessee shall take the actions required
by (S) 10.2 and (S) 10.3 to cause such engine to be a Replacement Engine.
Thereupon, Lessor will Transfer to Lessee in accordance with (S) 4.5 of the
Lease an Engine constituting part of the Aircraft but not installed on the
Airframe at the time of the return of the Airframe.
C. Hours of Operation.
If Lessee (or, if applicable, the Permitted Sublessee last in
possession of the Aircraft) does not then use a continuous maintenance program
with respect to the Airframe, then, during the period of operation of the
Aircraft immediately before such return, (1) Lessee or such Permitted Sublessee
(as applicable) shall use a block overhaul program for the Airframe approved by
the FAA or the Aviation Authority under the laws of which the Aircraft was then
registered, and (2) the Airframe shall have remaining until the next scheduled
full D check at least 25% of the allowable hours between D checks permitted
under the maintenance program then used by Lessee or such Permitted Sublessee.
If, during the period of operation of the Aircraft immediately before such
return, Lessee (or such Permitted Sublessee) does not use an on-condition
maintenance program with respect to the Engines or engines installed on the
Airframe, then the average number of hours or cycles of operation (whichever
applies under the maintenance program then in use with respect to such Engines
or engines) on such Engines or engines remaining until the next scheduled engine
refurbishment shall be at least 25% of the hours or cycles (whichever applies)
between engine refurbishment allowed under the maintenance program then in use
for such Engines or engines approved by the FAA or the Aviation Authority of the
country under the laws of which the Aircraft was then registered.
D. Deficiency Payment.
If upon return the Airframe or any Engine (including any Replacement
Engine) (each, an "Item of Equipment") is below the minimum standard applicable
thereto specified in (S) C (the "Minimum"), Lessor shall accept return of the
Aircraft, provided that the other return conditions set forth in this Annex B
have been satisfied or waived, upon payment to Lessor of the excess (if any) of
(1) the sum of the Deficiency Amounts (as such phrase is defined below) for
B-2
<PAGE>
all such Items of Equipment over (2) the sum of the Credit Amounts (as defined
below) for all such Items of Equipment; and if there is no such excess, Lessor
shall accept return of the Aircraft without any payment by Lessee. For purposes
of this (S) D, with respect to any Item of Equipment,
"Performance Costs" is the cost of performing the applicable overhaul
or refurbishment on which the Minimum for such Item of Equipment is
based at a rate equal to 120% of the direct cost to Lessee of
performing such work or, if Lessee does not perform such work, at a
rate then charged by an outside maintenance provider to Lessee for
performing such work;
"Deficiency Amount" is the Performance Cost for such Item of Equipment
multiplied by a fraction, the numerator of which is the number of hours
or cycles (whichever applies) below the Minimum applicable to such Item
of Equipment at the time of return, and the denominator of which is the
total hours or cycles (whichever applies) between such overhaul or
refurbishment under the Maintenance Program; and
"Credit Amount" is the Performance Cost for such Item of Equipment
multiplied by a fraction, the numerator of which is the number of hours
or cycles (whichever applies) above the Minimum applicable to such Item
of Equipment at the time of return, and the denominator of which is the
total hours or cycles (whichever applies) between such overhaul or
refurbishment under the Maintenance Program.
E. Aircraft Documents.
At the expiration or termination of this Lease, Lessee shall deliver
the Aircraft Documents to Lessor.
B-3
<PAGE>
ANNEX C
MAINTENANCE
The terms defined in Annex A to Lease Agreement N9__AT, when
capitalized as in Annex A, have the same meanings when used in this
"Maintenance" Annex. Annex A also contains rules of usage that control
construction in this "Maintenance" Annex.
A. Maintenance.
At its own cost and expense, Lessee shall maintain, service, repair,
and overhaul the Aircraft (or cause the Aircraft to be maintained, serviced,
repaired, and overhauled) in accordance with (1) maintenance standards required
by, or substantially as stringent as those required by, the FAA or the central
civil aviation authority of Canada, France, Germany, Japan, or the United
Kingdom for the Aircraft (the "Maintenance Program"), so as (aa) to keep the
Aircraft in as good operating condition as originally delivered hereunder,
ordinary wear and tear excepted, and (bb) to keep the Aircraft in such operating
condition as may be necessary to enable the applicable airworthiness certificate
for the Aircraft to be maintained under the regulations of the FAA or other
Aviation Authority then having jurisdiction over the operation of the Aircraft
(but in any event in accordance with the Maintenance Program), other than during
(x) temporary periods of storage in accordance with applicable regulations, (y)
maintenance and modification permitted hereunder, and (z) periods when the FAA
or such other Aviation Authority has revoked or suspended the airworthiness
certificates for Similar Aircraft; and (2) except during periods when a
Permitted Sublease is in effect, the same standards as Lessee uses with respect
to similar aircraft of similar size in its fleet operated by Lessee in similar
circumstances and, during any period in which a Permitted Sublease is in effect,
the same standards used by the Permitted Sublessee with respect to similar
aircraft of similar size in its fleet and operated by the Permitted Sublessee in
similar circumstances. Lessee further agrees that the Aircraft will be
maintained, used, serviced, repaired, overhauled, or inspected in compliance
with applicable Laws with respect to the maintenance of the Aircraft and in
compliance with each applicable airworthiness certificate, license, and
registration relating to the Aircraft issued by the Aviation Authority, other
than minor or nonrecurring violations with respect to which corrective measures
are taken upon discovery thereof and except to the extent Lessee or Permitted
Sublessee is contesting in good faith the validity or application of any such
Law or requirement relating to any such certificate, license, or registration in
any reasonable manner which does not create a material risk of sale, loss, or
forfeiture of the Aircraft, the Airframe, or any Engine or the interest of
Lessor,
C-1
<PAGE>
Mortgagee, or any Participant therein or a material risk of criminal liability
or material civil penalty against Lessor, any Participant, or Mortgagee;
provided, that no contest shall excuse the failure to maintain the airworthiness
certification for the Aircraft in good standing without Lessor's written
consent, nor shall the pendency of any contest prevent a prohibition of use from
becoming an Event of Loss. Lessee shall cause the Aircraft Documents to be
maintained in English.
B. Replacement of Parts.
Except as otherwise provided herein, Lessee, at its own cost and
expense, will promptly replace (or cause to be replaced) all Parts that are from
time to time incorporated or installed in or attached to the Aircraft, and that
become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair, or permanently rendered unfit for use for any reason whatsoever. In
addition, Lessee may, at its own cost and expense, remove (or permit to be
removed) in the ordinary course of maintenance, service, repair, overhaul, or
testing any Parts, whether or not worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair, or permanently rendered unfit for use;
provided, that, except as otherwise provided herein, Lessee will replace or
cause the replacement of such Parts as promptly as practicable. All replacement
Parts shall be free and clear of all Liens, except for Permitted Liens and
pooling arrangements to the extent permitted by (S) C below and shall be in good
operating condition and (except in the case of replacement property installed on
the basis of operational exigencies) have a value, remaining useful life, and
utility not less than the value, remaining useful life, and utility of the Parts
replaced (assuming such replaced Parts were in the condition required under this
Lease). Except as otherwise provided herein, all Parts at any time removed from
the Aircraft shall remain the property of Lessor, no matter where located, until
they are replaced by Parts that have been incorporated or installed in or
attached to the Aircraft and that meet the requirements for replacement Parts
specified above. As soon as a replacement Part is incorporated or installed in
or attached to the Aircraft as above provided, without further act, (1) title to
the replaced Part shall vest in Lessee (or if a Permitted Sublease is then in
effect, in the Permitted Sublessee) free and clear of all Lessor Liens and all
rights of Lessor, and the replaced Part shall no longer be deemed a Part
hereunder, (2) title to such replacement Part shall vest in Lessor, subject only
to Permitted Liens and pooling arrangements to the extent permitted by (S) C
below and except in the case of replacement property temporarily installed on an
emergency basis, and (3) such replacement Part shall become subject to this
Lease and the Mortgage and be deemed part of the Aircraft for all purposes
hereof and thereof to the same extent as the Parts originally incorporated or
installed in or attached to the Aircraft.
C-2
<PAGE>
C. Pooling of Parts.
Any Part removed from the Aircraft may be subjected by Lessee or a
Permitted Sublessee to a normal pooling arrangement customary in the airline
industry and entered into in the ordinary course of business of Lessee or such
Permitted Sublessee, so long as a Part replacing such removed Part shall be
incorporated or installed in or attached to the Aircraft in accordance with (S)
B of this Annex C as promptly as practicable after the removal of such removed
Part. In addition, any replacement Part when incorporated or installed in or
attached to the Aircraft may be owned by any third party subject to such a
normal pooling arrangement, so long as Lessee or Permitted Sublessee, as
promptly thereafter as reasonably possible, either (1) causes title to such
replacement Part to vest in Lessor in accordance with (S) B of this Annex C,
free and clear of all Liens (except Permitted Liens), or (2) replaces (or causes
to be replaced) such replacement Part by incorporating or installing in or
attaching to the Aircraft a further replacement Part owned by Lessee or a
Permitted Sublessee free and clear of all Liens (except Permitted Liens) and by
causing title to such further replacement Part to vest in Lessor in accordance
with (S) B of this Annex C.
D. Alterations, Modifications, and Additions.
Lessee shall make (or cause to be made) such alterations and
modifications in and additions to the Aircraft as may be required from time to
time to meet the applicable standards of the FAA or other Aviation Authority
having jurisdiction over the operation of the Aircraft, to the extent made
mandatory in respect of the Aircraft (a "Mandatory Modification"); provided,
that Lessee or any Permitted Sublessee may, in good faith and by appropriate
procedure, contest the validity or application of any law, rule, regulation, or
order in any reasonable manner which does not materially adversely affect
Lessor's interest in the Aircraft (and, so long as any Equipment Notes are
outstanding, Mortgagee's interest in the Aircraft) and does not involve any
material risk of sale, forfeiture, or loss of the Aircraft or the interest of
Lessor, Mortgagee, or any Participant therein, any material risk of material
civil penalty, or any material risk of criminal liability being imposed on
Lessor, Mortgagee, or the holder of any Equipment Note. In addition, Lessee may
make or permit to be made such alterations and modifications in and additions to
the Aircraft (each an "Optional Modification") as Lessee or any Permitted
Sublessee deems desirable in the proper conduct of its business, including
removal of Parts which Lessee deems are obsolete or no longer suitable or
appropriate for use in the Aircraft; provided, that no such Optional
Modification shall (1) diminish the fair market value, utility, or useful life
of the Aircraft or any Engine below its fair market value, utility, or useful
life immediately before such Optional Modification (assuming the Aircraft or
such Engine was in the
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condition required by the Lease immediately before such Optional Modification),
or (2) cause the Aircraft to cease to have the applicable standard airworthiness
certificate. Except as otherwise provided herein, title to all Parts (other than
Removable Parts (as defined below)) incorporated or installed in or attached to
the Aircraft as the result of such Optional Modification shall, without further
act, vest in Lessor and become subject to this Lease and the Mortgage.
Notwithstanding anything to the contrary in this (S) D, Lessee or a Permitted
Sublessee may, at any time during the Term, remove any Part (such Part being
referred to herein as a "Removable Part") if (aa) such Part is in addition to,
and not in replacement of or substitution for, any Part originally incorporated
or installed in or attached to the Aircraft at the time of delivery thereof to
Lessee or any Part in replacement of, or substitution for, any such Part, (bb)
such Part is not required to be incorporated or installed in or attached to the
Aircraft pursuant to the terms of (S) A of Annex B to the Lease, and (cc) such
Part can be removed from the Airframe or Engine without diminishing the fair
market value, utility, or remaining useful life that the Airframe or Engine
would have had at the time of removal had such removal not occurred, assuming
that such Airframe or Engine was in the condition and repair required to be
maintained by the terms hereof and such Removable Part had not been incorporated
or installed in or attached to the Aircraft. Removable Parts may be leased from
or financed by third parties other than Lessor. Title to any Removable Part
shall not vest in Lessor or be subject to the Lien of the Mortgage; except that
any Part not removed before the return to Lessor hereunder of the Airframe or
Engine on which it is incorporated, installed, or attached shall become the
property of Lessor.
E. Records.
Lessee shall maintain (or cause to be maintained) all Aircraft Documents. All
Aircraft Documents that are specific to the Aircraft shall be the property of
Lessor, but shall become the property of Lessee upon Lessee's purchase of the
Aircraft pursuant to the terms of this Lease or upon the occurrence of an Event
of Loss and Lessee's compliance with (S) 10. All Aircraft Records shall be
maintained in English (except that, during the term of any Permitted Sublease to
a Permitted Sublessee who is not a U.S. Air Carrier, such Permitted Sublessee
may maintain Aircraft Records in the primary language of the country in which
such Permitted Sublessee is located, and such Aircraft Records shall be
translated into English on an ongoing basis and no less frequently than once
each year).
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ANNEX D
INSURANCE
The terms defined in Annex A to Lease Agreement N9__AT, when
capitalized as in Annex A, have the same meanings when used in this "Insurance"
Annex. Annex A also contains rules of usage that control construction in this
"Insurance" Annex.
A. LIABILITY INSURANCE
1. Except as provided in (S) A2 below, Lessee will carry or cause to be
carried at all times, at no expense to Lessor, any Participant, any Certificate
Holder, or Mortgagee, comprehensive airline legal liability (including passenger
liability, property damage, and contractual liability insurance) with respect to
the Aircraft which is (a) in an amount not less than the greater of (x) the
amount of comprehensive airline legal liability insurance from time to time
applicable to aircraft operated by Lessee of the same type and operating on
similar routes as the Aircraft, and (y) the Minimum Liability Insurance Amount
per occurrence; (b) of the type and covering the same risks as from time to time
applicable to aircraft operated by Lessee of the same type as the Aircraft; and
(c) maintained in effect with insurers of nationally or internationally
recognized responsibility (such insurers being referred to herein as "Approved
Insurers").
2. During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by (S) A1 above, insurance otherwise conforming with the provisions of
(S) A1 except that (a) the amounts of coverage shall not be required to exceed
the amounts of public liability and property damage insurance from time to time
applicable to aircraft operated by Lessee of the same type as the Aircraft which
are on the ground and not in operation, and (b) the scope of the risks covered
and the type of insurance shall be the same as from time to time shall be
applicable to aircraft operated by Lessee of the same type which are on the
ground and not in operation.
B. HULL INSURANCE
1. Except as provided in (S) B2 below, Lessee will carry or cause to be
carried at all times, at no expense to Lessor, any Participant, any Certificate
Holder, or Mortgagee, with Approved Insurers "all-risk" ground and flight
aircraft hull insurance covering the Aircraft (including the Engines when they
are installed on the Airframe or any other airframe) which is of the type as
from time to time applicable to aircraft operated by Lessee of the same type as
the
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Aircraft for an amount denominated in United States Dollars not less than the
Stipulated Loss Value of the Aircraft.
Any policies of insurance carried in accordance with this (S) B1
covering the Aircraft and any policies taken out in substitution or replacement
for any such policies (a) shall name Mortgagee (or, if the Lien of the Mortgage
has been discharged, Lessor) as exclusive loss payee for any proceeds to be paid
under such policies up to an amount equal to the Stipulated Loss Value, and (b)
shall provide that (aa) in the event of a loss involving proceeds in excess of
the Threshold Amount, the proceeds in respect of such loss up to an amount equal
to the Stipulated Loss Value for the Aircraft shall be payable to Mortgagee (or,
if the Lien of the Mortgage has been discharged, to Lessor), except in the case
of a loss with respect to an Engine installed on an airframe other than the
Airframe, in which case Lessee (or any Permitted Sublessee) shall endeavor to
arrange for any payment of insurance proceeds in respect of such loss to be held
for the account of Mortgagee (or, if the Lien of the Mortgage has been
discharged, Lessor), whether such payment is made to Lessee (or any Permitted
Sublessee) or any third party and, if Mortgagee (or Lessor) receives such a
payment otherwise than in respect of an Event of Loss, then, upon receipt of
evidence reasonably satisfactory to Mortgagee (or Lessor) that the damage giving
rise to such payment has been repaired or that such payment is then required to
pay for repairs then being made, Mortgagee (or Lessor) shall, unless a Special
Default exists, pay the amount of such payment to Lessee or its order, and (bb)
the entire amount of any loss involving proceeds of the Threshold Amount or less
or the amount of any proceeds of any loss in excess of the Stipulated Loss Value
for the Aircraft shall be paid to Lessee or its order unless a Special Default
exists and the insurers have been notified thereof by Lessor or the Mortgagee.
In the case of a loss with respect to an engine (other than an Engine) installed
on the Airframe, Lessor shall hold any payment to it of any insurance proceeds
for that loss for the account of Lessee or any other third party who is entitled
to receive such proceeds.
2. During any period that the Aircraft is on the ground and not in
operation, Lessee may carry or cause to be carried, in lieu of the insurance
required by (S) B1 above, insurance otherwise conforming with the provisions of
(S) B1, except that the scope of the risks and the type of insurance shall be
the same as from time to time applicable to aircraft operated by Lessee of the
same type similarly on the ground and not in operation, provided, that Lessee
shall maintain insurance against risk of loss or damage to the Aircraft in an
amount equal to the Stipulated Loss Value of the Aircraft during such period
that the Aircraft is on the ground and not in operation.
D-2
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C. WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE
If Lessee (or any Permitted Sublessee) operates or proposes to operate the
Aircraft, the Airframe, or any Engine (1) in any area of recognized hostilities,
or (2) on international routes and Lessee (or such Permitted Sublessee)
maintains war-risk, hijacking, or allied perils insurance for other aircraft
that it operates on such routes, Lessee shall maintain or cause to be maintained
war-risk, hijacking, and allied perils insurance of substantially the same type
carried by similar United States commercial air carriers operating the same or
comparable models of aircraft on similar routes or in such areas, and in no
event in an amount less than the Stipulated Loss Value. In any event, Lessee
shall maintain or cause a Permitted Sublessee to maintain the "Common North
American Airline Buyback" to the War Exclusion Clause (or London or other
equivalent) war risk perils buyback.
D. GENERAL PROVISIONS
Any policies of insurance carried in accordance with (S)(S) A, B, and
C, including any policies taken out in substitution or replacement for such
policies:
(1) shall name Lessor, each Participant, each Certificate
Holder (identified by description, not by name) the Liquidity Provider,
and Mortgagee as additional insureds (the "Additional Insureds"), as
their interests may appear;
(2) shall apply worldwide and have no territorial restrictions
or limitations (except only in the case of war, hijacking, and allied
perils insurance required under (S) C, which shall apply to the fullest
extent available in the international insurance market);
(3) shall provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance shall not be
invalidated or impaired by any act or omission (including
misrepresentation and nondisclosure) by Lessee (or any Permitted
Sublessee) or any other Person (including use for illegal purposes of
the Aircraft or any Engine), and shall insure the Additional Insureds
regardless of any breach or violation of any representation, warranty,
declaration, term, or condition contained in such policies by Lessee
(or any Permitted Sublessee);
(4) shall provide that, if the insurers cancel such insurance
for any reason whatsoever, or if it is allowed to lapse for nonpayment
of premium, or if any material change is made in the insurance which
adversely affects the interest of any of the Additional Insureds, such
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<PAGE>
cancellation, lapse, or change shall not be effective as to the
Additional Insureds for 30 days (seven days in the case of war risk,
hijacking, and allied perils insurance) after receipt by the Additional
Insureds of written notice by such insurers of such cancellation, lapse
or change, provided, that if any notice period specified above is not
reasonably obtainable, such policies shall provide for as long a period
of prior notice as shall then be reasonably obtainable;
(5) shall waive any rights of recourse, subrogation, setoff
(including for unpaid premiums), recoupment, counterclaim, or other
deduction, whether by attachment or otherwise, against each Additional
Insured;
(6) shall be primary without right of contribution from any
other insurance that may be available to any Additional Insured;
(7) shall provide that all of the liability insurance
provisions thereof, except the limits of liability, shall operate in
all respects as if a separate policy had been issued covering each
party insured thereunder;
(8) shall provide that none of the Additional Insureds shall
be liable for any insurance premium; and
(9) shall contain a 50/50 Clause per Lloyd's Aviation
Underwriters' Association Standard Policy Form AVS 103;
provided, that any such endorsements may be subject to any limitations on
endorsements generally prevailing in the airline insurance marketplace at the
time (E.G., AVN67B).
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
On or before the Delivery Date and on or before each renewal date of
the insurance policies required hereunder, Lessee will furnish or cause to be
furnished to Lessor, Owner Participant, and Mortgagee insurance certificates
describing in reasonable detail the insurance maintained hereunder and a report,
signed by Lessee's or a Permitted Sublessee's regular independent insurance
broker (the "Insurance Broker"), stating the opinion of such Insurance Broker
that (1) all premiums for the insurance then due have been paid, and (2) such
insurance complies with the terms of this Annex D. To the extent that such
agreement is reasonably obtainable, Lessee will also cause the Insurance Broker
to agree to notify Lessor, Owner Participant, and Mortgagee in writing of any
default in the payment of any premium and of any other act or omission on the
part of Lessee of which the Insurance Broker has knowledge and which might
invalidate or render unenforceable, in whole or in part, any
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<PAGE>
insurance on the Aircraft or Engines or cause the cancellation or termination of
such insurance, and to notify Lessor, Owner Participant, and Mortgagee in
writing at least 30 days (seven days for war-risk and allied perils coverage, or
such shorter period therefor as may be available in the international insurance
market, as applicable) before the cancellation, lapse, or materially adverse
change of any insurance maintained pursuant to this Annex D.
F. RIGHT TO PAY PREMIUMS
Each Additional Insured shall have the rights but not the obligations
of an additional named insured. No Additional Insured shall have any obligation
to pay any premium, commission, assessment, or call due on any such insurance
(including reinsurance). Notwithstanding the foregoing, in the event of
cancellation of any required insurance due to the nonpayment of premium, each of
Lessor, Owner Participant, and Mortgagee shall have the option, in its sole
discretion, to pay any such premium and to maintain such coverage, as Lessor,
Owner Participant, or Mortgagee may require, until the scheduled expiry date of
such insurance and, in such event, Lessee shall, upon demand, reimburse Lessor,
Owner Participant, and Mortgagee for amounts that they so pay.
G. DEDUCTIBLES; SELF-INSURANCE
Lessee may self-insure by way of deductible, premium adjustment,
franchise provisions, or otherwise (including, with respect to insurance
maintained pursuant to (S) B, insuring for a maximum amount which is less than
the Stipulated Loss Value of the Aircraft) in the insurance covering the risks
required to be insured against pursuant to (S) 11 and this Annex D under a
program applicable to all aircraft in Lessee's fleet, but in no case shall the
aggregate amount of self-insurance in regard to (S) 11 and this Annex D exceed
$1 million per occurrence or, if greater, the lesser per policy year with
respect to all of the aircraft in Lessee's fleet (including the Aircraft) of (x)
4% of the consolidated tangible net worth of Holdings at the time (based on the
latest publicly-available financial statements at the time that the insurance is
placed), and (y) the value of the single most valuable aircraft in Lessee's
fleet, unless an insurance broker of national standing shall certify that the
standard among all other major U.S. airlines is a higher level of
self-insurance, in which case Lessee may self-insure to such higher level. In
addition, Lessee (and any Permitted Sublessee) may self-insure to the extent of
any applicable deductible per aircraft that does not exceed industry standards
for major U.S. airlines.
D-5
<PAGE>
Exhibit A-3 to
Note Purchase Agreement
================================================================================
TRUST INDENTURE AND MORTGAGE N9__AT
dated as of _______________, ____
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION
not in its individual capacity, except as expressly
provided herein, but solely as trustee,
Owner Trustee
and
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity, except as expressly
provided herein, but solely as trustee,
Mortgagee
--------------------------------------------------------
Equipment Notes covering one Boeing model 717-200
aircraft bearing United States registration no. N9__AT
and manufacturer's serial no. 550__
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GRANTING CLAUSE...................................................................................................1
DEFINITIONS; CONSTRUCTION.........................................................................................7
THE EQUIPMENT NOTES...............................................................................................7
2.01. Form of Equipment Notes.............................................................................7
2.02. Issuance and Terms of Equipment Notes; Additional Payments
by Owner Trustee................................................................................8
2.03. Payments from Collateral Only.......................................................................9
2.04. Method of Payment..................................................................................11
2.05. Application of Payments............................................................................13
2.06. Termination of Interest in Collateral..............................................................13
2.07. Registration, Transfer, and Exchange of Equipment Notes............................................14
2.08. Mutilated, Destroyed, Lost, or Stolen Equipment Notes..............................................15
2.09. Payment of Expenses on Transfer; Cancellation......................................................16
2.10. Mandatory Redemptions of Equipment Notes...........................................................16
2.11. Voluntary Redemptions of Equipment Notes...........................................................17
2.12. Redemptions; Notice of Redemption..................................................................17
2.13. Option to Purchase Equipment Notes.................................................................18
2.14. Subordination......................................................................................19
2.15. Lessee's Assumption of Equipment Notes.............................................................20
RECEIPT, DISTRIBUTION, AND APPLICATION OF COLLATERAL PROCEEDS....................................................20
3.01. Basic Rent Distribution............................................................................20
3.02. Event of Loss; Replacement; Voluntary Termination; Optional
Redemption.....................................................................................21
3.03. Payments After Default.............................................................................22
3.04. Certain Payments...................................................................................26
3.05. Other Payments.....................................................................................27
3.06. Payments to Owner Trustee..........................................................................27
3.07. Application of Payments Under Guarantee............................................................27
OWNER TRUSTEE'S COVENANTS; MORTGAGE EVENTS OF DEFAULT;
REMEDIES OF MORTGAGEE.........................................................................28
4.01. Owner Trustee's Covenants..........................................................................28
4.02. Mortgage Event of Default..........................................................................29
4.03. Certain Rights.....................................................................................31
4.04. Remedies...........................................................................................32
4.05. Return of Aircraft, etc............................................................................35
4.06. Remedies Cumulative................................................................................37
4.07. Discontinuance of Proceedings......................................................................37
4.08. Waiver of Past Defaults............................................................................37
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
4.09. Appointment of Receiver............................................................................38
4.10. Mortgagee Authorized to Execute Bills of Sale, etc.................................................38
4.11. Rights of Note Holders to Receive Payment..........................................................38
MORTGAGEE'S DUTIES...............................................................................................38
5.01. Notice of Default..................................................................................38
5.02. Action Upon Instructions; Certain Rights and Limitations...........................................39
5.03. Indemnification....................................................................................42
5.04. No Duties Except as Specified in Mortgage or Instructions..........................................43
5.05. No Action Except Under Lease, Mortgage, or Instructions............................................43
5.06. Replacement Airframes and Replacement Engines......................................................43
5.07. Mortgage Supplements for Replacements..............................................................44
5.08. Effect of Replacement..............................................................................44
5.09. Investment of Amounts Held by Mortgagee............................................................44
OWNER TRUSTEE AND MORTGAGEE......................................................................................45
6.01. Acceptance of Trusts and Duties....................................................................45
6.02. Absence of Duties..................................................................................45
6.03. No Representations or Warranties as to Aircraft or Documents.......................................46
6.04. No Segregation of Money; No Interest...............................................................46
6.05. Reliance; Agreements; Advice of Counsel............................................................47
6.06. Capacity in Which Acting...........................................................................47
6.07. Compensation.......................................................................................47
6.08. Instructions from Note Holders.....................................................................48
INDEMNIFICATION OF MORTGAGEE BY OWNER TRUSTEE....................................................................48
7.01. Scope of Indemnification...........................................................................48
SUCCESSOR AND SEPARATE TRUSTEES..................................................................................49
8.01. Notice of Successor Owner Trustee..................................................................49
8.02. Resignation of Mortgagee; Appointment of Successor.................................................49
8.03. Appointment of Additional and Separate Trustees....................................................51
SUPPLEMENTS AND AMENDMENTS TO THIS MORTGAGE AND OTHER
DOCUMENTS........................................................................................................52
9.01. Instructions of Majority; Limitations..............................................................52
9.02. Trustees Protected.................................................................................55
9.03. Documents Mailed to Note Holders...................................................................56
9.04. No Request Necessary for Lease Supplement or Mortgage Supplement...................................56
MISCELLANEOUS....................................................................................................56
10.01. Termination of Mortgage...........................................................................56
10.02. No Legal Title to Collateral in Note Holder.......................................................57
10.03. Mortgagee's Sale of Aircraft Is Binding...........................................................57
10.04. Mortgage for Benefit of Owner Trustee, Mortgagee, Owner Participant, Note Holders, and the
Other Mortgage Indemnitees.......................................................................57
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
10.05. Notices...........................................................................................57
10.06. Severability......................................................................................57
10.07. No Oral Modification or Continuing Waiver.........................................................58
10.08. Successors and Assigns............................................................................58
10.09. Headings..........................................................................................58
10.10. Normal Commercial Relations.......................................................................58
10.11. Governing Law; Counterpart Form...................................................................59
10.12. Voting By Note Holders............................................................................59
10.13. Bankruptcy........................................................................................59
</TABLE>
EXHIBIT A Aircraft Description Exhibit
EXHIBIT B Form of Equipment Note
SCHEDULE I Equipment Notes Amortization and Interest Rates
iii
<PAGE>
TRUST INDENTURE AND MORTGAGE N9__AT
This Trust Indenture and Mortgage N9__AT (this "Mortgage") is entered
into as of ________________, ____, between First Security Bank, National
Association, a national banking association, not in its individual capacity,
except when expressly referred to herein as "FSB", but solely as trustee under
the Trust Agreement referred to below ("Owner Trustee"), and State Street Bank
and Trust Company of Connecticut, National Association, a national banking
association, not in its individual capacity, except when expressly referred to
herein as "SSB", but solely as Mortgagee hereunder ("Mortgagee").
Certain terms used in this Mortgage are defined pursuant to Article I.
RECITALS:
A. Owner Participant and FSB entered into the Trust Agreement whereby
(1) Owner Trustee established a trust for the use and benefit of Owner
Participant (subject to the assignment made in this Mortgage for the benefit of
the holders of Equipment Notes issued hereunder), and (2) Owner Trustee is
authorized and directed to execute and deliver this Mortgage.
B. Owner Trustee and Mortgagee want by this Mortgage to provide for (1)
Owner Trustee's issuance of the Equipment Notes, and (2) Owner Trustee's
assignment to Mortgagee, as part of the Collateral, of all of Owner Trustee's
right, title, and interest in and to the Aircraft and (except as hereinafter
expressly provided) all of Owner Trustee's right, title, and interest in, to,
and under the Lease and the Participation Agreement and all payments and other
amounts received hereunder or thereunder in accordance with the terms hereof or
thereof, as security for Owner Trustee's and Lessee's obligations to the Note
Holders and the Mortgage Indemnitees.
C. All acts have occurred that are necessary to make the Equipment
Notes, when executed by Owner Trustee and authenticated and delivered by
Mortgagee hereunder, valid, binding, and enforceable obligations of Owner
Trustee; and all acts have occurred that are necessary to make this Mortgage the
valid, binding, and legal obligation of Owner Trustee for the uses and purposes
herein set forth, in accordance with its terms.
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE WITNESSETH, that, to secure the prompt
payment of the Original Amount of, interest on, Make-Whole Amount (if any) on,
and all other amounts due with respect to all Equipment Notes from time to time
outstanding hereunder according to their tenor and effect, and to secure
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Owner Trustee's performance of all its agreements herein, in the Participation
Agreement, and the Equipment Notes, for the benefit of the Note Holders, the
Loan Participants, and each of the Mortgage Indemnitees, and the prompt payment
of all amounts from time to time owing by Owner Trustee or Lessee hereunder,
under the Participation Agreement, under the Lease, and under the KfW Agreement
or the Boeing Agreement to the Loan Participants, the Note Holders, the
Certificate Holders, or any Mortgage Indemnitee, and for the uses and purposes
and subject to the terms and provisions hereof, and in consideration of the
premises and of the covenants herein, and of the acceptance of the Equipment
Notes by the holders thereof, and for other good and valuable consideration the
receipt and adequacy whereof are hereby acknowledged, Owner Trustee hereby
grants to Mortgagee (and its successors in trust and assigns), for the security
and benefit of the Loan Participants, the Note Holders, and each of the Mortgage
Indemnitees, a first-priority security interest in and mortgage lien on all
Owner Trustee's right, title, and interest in, to, and under the following
described property, rights, and privileges, whether existing or hereafter
acquired, other than Excluded Payments (which, collectively, excluding Excluded
Payments but including all property hereafter specifically subject to the Lien
of this Mortgage by the terms hereof or any supplement hereto, are included
within, and are referred to as, the "Collateral"):
(1) the Airframe and Engines described in the Aircraft Description
Exhibit, whether or not any such Engine is installed in or attached to the
Airframe or any other airframe, including all Parts included within the
definitions of "Airframe" or "Engine", including all substitutions, renewals,
and replacements of and additions, improvements, accessions, and accumulations
to the Airframe and Engines (other than additions, improvements, accessions, and
accumulations excluded from the definition of Parts), and (b) all Aircraft
Documents;
(2) the Lease, and all rights, powers, privileges, options, claims,
demands, and other benefits of Owner Trustee as lessor under the Lease,
including the immediate and continuing right to receive and collect all Rent,
income, revenues, profits, insurance proceeds, condemnation awards, and other
payments, tenders, and security now or hereafter payable to or receivable by
lessor under the Lease and the other Operative Agreements pursuant thereto, and
the right to make all waivers and agreements, to give and receive copies of all
notices and other instruments or communications, to accept surrender or
redelivery of the Aircraft or any part thereof, and all Owner Trustee's rights,
powers, and remedies (as lessor under the Lease) to take such action while a
Lease Event of Default exists (including the commencement, conduct, and
consummation of legal, administrative, or other proceedings) as permitted by the
Lease or by Law, and to do any and all other
2
<PAGE>
things whatsoever which Owner Trustee or any lessor is or may be entitled to do
under or in respect of the Lease and any right to restitution from Lessee or any
other Person in respect of any determination of invalidity of the Lease;
(3) each Permitted Sublease assignment and each assigned Permitted
Sublease (to the extent assigned under such Permitted Sublease assignment), and
all rents or other payments of any kind made under such assigned Permitted
Sublease (to the extent assigned under such Permitted Sublease assignment), and
all rights, powers, privileges, options, collateral, and other benefits of Owner
Trustee under such Permitted Sublease assignment and such assigned Permitted
Sublease;
(4) all Owner Trustee's right, title, interest, claims, and demands in,
to, and under:
(a) the Purchase Agreement and the GTA;
(b) the Purchase Agreement Assignment, with the Consent and
Agreement and the Engine Consent and Agreement attached thereto;
(c) the Bills of Sale and any other bill(s) of sale relating
to the Aircraft; and
(d) the Guarantee; and
(e) any and all other contracts, agreements, and instruments
relating to the Airframe and Engines or any rights or interests therein
to which Owner Trustee is now or may hereafter be a party;
together with all Owner Trustee's rights, powers, privileges, licenses, options,
and other benefits under each contract, agreement, and instrument referred to in
this clause (4), including the right to receive and collect all payments to
Owner Trustee thereunder now or hereafter payable to or receivable by Owner
Trustee pursuant thereto and the right to make all waivers and agreements, to
give and receive notices and other instruments or communications, or to take any
other action under or in respect of any thereof or to take such action upon the
existence of a default thereunder, including the commencement, conduct, and
consummation of legal, administrative, or other proceedings, as shall be
permitted thereby or by Law, and to do any and all other things that Owner
Trustee is or may be entitled to do thereunder, and any right to restitution
from Lessee, Owner Participant, or any other Person in respect of any
determination of invalidity of any thereof;
(5) all rents, issues, profits, revenues, and other income of the
property subjected or required to be subjected to the Lien of this Mortgage,
3
<PAGE>
including all payments or proceeds payable to Owner Trustee after cancellation
or termination of the Lease with respect to the Aircraft as the result of the
sale, lease, or other disposition thereof, and all estate, right, title, and
interest of every nature whatsoever of Owner Trustee in and to the same;
(6) without limiting the generality of the foregoing, all insurance and
requisition proceeds with respect to the Aircraft or any part thereof, including
the insurance required under (S) 11 of the Lease;
(7) without limiting the generality of the foregoing, all Owner
Trustee's rights to amounts paid or payable by Lessee to Owner Trustee under the
Participation Agreement and all rights of Owner Trustee to enforce payments of
any such amounts thereunder;
(8) without limiting the generality of the foregoing, all money and
securities from time to time deposited or required to be deposited with
Mortgagee pursuant to any terms of this Mortgage or the Lease or required hereby
or by the Lease to be held by Mortgagee hereunder as security for the
obligations of Lessee under the Lease or of Owner Trustee hereunder; and
(9) all proceeds of the foregoing;
EXCLUDING FROM EACH OF FOREGOING CLAUSES (1) THROUGH (9) all Excluded Payments
and subject to (S) 5.02 hereof.
Concurrently with the delivery of this Mortgage, Owner Trustee will
deliver to Mortgagee the original executed counterpart of the Lease (to which a
chattel paper legend is attached), and executed copies of the Participation
Agreement, the Guarantee, the Purchase Agreement and the GTA (to the extent
assigned by the Purchase Agreement Assignment), and the Purchase Agreement
Assignment (with the Consent and Agreement and the Engine Consent and Agreement
attached).
TO HAVE AND TO HOLD all and singular the aforesaid property unto
Mortgagee, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the Loan Participants, the Note Holders,
and the Mortgage Indemnitees, except as provided in (S) 2.14 and Article III,
without any preference, distinction, or priority of any one Equipment Note over
any other by reason of priority of time of issue, sale, negotiation, or date of
maturity thereof, or otherwise for any reason whatsoever, and for the uses and
purposes and (in all cases and as to all property specified in the foregoing
clauses (1) through (9)) subject to the terms and provisions in this Mortgage.
Anything herein to the contrary notwithstanding, Owner Trustee shall
remain liable under the Mortgage Agreements to perform all the obligations
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that it assumes thereunder, except to the extent prohibited or excluded from
doing so pursuant to the terms and provisions thereof, and Mortgagee, the Loan
Participants, the Note Holders, and the Mortgage Indemnitees shall have no
obligation or liability under the Mortgage Agreements because of the assignment
hereunder, nor shall Mortgagee, the Loan Participants, the Note Holders, the
Certificate Holders, or the Mortgage Indemnitees be required or obligated in any
manner to perform or fulfill any obligations of Owner Trustee under or pursuant
to the Mortgage Agreements, or, except as herein expressly provided, to make any
payment, or to make any inquiry as to the nature or sufficiency of any payment
received by it, or present or file any claim, or take any action to collect or
enforce the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
Owner Trustee hereby constitutes Mortgagee the true and lawful attorney
of Owner Trustee, irrevocably, granted for good and valuable consideration and
coupled with an interest and with full power of substitution, and with full
power (in the name of Owner Trustee or otherwise) to ask for, require, demand,
receive, compound, and give acquittance for any and all money and claims for
money (in each case including insurance and requisition proceeds but in all
cases excluding Excluded Payments) due and to become due under or arising out of
the Mortgage Agreements, and all other property which now or hereafter
constitutes part of the Collateral, to endorse any checks or other instruments
or orders in connection therewith, and to file any claims or to take any action
or to institute any proceedings which Mortgagee deems necessary or advisable in
connection with this Mortgage. Without limiting the generality of the foregoing,
but subject to the rights of Owner Trustee and Owner Participant under (S) 2.13,
(S) 4.03, and (S) 4.04(a), during the continuance of any Mortgage Event of
Default, Mortgagee shall have the right under such power of attorney to accept
any offer in connection with the exercise of remedies as set forth herein of any
purchaser to purchase the Airframe and Engines, and upon such purchase to
execute and deliver in the name of and on behalf of Owner Trustee an appropriate
bill of sale and other instruments of transfer relating to the Airframe and
Engines, when purchased by such purchaser, and to perform all other necessary or
appropriate acts with respect to any such purchase, and in its discretion to
file any claim or take any other action or proceedings, either in its own name
or in the name of Owner Trustee or otherwise, which Mortgagee deems necessary or
appropriate to protect and preserve the right, title, and interest of Mortgagee
in and to such Rents and other sums and the security intended to be afforded
hereby; provided, that no action of Mortgagee pursuant to this paragraph shall
increase the obligations or liabilities of Owner Trustee to any Person beyond
those obligations and liabilities specifically set forth in the Operative
Agreements. Under the Lease, Lessee is directed (so long as this Mortgage has
not been fully discharged) to make all payments of Rent (other than Excluded
Payments) and all other amounts which are required to be paid
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to or deposited with Owner Trustee pursuant to the Lease (other than Excluded
Payments) directly to, or as directed by, Mortgagee at such address or addresses
as Mortgagee shall specify, for application as provided in this Mortgage. Owner
Trustee agrees that, promptly upon receipt thereof, it will transfer to
Mortgagee any and all money that Owner Trustee from time to time receives if it
constitutes part of the Collateral, for distribution by Mortgagee pursuant to
this Mortgage, except that Owner Trustee shall accept for distribution pursuant
to the Trust Agreement any amounts distributed to it by Mortgagee under this
Mortgage.
Upon Mortgagee's written request, Owner Trustee will promptly and duly
execute and deliver (or cause to be duly executed and delivered) any and all
such further instruments and documents as Mortgagee reasonably deems necessary
or desirable to perfect, preserve, or protect the mortgage, security interests,
and assignments created or intended to be created hereby, or to obtain for
Mortgagee the full benefits of the assignment hereunder and of the rights and
powers herein granted.
Owner Trustee warrants and represents that it has not assigned or
pledged, and agrees that, so long as the assignment hereunder remains in effect
and the Lien hereof has not been released pursuant to (S) 10.01, it will not
assign or pledge, any of its right, title, or interest hereby assigned, to
anyone other than Mortgagee, and that it will not, except as otherwise provided
in this Mortgage and except with respect to Excluded Payments to which it is
entitled, (1) accept any payment from Lessee or any Permitted Sublessee under
any Mortgage Agreement, (2) enter into any agreement amending or supplementing
any Mortgage Agreement, (3) execute any waiver or modification of, or consent
under, the terms of, or exercise any rights, powers, or privileges under, any
Mortgage Agreement, (4) settle or compromise any claim arising under any
Mortgage Agreement, or (5) submit or consent to the submission of any dispute,
difference, or other matter arising under or in respect of any Mortgage
Agreement to arbitration thereunder.
Owner Trustee shall not, without Mortgagee's prior written consent:
(a) receive or collect or agree to the receipt or collection of any
payment (other than Excluded Payments) of Rent, including Basic Rent, Stipulated
Loss Value, Termination Value, EBO Price, or any other payment to be made
pursuant to (S) 9 or (S) 10 of the Lease before the date for the payment thereof
provided for by the Lease, or assign, transfer, or hypothecate (other than to
Mortgagee hereunder) any payment of Rent (other than Excluded Payments),
including Basic Rent, Stipulated Loss Value, Termination Value, EBO Price, or
any other payment to be made pursuant to (S) 9 or (S) 10 of the
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Lease, then due or to accrue in the future under the Lease in respect of the
Airframe and Engines; or
(b) except as contemplated by the Trust Agreement in connection with
the appointment of a successor owner trustee, sell, mortgage, transfer, assign,
or hypothecate (other than to Mortgagee hereunder) its interest in the Airframe
and Engines or any other Collateral or any part thereof or in any amount to be
received by it from the use or disposition of the Airframe and Engines, other
than amounts distributed to it pursuant to Article III hereof.
Any and all property described or referred to in the granting clauses
hereof which Owner Trustee acquires in the future shall ipso facto, and without
any other conveyance, assignment, or act on the part of Owner Trustee or
Mortgagee, become and be subject to the Lien herein granted as fully and
completely as though specifically described herein, but nothing in this
paragraph shall modify or change Owner Trustee's obligations in the foregoing
paragraphs.
Owner Trustee ratifies and confirms the Lease, and agree, that it will
not violate any covenant or agreement made by it therein, herein, or in any
other Owner Trustee Agreement.
Nothing in the Granting Clause or the preceding paragraphs shall impair
any of the rights of Owner Trustee or Owner Participant under (S) 2.13, 4.03,
4.04, or 5.02.
Owner Trustee and Mortgagee further agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
The terms defined in Annex A to the "Lease", when capitalized as in
such Annex A, have the same meanings when used in this Mortgage. Annex A also
contains rules of usage that control construction in this Mortgage. The "Lease"
is Lease Agreement N9__AT, dated the date of this Mortgage, between Owner
Trustee and AirTran Airways, Inc.
ARTICLE II
THE EQUIPMENT NOTES
2.01. FORM OF EQUIPMENT NOTES
The Equipment Notes shall be substantially in the form of Exhibit B.
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2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES; ADDITIONAL PAYMENTS BY
OWNER TRUSTEE
The Equipment Notes shall be dated the date of their issuance, shall be
issued in three separate series consisting of Series A, Series B, and Series C,
and shall have the maturities and principal amounts and shall bear interest as
specified in Schedule I hereto. On the Delivery Date, each Equipment Note shall
be issued to the Subordination Agent on behalf of the Pass-Through Trustees
under the Pass-Through Trust Agreements. The Equipment Notes shall be issued in
registered form only. The Equipment Notes shall be issued in original principal
amounts of at least $100,000 and integral multiples of $1,000, except that one
Equipment Note of each Series may be in an amount that is not an integral
multiple of $1,000.
Owner Trustee agrees to pay to Mortgagee, for distribution in
accordance with (S) 3.04: (1) to the extent not payable (whether or not in fact
paid) under (S) 6(a) of the Note Purchase Agreement (as originally in effect or
amended with Owner Participant's consent), an amount equal to the fees payable
to Liquidity Provider under (S) 2.03 of each Liquidity Facility and the related
Fee Letter (as defined in the Intercreditor Agreement) multiplied by a fraction
the numerator of which shall be the then-outstanding aggregate principal amount
of the Equipment Notes and the denominator of which shall be the
then-outstanding aggregate principal amount of all "Equipment Notes" (as defined
in the Note Purchase Agreement); (2) (aa) the amount equal to interest on any
Downgrade Advance (other than any Applied Downgrade Advance) payable under (S)
3.07 of each Liquidity Facility, multiplied by (bb) the fraction specified in
the foregoing clause (1); (3) (aa) the amount equal to interest on any Non-
Extension Advance (other than any Applied Non-Extension Advance) payable under
(S) 3.07 of each Liquidity Facility, multiplied by (bb) the fraction specified
in the foregoing clause (1); and (4) if any payment default exists with respect
to interest on any Equipment Notes, (aa) the interest on any Unpaid Advance,
Applied Downgrade Advance, or Applied Non-Extension Advance payable under (S)
3.07 of each Liquidity Facility, plus any amount of interest at the Past-Due
Rate actually payable (whether or not in fact paid) by Owner Trustee on the
overdue scheduled interest on the Equipment Notes in respect of which such
Unpaid Advance, Applied Downgrade Advance, or Applied Non-Extension Advance was
made, multiplied by (bb) a fraction the numerator of which shall be the total
then-overdue amounts of interest on the Equipment Notes (other than interest
becoming due and payable solely as a result of acceleration of any such
Equipment Notes) and the denominator of which shall be the total then-overdue
amounts of interest on all "Equipment Notes" (as defined in the Note Purchase
Agreement) (other than interest becoming due and payable solely as a result of
acceleration of any such "Equipment Notes"). For purposes of this paragraph, the
terms "Applied Downgrade Advance", "Applied Non-Extension
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Advance", "Cash Collateral Account", "Downgrade Advance", "Final Advance",
"Investment Earnings", "Non-Extension Advance", and "Unpaid Advance" shall have
the meanings specified in each Liquidity Facility or the Intercreditor Agreement
referred to therein.
The Equipment Notes shall be executed on behalf of Owner Trustee by its
President, one of its Vice Presidents, Assistant Vice Presidents, or Assistant
Secretaries, or another of its authorized officers. Equipment Notes bearing the
signatures of individuals who were at any time the proper officers of Owner
Trustee shall bind Owner Trustee, even if such individuals or any of them have
ceased to hold such offices before the authentication and delivery of such
Equipment Notes or did not hold such offices at the dates of such Equipment
Notes. Owner Trustee may from time to time execute Equipment Notes and deliver
them to Mortgagee for authentication upon original issue, and Mortgagee
thereupon shall authenticate and deliver such Equipment Notes upon Owner
Trustee's written request signed by a Vice President or Assistant Vice President
or other authorized officer of Owner Trustee. Each such request shall specify
the aggregate Original Amount of all Equipment Notes to be authenticated
hereunder on original issue. No Equipment Note shall be secured by or entitled
to any benefit under this Mortgage, or be valid or obligatory for any purposes,
unless there appears on such Equipment Note a certificate of authentication in
the form provided for herein, executed by Mortgagee by the manual signature of
one of its authorized officers, and such certificate upon any Equipment Notes be
conclusive evidence, and the only evidence, that such Equipment Note has been
duly authenticated and delivered hereunder.
The aggregate Original Amount of the Equipment Notes issued hereunder
shall not exceed ____% of Lessor's Cost. The aggregate Original Amount of any
Series of Equipment Notes issued hereunder shall not exceed the amount set forth
on Schedule I for such Series.
2.03. PAYMENTS FROM COLLATERAL ONLY
(a) Without impairing any of the other rights, powers,
remedies, privileges, liens, or security interests of the Note Holders under
this Mortgage, each Note Holder, by its acceptance of an Equipment Note, agrees
that as between it and Owner Trustee, except as expressly provided in any
Operative Agreement, (1) the obligation to make all payments of the Original
Amount of, interest on, and Make-Whole Amount (if any) and all other amounts due
with respect to the Equipment Notes, and Owner Trustee's performance of every
obligation or covenant in the Operative Agreements, shall be payable only from
the income and proceeds from the Trust Estate (to the extent included in the
Collateral), and only to the extent that Owner Trustee has sufficient income or
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proceeds from the Trust Estate (to the extent included in the Collateral) to
enable Mortgagee to make such payments in accordance with Article III, and all
statements, representations, covenants, and agreements made by Owner Trustee in
this Mortgage and any agreement referred to herein other than the Trust
Agreement, unless expressly otherwise stated, are made and intended only for the
purpose of binding the Trust Estate and establishing the existence of rights and
remedies which can be exercised and enforced against the Trust Estate;
therefore, anything in the Operative Agreements to the contrary notwithstanding
(without limiting any express provisions or representations that the institution
acting as Owner Trustee is responsible for, or is making, in its individual
capacity as "FSB", for which there would be personal liability of FSB), no
recourse shall be had with respect to the Operative Agreements against FSB or
against any institution or person which becomes a successor trustee or
co-trustee or any officer, director, trustee, or direct or indirect parent or
controlling Person or Persons of any of them; and (2) neither FSB, nor Owner
Participant, nor Mortgagee, nor any officer, director, trustee, employee, agent,
or direct or indirect parent or controlling Person or Persons of any of them
(other than Owner Trustee) shall have any personal liability for any amount
payable under any of the Operative Agreements or under the Equipment Notes
except as expressly provided in the Operative Agreements; provided, that nothing
in this 2.03(a) shall limit the exercise and enforcement in accordance with the
Operative Agreements of rights and remedies against the Collateral.
(b) If (1) all or any part of the Trust Estate becomes the
property of, or Owner Trustee or Owner Participant becomes, a debtor subject to
the reorganization provisions of the Bankruptcy Code, (2) pursuant to such
reorganization provisions (including by application of (S) 1111(b) of the
Bankruptcy Code therein), FSB or Owner Participant is required, by reason of
FSB's or Owner Participant's being held to have recourse liability to any Note
Holder or Mortgagee, directly or indirectly (other than the recourse liability
of FSB or Owner Participant under the Participation Agreement, the Lease, or
this Mortgage or by separate agreement), to make payment on account of any
amount payable as principal, Make-Whole Amount (if any), interest, or other
amounts on the Equipment Notes, and (3) any Note Holder or Mortgagee actually
receives any Excess Amount which reflects any payment by FSB or Owner
Participant on account of clause (2) of this (S) 2.03(b), then such Note Holder
or Mortgagee (as applicable) shall promptly refund such Excess Amount to FSB or
Owner Participant (whichever made such payment).
For purposes of this (S) 2.03(b), "Excess Amount" means the amount by
which such payment exceeds the amount that would have been received by a Note
Holder or the Trustee if FSB or Owner Participant had not become subject to the
recourse liability referred to in clause (2) of this (S) 2.03(b). Nothing in
this (S) 2.03(b) shall prevent a Note Holder or Mortgagee from enforcing any
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personal recourse obligation (and retaining the proceeds thereof) of FSB or
Owner Participant under the Participation Agreement, the Lease, or this Mortgage
(including any exhibits or annexes hereto or thereto) or from retaining any
amount paid by Owner Participant under (S) 2.13 or (S) 4.03 hereof.
2.04. METHOD OF PAYMENT
(a) The Original Amount of, interest on, and any Make-Whole
Amount or other amount due under each Equipment Note or hereunder will be
payable in Dollars by wire transfer of immediately available funds not later
than 11:00 a.m., New York City time, on the due date of payment to Mortgagee at
the Corporate Trust Office for distribution among the Note Holders in the manner
provided herein. Owner Trustee shall not have any responsibility for the
distribution of such payment to any Note Holder. Notwithstanding the foregoing
or any provision in any Equipment Note to the contrary, Mortgagee will pay or
cause to be paid, if so directed in writing by any Note Holder (with a copy to
Owner Trustee), all amounts paid by Owner Trustee hereunder and under such
holder's Equipment Note(s) to such holder or a nominee therefor (including all
amounts distributed pursuant to Article III of this Mortgage) by transferring,
or causing to be transferred, by wire transfer of immediately available funds in
Dollars, before 2:00 p.m., New York City time, on the due date of payment, to an
account maintained by such holder with a bank located in the continental United
States, the amount to be distributed to such holder, for credit to the account
of such holder maintained at such bank. If Mortgagee fails to initiate the
transfer by federal wire transfer of any such payment as provided in the
preceding sentence after its receipt of funds at the place and before the time
specified above by reason of its failure to use ordinary care, SSB shall
compensate such holders for loss of use of funds at the Debt Rate until such
payment is made, and Mortgagee shall be entitled to any interest earned on such
funds until such payment is made. Any payment made hereunder shall be made
without any presentment or surrender of any Equipment Note. Mortgagee shall not
be required to make, or cause to be made, wire transfers as aforesaid before the
first Business Day on which it is practicable for Mortgagee to do so in view of
the time of day when it received the funds to be so transferred (if it received
the funds after 11:00 a.m., New York City time, at the place of payment). Before
the due presentment for registration of transfer of any Equipment Note, Owner
Trustee and Mortgagee shall deem and treat the Person in whose name any
Equipment Note is registered on the Equipment Note Register as the absolute
owner and holder of such Equipment Note for the purpose of receiving payment of
all amounts payable with respect to such Equipment Note and for all other
purposes, and neither Owner Trustee nor Mortgagee shall be affected by any
notice to the contrary. So long as any signatory to the Participation Agreement
or nominee thereof shall be a registered Note Holder, all payments to it shall
be made to
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the account of such Note Holder specified in Schedule I thereto, and otherwise
in the manner provided in or pursuant to the Participation Agreement, unless and
until it specifies some other account or manner of payment by notice to
Mortgagee consistent with this (S) 2.04.
(b) Mortgagee (as agent for Owner Trustee) shall exclude and
withhold at the appropriate rate from each payment of Original Amount of,
interest on, and any Make-Whole Amount or other amount due hereunder or under
each Equipment Note (and such exclusion and withholding shall constitute payment
in respect of such Equipment Note) any and all United States withholding taxes
applicable thereto as required by Law. Mortgagee agrees (1) to act as such
withholding agent, and, in connection therewith, (2) whenever any present or
future United States taxes or similar charges are required to be withheld with
respect to any amounts payable hereunder or in respect of the Equipment Notes,
to withhold such amounts and timely pay them to the appropriate authority in the
name of and on behalf of the Note Holders, (3) to file any necessary United
States withholding tax returns or statements when due, and (4) as promptly as
possible after the payment thereof, to deliver to each Note Holder (with a copy
to Owner Trustee and Lessee) appropriate receipts showing the payment thereof,
together with such additional documentary evidence as any such Note Holder
reasonably requests from time to time.
In the case of a Note Holder that is a Non-U.S. Person, Mortgagee
agrees on the written request of any Note Holder to furnish such Note Holder
with such forms and other documentation as may be necessary or desirable to
enable such Note Holder to claim an exemption from, or reduced rate of, such
taxes. Provided that such Note Holder has furnished Mortgagee with the requested
forms and other documentation duly executed by such Note Holder and has not
notified Mortgagee of the withdrawal or inaccuracy of such form prior to the
date of each interest payment, only the reduced amount (if any) required by
applicable law or treaty shall be withheld from payments under the Equipment
Notes held by such Note Holder in respect of United States federal income tax.
In the case of a Note Holder that is a U.S. Person and not an Exempt Recipient
that has furnished to the Mortgagee a properly completed and currently effective
U.S. Treasury Form W-9, no amount shall be withheld from payments under the
Equipment Notes held by such Note Holder in respect of United States federal
income tax. If any Note Holder has notified Mortgagee that any of the fore-going
forms or certificates is withdrawn or inaccurate, or if the Internal Revenue
Code or the regulations thereunder or the administrative interpretation thereof
are at any time after the date hereof amended to require such withholding of
United States federal income taxes from payments under the Equipment Notes held
by such Note Holder, or if such withholding is otherwise required, Mortgagee
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agrees to withhold from each payment due to the relevant Note Holder withholding
taxes at the appropriate rate under applicable law, and will, as more fully
provided above, on a timely basis, deposit such amounts with an authorized
depository and make such return, filings, and other reports in connection
therewith, and in the manner required under applicable Law. For purposes of this
paragraph, an "Exempt Recipient" is a Person described in Code (S) 6049(b)(4).
Neither Owner Trustee nor Owner Participant shall have any liability
for the failure of Mortgagee to withhold taxes in the manner provided for herein
or for any false, inaccurate or untrue evidence provided by any Note Holder
hereunder.
2.05. APPLICATION OF PAYMENTS
Each payment of Original Amount, Make-Whole Amount (if any), and
interest due on each Equipment Note shall be applied:
First: to pay accrued interest on such Equipment Note (and any
interest on any overdue Original Amount, any overdue Make-Whole Amount,
and (to the extent permitted by Law) any overdue interest and any other
overdue amounts thereunder) to the date of such payment;
Second: to pay the Original Amount of such Equipment Note (or
a portion thereof) then due thereunder;
Third: to pay any Make-Whole Amount or other amount due
hereunder or under such Equipment Note; and
Fourth: to pay the Original Amount of such Equipment Note
remaining unpaid (provided, that such Equipment Note shall not be
subject to redemption except as provided in (S) 2.10, (S) 2.11, and
(S) 2.12 hereof).
The amounts paid pursuant to clause "Fourth" above shall be applied to
the installments of Original Amount of such Equipment Note in the inverse order
of their normal maturity.
2.06. TERMINATION OF INTEREST IN COLLATERAL
No Note Holder, Certificate Holder, nor any other Mortgage Indemnitee
(as such) shall have any further interest in, or other right with respect to,
the Collateral when and if the Original Amount of, Make-Whole Amount (if any)
and interest on, and other amounts due under all Equipment Notes held by such
Note Holder and all other sums then due and payable to such Note Holder, any
Certificate Holder (to the extent secured thereby), such Mortgage
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Indemnitee, or Mortgagee hereunder (including under the third paragraph of
(S) 2.02) and under the other Operative Agreements by Owner Trustee and Lessee
(collectively, together with all other amounts secured by the terms of the first
paragraph of the Granting Clause hereof, the "Secured Obligations") have been
paid in full.
2.07. REGISTRATION, TRANSFER, AND EXCHANGE OF EQUIPMENT NOTES
Mortgagee shall keep a register (the "Equipment Note Register") in
which Mortgagee shall provide for the registration of Equipment Notes and the
registration of transfers of Equipment Notes. No such transfer shall be given
effect unless and until registered thereunder. Mortgagee shall keep the
Equipment Note Register at its Corporate Trust Office. Mortgagee is hereby
appointed "Equipment Note Registrar" for the purpose of registering Equipment
Notes and transfers of Equipment Notes as herein provided. A holder of any
Equipment Note intending to exchange such Equipment Note shall surrender such
Equipment Note to Mortgagee at the Corporate Trust Office, together with a
written request from the registered holder thereof for the issuance of a new
Equipment Note, specifying (in the case of a surrender for transfer) the name(s)
and address(es) of the new holder(s). Upon surrender of any Equipment Note for
registration of transfer, Owner Trustee shall execute, and Mortgagee shall
authenticate and deliver, in the name(s) of the designated transferee(s), one or
more new Equipment Notes of the same aggregate Original Amount and of the same
series, and dated the same date as the surrendered Equipment Note. At the Note
Holder's option, Equipment Notes may be exchanged for other Equipment Notes of
any authorized denominations of the same aggregate Original Amount, upon
surrender of the Equipment Notes to be exchanged to Mortgagee at the Corporate
Trust Office. Whenever any Equipment Notes are so surrendered for exchange,
Owner Trustee shall execute, and Mortgagee shall authenticate and deliver, the
Equipment Notes which the Note Holder making the exchange is entitled to
receive. All Equipment Notes issued upon any registration of transfer or
exchange of Equipment Notes (whether under this (S) 2.07 or under (S) 2.08 or
otherwise under this Mortgage) shall be the valid obligations of Owner Trustee
evidencing the same respective obligations, and entitled to the same security
and benefits under this Mortgage, as the Equipment Notes surrendered upon such
registration of transfer or exchange. Every Equipment Note presented or
surrendered for registration of transfer shall (if so required by Mortgagee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to Mortgagee duly executed by the Note Holder or such holder's
attorney duly authorized in writing, and Mortgagee shall require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act, and the securities Laws of any applicable state. Mortgagee shall make a
notation on each new Equipment Note of the
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amount of all payments of Original Amount previously made on the old Equipment
Note or Equipment Notes with respect to which such new Equipment Note is issued
and the date to which interest on such old Equipment Note or Equipment Notes has
been paid. Interest shall be deemed to have been paid on such new Equipment Note
to the date on which interest was paid on such old Equipment Note, and all
payments of the Original Amount marked on such new Equipment Note, as provided
above, shall be deemed to have been made thereon. Owner Trustee shall not be
required to exchange any surrendered Equipment Notes as provided above during
the 10-day period before the due date of any payment on such Equipment Note.
Owner Trustee shall in all cases deem the Person in whose name any Equipment
Note is then issued and registered as the absolute owner and holder of such
Equipment Note for the purpose of receiving payment of all amounts payable by
Owner Trustee with respect to such Equipment Note, and for all other purposes,
until Owner Trustee receives from Mortgagee a notice stating otherwise and such
change is reflected on the Equipment Note Register. Mortgagee will promptly
notify Owner Trustee and Lessee of each registration of a transfer of an
Equipment Note. Any such transferee of an Equipment Note, by its acceptance of
an Equipment Note, agrees to the provisions of the Participation Agreement
applicable to Note Holders, and shall be deemed to have covenanted to the
parties to the Participation Agreement as to the matters covenanted by the
original Loan Participant in the Participation Agreement. Subject to compliance
by the Note Holder and its transferee (if any) of the requirements in this (S)
2.07, Mortgagee and Owner Trustee shall use all reasonable efforts to issue new
Equipment Notes upon transfer or exchange within 10 Business Days after an
Equipment Note is surrendered for transfer or exchange.
2.08. MUTILATED, DESTROYED, LOST, OR STOLEN EQUIPMENT NOTES
If any Equipment Note is mutilated, destroyed, lost, or stolen, then,
upon the written request of the holder of such Equipment Note, Owner Trustee
shall execute, and Mortgagee shall authenticate and deliver, in replacement
thereof, a new Equipment Note, payable in the same Original Amount, dated the
same date and captioned as issued in connection with the Aircraft. If the
Equipment Note being replaced is mutilated, such Equipment Note shall be
surrendered to Mortgagee and a photocopy thereof shall be furnished to Owner
Trustee. If the Equipment Note being replaced is destroyed, lost, or stolen, the
holder of such Equipment Note shall furnish to Owner Trustee and Mortgagee (a)
such security or indemnity as they require to save Owner Trustee and Mortgagee
harmless, and (b) evidence satisfactory to Owner Trustee and Mortgagee of the
destruction, loss, or theft of such Equipment Note and of the ownership thereof.
If a "qualified institutional buyer" of the type referred to in paragraph
(a)(1)(i)(A), (B), (D), or (E) of Rule 144A under the Securities Act (a "QIB")
or a
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Pass-Through Trustee holds any such destroyed, lost, or stolen Equipment Note,
and (in the case of a QIB) has assets in excess of $100 million, then such QIB's
or Pass-Through Trustee's written indemnity, signed by an authorized QIB or
Pass-Through Trustee officer (respectively), in favor of, delivered to, and in
form reasonably satisfactory to Lessee, Owner Trustee, and Mortgagee, shall be
accepted as satisfactory indemnity and security, and no further indemnity or
security shall be required as a condition to the execution and delivery of such
new Equipment Note. Subject to the Note Holder's compliance with the
requirements in this (S) 2.08, Mortgagee and Owner Trustee shall use all
reasonable efforts to issue new Equipment Notes within 10 Business Days after
receiving the Note Holder's written request therefor.
2.09. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION
(a) No service charge shall be made to a Note Holder for any
registration of transfer or exchange of Equipment Notes, but Mortgagee (as
Equipment Note Registrar) may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Equipment Notes.
(b) Mortgagee shall cancel all Equipment Notes surrendered
for replacement, redemption, transfer, exchange, payment, or cancellation, and
shall destroy the cancelled Equipment Notes.
2.10. MANDATORY REDEMPTIONS OF EQUIPMENT NOTES
(a) On the date on which Lessee is required pursuant to (S)
10.1.2 of the Lease to pay for an Event of Loss to the Aircraft, all Equipment
Notes shall be redeemed in whole at a redemption price equal to 100% of the
unpaid Original Amount thereof, together with all accrued interest thereon to
the date of redemption and all other Secured Obligations owed or then due and
payable to the Note Holders and the Certificate Holders, but without Make-Whole
Amount.
(b) If Lessee terminates the Lease pursuant to (S) 9 thereof,
on the date that the Lease is so terminated, all the Equipment Notes shall be
redeemed in whole at a redemption price equal to 100% of the unpaid Original
Amount thereof, together with accrued interest thereon to the date of redemption
and all other Secured Obligations then due and payable under the Operative
Agreements to the Note Holders and the Certificate Holders, plus any Make-Whole
Amount.
(c) If Lessee terminates the Lease pursuant to (S) 17.5
thereof and does not assume the Equipment Notes in accordance with (S) 2.15 and
(S) 11.6 of the Participation Agreement, on the date that the Lease is so
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terminated, all the Equipment Notes shall be redeemed in whole at a redemption
price equal to 100% of the unpaid Original Amount thereof, together with accrued
interest thereon to the date of redemption and all other Secured Obligations
then due and payable under the Operative Agreements to the Note Holders and the
Certificate Holders, plus any Make-Whole Amount.
2.11. VOLUNTARY REDEMPTIONS OF EQUIPMENT NOTES
Owner Trustee may redeem all (but not less than all) of the Equipment
Notes under (S) 11 of the Participation Agreement upon at least 30 days'
revocable prior written notice to Mortgagee and the Note Holders, and such
Equipment Notes shall (as provided in (S) 11 of the Participation Agreement) be
redeemed in whole at a redemption price equal to 100% of the unpaid Original
Amount thereof, together with accrued interest thereon to the date of redemption
and all other Secured Obligations owed or then due and payable to the Note
Holders and the Certificate Holders, plus any Make-Whole Amount.
2.12. REDEMPTIONS; NOTICE OF REDEMPTION
(a) Neither any redemption of any Equipment Note nor any
purchase by Owner Trustee of any Equipment Note may be made except to the extent
and in the manner expressly permitted by this Mortgage. Mortgagee shall not
purchase any Equipment Note.
(b) Mortgagee shall give notice of redemption of the
Equipment Notes by first-class mail, postage prepaid, mailed not less than 20
nor more than 60 days before the redemption date, to each Note Holder of such
Equipment Notes to be redeemed, at such Note Holder's address appearing in the
Equipment Note Register. For of a redemption to be made pursuant to (S) 2.10(b)
or (S) 2.10(c), such notice shall be revocable and shall be deemed revoked if
the Lease does not in fact terminate on the specified termination date, or if
notice of such redemption is given in connection with a refinancing of Equipment
Notes pursuant to (S) 2.11 and Mortgagee receives written notice of such
revocation from Lessee or Owner Trustee not later than three days before the
redemption date. All notices of redemption shall state: (1) the redemption date,
(2) the applicable basis for determining the redemption price, (3) that on the
redemption date, the redemption price will become due and payable upon each such
Equipment Note, and that, if any such Equipment Notes are then outstanding,
interest on such Equipment Notes shall cease to accrue on and after such
redemption date, and (4) the place(s) where such Equipment Notes are to be
surrendered for payment of the redemption price.
(c) On or before the redemption date, Owner Trustee (or any
person on behalf of Owner Trustee) shall, to the extent an amount equal to the
redemption price for the Equipment Notes to be redeemed on the redemption
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date is not then held in the Collateral, deposit or cause to be deposited with
Mortgagee by 12:00 noon on the redemption date, in immediately available funds,
the redemption price of the Equipment Notes to be redeemed.
(d) If notice of redemption is given as aforesaid (and not
revoked as contemplated in (S) 2.12(b)), then, on the redemption date, the
Equipment Notes to be redeemed shall become due and payable at Mortgagee's
Corporate Trust Office or at any office or agency maintained for such purposes
pursuant to (S) 2.07, and from and after such redemption date (unless there
shall be a default in the payment of the redemption price) any such Equipment
Notes then outstanding shall cease to bear interest. Upon surrender of any such
Equipment Note for redemption in accordance with such notice, such Equipment
Note shall be redeemed at the redemption price. If any Equipment Note called for
redemption is not so paid upon surrender for redemption, the principal amount
thereof shall, until paid, continue to bear interest from the redemption date at
the interest rate in effect for such Equipment Note as of such redemption date.
2.13. OPTION TO PURCHASE EQUIPMENT NOTES
In accordance with this (S) 2.13, Owner Participant may buy all (but
not less than all) the Equipment Notes outstanding hereunder, and each Note
Holder will sell to such buyer or its nominee (without recourse or warranty of
any kind except against Liens on such Equipment Notes arising by, through, or
under such holder), all such Note Holder's right, title, and interest in and to
the Equipment Notes that it holds, and such buyer or its nominee shall assume
all of such holder's obligations under the Participation Agreement and
hereunder.
Owner Participant may exercise such purchase option at any time
following the occurrence of any of the following events, and in any such event
the purchase price for each Equipment Note shall be the unpaid Original Amount
thereof, plus accrued and unpaid interest thereon to (but excluding) the
purchase date, and all other Secured Obligations owed, or then due and payable
hereunder (including under the third paragraph of (S) 2.02 hereof). Such
purchase option may be exercised if (x) a Mortgagee Event exists or (y) a Lease
Event of Default exists, provided, that if such option is exercised pursuant to
clause (y) when a Lease Event of Default has existed for less than 180 days, the
purchase price provided in the preceding sentence shall also include any
Make-Whole Amount.
Owner Participant may exercise such purchase option by giving
irrevocable written notice to Mortgagee, specifying a purchase date within 15
days after the date of such notice. Mortgagee shall promptly send a copy of such
notice to each Note Holder. Mortgagee shall not exercise any of the
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remedies hereunder or (unless Owner Participant consents) under the Lease after
such notice is given until the required purchase date.
If Owner Participant so requests on or before the purchase date, the
Note Holders will comply with (S) 2.07 to enable new Equipment Notes to be
issued to Owner Trustee or Owner Participant or its nominee in such
denominations as Owner Participant shall request. All taxes, charges, and
expenses required pursuant to (S) 2.09 in connection with the issuance of such
new Equipment Note shall be borne by Owner Participant.
2.14. SUBORDINATION
(a) Owner Trustee and (by accepting its Equipment Notes) each
Note Holder agree that, after the commencement of a proceeding of the type
referred to in (S) 4.02(g), no payment or distribution shall be made on or in
respect of the Secured Obligations owed to such Note Holder, including any
payment or distribution of cash, property, or securities, except as expressly
provided in Article III.
(b) By accepting its Equipment Notes of any Series (other than
Series A), each Note Holder of such Series agrees that if it receives any
payment or distribution on any Secured Obligations in respect of such Series
which it is not entitled to receive under this (S) 2.14 or Article III, it will
hold any amount so received in trust for the Senior Holder, and will forthwith
turn over such payment to Mortgagee in the form received to be applied as
provided in Article III.
(c) The "Senior Holder" is (1) the Note Holders of Series A
until the Secured Obligations in respect of Series A Equipment Notes (other than
any Make-Whole Amount thereon) have been paid in full, (2) after such Secured
Obligations have been paid in full, the Note Holders of Series B until the
Secured Obligations in respect of Series B Equipment Notes (other than any
Make-Whole Amount thereon) have been paid in full, (3) after such Secured
Obligations have been paid in full, the Note Holders of Series C until the
Secured Obligations in respect of Series C Equipment Notes (other than any
Make-Whole Amount thereon) have been paid in full, (4) after such Secured
Obligations have been paid in full, the Note Holders of Series A until any
Make-Whole Amount in respect of Series A Equipment Notes has been paid in full,
(5) after such Secured Obligations have been paid in full, the Note Holders of
Series B until any Make-Whole Amount in respect of Series B Equipment Notes has
been paid in full, and (6) after such Secured Obligations have been paid in
full, the Note Holders of Series C until any Make-Whole Amount in respect of
Series C Equipment Notes has been paid in full.
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2.15. LESSEE'S ASSUMPTION OF EQUIPMENT NOTES.
If, in accordance with (S) 17.5.2 of the Lease and (S) 11.6 of the
Participation Agreement, Lessee elects to assume Owner Trustee's obligations
hereunder, under the Equipment Notes, and under the other Operative Agreements
by a supplemental indenture reasonably satisfactory to Mortgagee (which shall
contain (a) provisions substantially similar to (S)(S) 6, 7, 8, 10, 11, and 12
of the Lease, and (b) other provisions necessary or advisable to effectuate such
assumption), then, upon delivery of such supplemental indenture, Holdings's
delivery of a guarantee of the Equipment Notes and other amounts owing to the
Note Holders and the other Mortgage Indemnitees substantially in the form of the
Guarantee, Lessee's counsel's delivery of an opinion to the effect that such
assumption has been duly and validly effected, and compliance with all other
requirements of (S) 11.6 of the Participation Agreement, Owner Trustee shall be
released and discharged from any further obligations hereunder and under the
Equipment Notes and all other Operative Documents, and Owner Participant shall
be released and discharged from any further obligations under the Participation
Agreement and any other Operative Document to which it is a party, except with
respect to any obligations that accrued before the release date.
ARTICLE III
RECEIPT, DISTRIBUTION, AND APPLICATION OF COLLATERAL PROCEEDS
3.01. BASIC RENT DISTRIBUTION
Except as otherwise provided in (S) 3.02 and (S) 3.03, each installment
of Basic Rent, any payment of interest on overdue installments of Basic Rent,
and any payment received by Mortgagee pursuant to (S) 4.03 shall be promptly
distributed in the following order of priority:
First, (a) so much of such installment or payment as is required to
pay in full the payment(s) of Original Amount and interest
(and any interest on any overdue Original Amount and, to the
extent permitted by Law, on any overdue interest) then due
under all Series A Equipment Notes shall be distributed to the
Note Holders of Series A ratably, without priority of one over
the other, in the proportion that the amount of such
payment(s) then due under each Series A Equipment Note bears
to the total amount of the payments then due under all Series
A Equipment Notes;
(b) after giving effect to subclause (a) of this clause "First",
so much of such installment or payment remaining as is
required to pay in full the payment(s) of Original Amount and
interest (and any interest on any overdue Original Amount and,
to the extent permitted by
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Law, on interest) then due under all Series B Equipment Notes
shall be distributed to the Note Holders of Series B ratably,
without priority of one over the other, in the proportion that
the amount of such payment(s) then due under each Series B
Equipment Note bears to the total amount of the payments then
due under all Series B Equipment Notes; and
(c) after giving effect to subclause (b) of this clause "First",
so much of such installment or payment remaining as is
required to pay in full the payment(s) of Original Amount and
interest (and any interest on any overdue Original Amount and,
to the extent permitted by Law, on any overdue interest) then
due under all Series C Equipment Notes shall be distributed to
the Note Holders of Series C ratably, without priority of one
over the other, in the proportion that the amount of such
payment(s) then due under each Series C Equipment Note bears
to the total amount of the payments then due under all Series
C Equipment Notes; and
Second, the balance, if any, of such installment remaining thereafter
shall be distributed to Owner Trustee; provided, that if a
Mortgage Event of Default exists, then such balance shall not
be distributed as provided in this clause "Second" but shall
be held by Mortgagee as part of the Collateral and invested in
accordance with (S) 5.09 until whichever of the following
first occurs: (a) all Mortgage Events of Default are cured or
waived, in which event such balance shall be distributed as
provided in this clause "Second", (b) (S) 3.03 applies, in
which event such balance shall be distributed in accordance
with (S) 3.03, or (c) 180 days pass after the receipt of such
payment, in which event such payment shall be distributed as
provided in this clause "Second".
3.02. EVENT OF LOSS; REPLACEMENT; VOLUNTARY TERMINATION; OPTIONAL
REDEMPTION
Except as otherwise provided in (S) 3.03, any payments that Mortgagee
receives (1) with respect to the Airframe or the Airframe and one or more
Engines as the result of an Event of Loss, (2) pursuant to a voluntary
termination of the Lease pursuant to (S) 9 thereof or (S) 17.5 thereof (if
Lessee does not assume the Equipment Notes in accordance with (S) 2.15 and (S)
11.6 of the Participation Agreement), or (3) pursuant to an optional redemption
of the Equipment Notes pursuant to (S) 11 of the Participation Agreement shall
be applied to redeem the Equipment Notes and to all other Secured Obligations by
applying such funds in the following order of priority:
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First, (a) to reimburse Mortgagee and the Note Holders for any
reasonable costs or expenses incurred in connection with such
redemption for which they are entitled to reimbursement, or
indemnity by Lessee, under the Operative Agreements, and then
(b) to pay any other Secured Obligations then due to
Mortgagee, the Note Holders, and the other Mortgage
Indemnitees under this Mortgage, the Participation Agreement,
or the Equipment Notes (other than amounts specified in clause
"Second" of this (S) 3.02);
Second, (a) to pay the amounts specified in subclause (a) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable on the Series A Equipment Notes;
(b) after giving effect to subclause (a) of this clause "Second",
to pay the amounts specified in subclause (b) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable in respect of the Series B Equipment Notes;
(c) after giving effect to subclause (b) of this clause "Second",
to pay the amounts specified in subclause (c) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable in respect of the Series C Equipment Notes; and
Third, as provided in clause "Sixth" of (S) 3.03;
provided, that if a Replacement Airframe or Replacement Engine is substituted
for the Airframe or Engine subject to such Event of Loss as provided in (S) 10
of the Lease and in accordance with (S) 5.06 hereof, any insurance,
condemnation, or similar proceeds which result from such Event of Loss and are
paid over to Mortgagee shall be held by Mortgagee as permitted by (S) 6.04
hereof (and such moneys shall be invested as provided in (S) 5.09 hereof) as
additional security for Lessee's obligations under the Lessee Operative
Agreements and, unless otherwise applied pursuant to the Lease, such proceeds
(and such investment earnings) shall be released to Lessee at Lessee's written
request upon the release of such damaged Airframe or Engine and the replacement
thereof as provided in the Lease.
3.03. PAYMENTS AFTER DEFAULT
Except as otherwise provided in (S) 3.04 hereof, all payments received
and amounts held or realized by Mortgagee (including any amounts realized by
Mortgagee from the exercise of any remedies pursuant to (S) 15 of the Lease or
Article IV hereof) if a Mortgage Event of Default exists or after the
declaration specified in (S) 4.04(b) hereof, as well as all payments or amounts
then held by
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Mortgagee as part of the Collateral, shall be promptly distributed by Mortgagee
in the following order of priority:
First, so much of such payments or amounts as shall be required (a)
to reimburse Mortgagee or SSB for any tax (except to the
extent resulting from Mortgagee's failure to withhold taxes
pursuant to (S) 2.04(b)), expense, or other loss (including
all amounts to be expended at the expense of, or charged upon
the rents, revenues, issues, products, and profits of, the
property included in the Collateral (all such property being
the "Mortgaged Property") pursuant to (S) 4.05(b)) incurred by
Mortgagee or SSB (to the extent not previously reimbursed),
the expenses of any sale, or other proceeding, reasonable
attorneys' fees and expenses, court costs, and any other
expenditures incurred or expenditures or advances made by
Mortgagee, SSB, or the Note Holders in the protection,
exercise, or enforcement of any right, power, or remedy or any
damages sustained by Mortgagee, SSB, or any Note Holder
(liquidated or otherwise) upon such Mortgage Event of Default
shall be applied by Mortgagee as between itself, SSB, and the
Note Holders to reimburse such expenses and any other expenses
for which Mortgagee, SSB, or the Note Holders are entitled to
reimbursement under any Operative Agreement, and (b) to pay
all Secured Obligations payable to the other Mortgage
Indemnitees hereunder and under the Participation Agreement
and the Lease (other than amounts specified in clauses
"Second", "Third", and "Fifth" of this (S) 3.03); and if the
amount to be so distributed is insufficient to pay all amounts
described in subclauses (a) and (b), then ratably, without
priority of one over the other, in proportion to the amounts
owed each hereunder;
Second, so much of such payments or amounts remaining as is required
to reimburse the then-existing or prior Note Holders for
payments made pursuant to (S) 5.03 (to the extent not
previously reimbursed) shall be distributed to such
then-existing or prior Note Holders ratably, without priority
of one over the other, in accordance with the amount of the
payment or payments made by each such then-existing or prior
Note Holder pursuant to (S) 5.03;
Third, (a) so much of such payments or amounts remaining as is
required to pay in full (1) the unpaid Original Amount of all
Series A Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon (other than Make-Whole Amount)
and all other Secured Obligations in respect of the Series A
Equipment Notes (other than Make-Whole Amount) to the date of
distribution,
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shall be distributed to the Note Holders of Series A; and if
the amount so to be distributed is insufficient to pay in
full, then ratably, without priority of one over the other, in
the proportion that (x) the unpaid Original Amount of all
Series A Equipment Notes held by each holder plus the accrued
but unpaid interest and other amounts due hereunder or
thereunder (other than any Make-Whole Amount) to the date of
distribution, bears to (y) the unpaid Original Amount of all
Series A Equipment Notes held by all such holders plus the
accrued but unpaid interest and other amounts due thereon
(other than Make-Whole Amount) to the distribution date; and
(2) thereafter, any Secured Obligations payable to the Class A
Certificateholders (as defined in the Intercreditor
Agreement);
(b) after giving effect to subclause (a) of this clause "Third",
so much of such payments or amounts remaining as is required
to pay in full (1) any Secured Obligations payable to the
Class B Certificateholders (as defined in the Intercreditor
Agreement) and (2) thereafter, the unpaid Original Amount of
all Series B Equipment Notes, and the accrued but unpaid
interest and other amounts due thereon (other than Make-Whole
Amount) and all other Secured Obligations in respect of the
Series B Equipment Notes (other than Make-Whole Amount) to the
date of distribution, shall be distributed to the Note Holders
of Series B; and if the aggregate amount so to be distributed
is insufficient to pay in full, then ratably, without priority
of one over the other, in the proportion that (x) the unpaid
Original Amount of all Series B Equipment Notes held by each
holder plus the accrued but unpaid interest and other amounts
due hereunder or thereunder (other than any Make-Whole Amount)
to the date of distribution, bears to (y) the aggregate unpaid
Original Amount of all Series B Equipment Notes held by all
such holders plus the accrued but unpaid interest and other
amounts due thereon (other than the Make-Whole Amount) to the
distribution date; and
(c) after giving effect to subclause (b) of this clause "Third",
so much of such payments or amounts remaining as is required
to pay in full (1) the unpaid Original Amount of all Series C
Equipment Notes, and the accrued but unpaid interest and other
amounts due thereon (other than Make-Whole Amount, which shall
not be due and payable) and all other Secured Obligations in
respect of the Series C Equipment Notes (other than Make-Whole
Amount) to the date of distribution, shall be distributed to
the Note Holders of Series C; and if the amount so to be
distributed is insufficient to
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pay in full, then ratably, without priority of one over the
other, in the proportion that (x) the unpaid Original Amount
of all Series C Equipment Notes held by each holder plus the
accrued but unpaid interest and other amounts due hereunder or
thereunder (other than any Make-Whole Amount) to the date of
distribution, bears to (y) the unpaid Original Amount of all
Series C Equipment Notes held by all such holders plus the
accrued but unpaid interest and other amounts due thereon
(other than the Make-Whole Amount) to the distribution date;
and (2) thereafter, any Secured Obligations payable to the
Class C Certificateholders (as defined in the Intercreditor
Agreement)
Fourth, so much of such payments or amounts remaining as is required
to pay an amount equal to (a) (1) (aa) the excess of (x) the
Stipulated Loss Value of the Aircraft, determined as of the
SLV Date before the payment date (or, if the payment date
occurs on an SLV Date, determined on such SLV Date), plus (y)
any Basic Rent due and payable before or (if payable in
arrears but not if payable in advance) on such SLV Date, over
(bb) the total unpaid principal amount of all Equipment Notes
and all accrued but unpaid interest thereon as of such SLV
Date (before giving effect to any payments pursuant to clause
"Third" of this (S) 3.03), plus (2) interest on such amount at
the Debt Rate from such SLV Date to such payment date, and (b)
all other amounts then due and payable to Owner Trustee or
Owner Participant pursuant to the indemnification and other
provisions of the Operative Agreements, shall be distributed
to Owner Trustee for distribution pursuant to the Trust
Agreement;
Fifth, (a) so much of such payments or amounts remaining as is
required to pay in full the unpaid Make-Whole Amount due on
all Series A Equipment Notes shall be distributed to the Note
Holders of Series A; and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the total
unpaid amount thereof owed to each Series A Note Holder bears
to (y) the total amount thereof owed to all Series A Note
Holders;
(b) after giving effect to subclause (a) of this clause "Fifth",
so much of such payments or amounts remaining as is required
to pay in full the unpaid Make-Whole Amount due on all Series
B Equipment Notes shall be distributed to the Note Holders of
Series B; and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the total
unpaid amount thereof owed to
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each Series B Note Holder bears to (y) the total amount
thereof owed to all Series B Note Holders; and
(c) after giving effect to subclause (b) of this clause "Fifth",
so much of such payments or amounts remaining as is required
to pay in full the unpaid Make-Whole Amount due on all Series
C Equipment Notes shall be distributed to the Note Holders of
Series C; and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the total
unpaid amount thereof owed to each Series C Note Holder bears
to (y) the total amount thereof owed to all Series C Note
Holders; and
Sixth, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to Owner Trustee.
3.04. CERTAIN PAYMENTS
(a) Any payments that Mortgagee receives, and that this
Mortgage (other than this (S) 3.04(a)) does not provide how to apply but the
Lease or the Participation Agreement does provide how to apply, shall be applied
forthwith to the purpose for which such payment was made in accordance with the
Lease or the Participation Agreement (as applicable).
(b) Notwithstanding anything to the contrary in this Article
III, Mortgagee will distribute promptly upon receipt any indemnity payment that
it receives from Owner Trustee or Lessee in respect of SSB, any Note Holder, any
Certificate Holder, or any other Mortgage Indemnitee, in each case whether
pursuant to (S) 9 of the Participation Agreement or as Supplemental Rent,
directly to the Person entitled thereto. Any payment received by Mortgagee under
the second paragraph of (S) 2.02 or, if a Mortgage Event of Default exists,
under (S) 1(b) or (c) of the KfW Agreement or (S) 1(b) of the Boeing Agreement,
shall be distributed to the Subordination Agent to be distributed in accordance
with the Intercreditor Agreement.
(c) Notwithstanding anything to the contrary in this Article
III, Mortgagee shall distribute any Excluded Payment that it receives, promptly
upon receipt, directly to the Person(s) entitled to it.
(d) Notwithstanding any provision of this Mortgage to the
contrary, any amounts that Mortgagee holds pursuant to the Lease or any
Permitted Sublease assignment shall be held by Mortgagee as security for
Lessee's obligations under the Lessee Operative Agreements and, if and when
required by the Lease, paid or applied in accordance with the applicable
provisions of the Lease.
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3.05. OTHER PAYMENTS
Mortgagee shall distribute in the following order of priority any
payments that it receives, and that the Operative Agreements (other than this
(S) 3.05) do not provide how to apply, (a) to the extent received or realized at
any time before the payment in full of all Secured Obligations due the Note
Holders, in the order of priority specified in (S) 3.01, subject to the proviso
thereto, and (b) to the extent received after payment in full of all Secured
Obligations,
First, to the extent payments or amounts described in clause "First"
of (S) 3.03 are otherwise obligations of Lessee under the
Operative Agreements or for which Lessee is obligated to
indemnify against thereunder, in the manner provided in clause
"First" of (S) 3.03, and
Second, in the manner provided in clause "Sixth" of (S) 3.03.
Further, and except as otherwise provided in (S) 3.02, (S) 3.03, and
(S) 3.04, all payments received and amounts realized by Mortgagee under the
Lease or otherwise with respect to the Aircraft (including all amounts realized
upon the sale or re-lease of the Aircraft after the termination of the Lease
with respect thereto), to the extent received or realized at any time after
payment in full of all Secured Obligations due the Note Holders, shall be
distributed by Mortgagee in the order of priority specified in clause (b) of the
first sentence of this (S) 3.05.
3.06. PAYMENTS TO OWNER TRUSTEE
Any amounts distributed hereunder by Mortgagee to Owner Trustee shall
be paid to Owner Trustee (within the time limits contemplated by (S) 2.04(a)) by
wire transfer of funds of the type received by Mortgagee at such office and to
such account(s) of such entity or entities as shall be designated by notice from
Owner Trustee to Mortgagee from time to time. Owner Trustee hereby notifies
Mortgagee that, unless and until Mortgagee receives notice to the contrary from
Owner Trustee, all amounts to be distributed to Owner Trustee pursuant to clause
"Second" of (S) 3.01 or clause "Fourth" or "Sixth" of (S) 3.03 shall be
distributed by wire transfer of funds of the type received by Mortgagee to Owner
Participant's account (within the time limits contemplated by (S) 2.04(a))
specified in Schedule 1 to the Participation Agreement.
3.07. APPLICATION OF PAYMENTS UNDER GUARANTEE.
Mortgagee shall distribute all payments that it receives pursuant to
the Guarantee in the same order of priority, and in the same manner, as it would
have distributed the payment for which such payment under the Guarantee was
made.
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ARTICLE IV
OWNER TRUSTEE'S COVENANTS; MORTGAGE EVENTS OF DEFAULT; REMEDIES OF MORTGAGEE
4.01. OWNER TRUSTEE'S COVENANTS
Owner Trustee and (as to (S) 4.01(b) only) FSB hereby covenant and
agree as follows:
(a) Owner Trustee will duly and punctually pay the Original
Amount of, Make-Whole Amount (if any), and interest on and other amounts due
under the Equipment Notes and hereunder in accordance with the terms of the
Equipment Notes and this Mortgage and all amounts (if any) payable by it to the
Note Holders under the Participation Agreement or (S) 9 of the Lease;
(b) FSB will not, directly or indirectly, cause or permit to
exist a Lessor Lien attributable to it in its individual capacity with respect
to the Aircraft or any other portion of the Trust Estate; will promptly, at its
own expense, take such action as is necessary duly to discharge such Lessor Lien
attributable to it in its individual capacity; and will make restitution to the
Collateral for any actual diminution of the assets of the Trust Estate resulting
from such Lessor Liens attributable to it in its individual capacity;
(c) if Owner Trustee obtains Actual Knowledge of a Mortgage
Default or an Event of Loss, Owner Trustee will give prompt written notice of
such Mortgage Default or Event of Loss to Mortgagee, each Note Holder, each
Certificate Holder, Lessee, and Owner Participant;
(d) Owner Trustee will furnish to the Note Holders, each
Certificate Holder, and Mortgagee, promptly upon receipt thereof, duplicates or
copies of all reports, notices, requests, demands, certificates, and other
instruments furnished to Owner Trustee under the Lease, including a copy of each
report or notice received pursuant to (S) 9, (S) 8.2, or Annex D (S) E of the
Lease to the extent that Lessee does not furnish it or is not required to
furnish it to the Note Holders, each Certificate Holder, or Mortgagee pursuant
to the Lease;
(e) except with Mortgagee's consent (acting pursuant to
instructions given in accordance with (S) 9.01 hereof) or as provided in (S) 2
and (S) 11 of the Participation Agreement, Owner Trustee will not contract for,
create, incur, assume, or suffer to exist any Debt, and will not guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing, or
otherwise),
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endorse or otherwise be or become contingently liable, directly or indirectly,
in connection with the Debt of any other Person; and
(f) Owner Trustee will not enter into any business or other
activity other than the business of owning the Aircraft, the leasing thereof to
Lessee, and the carrying out of the Transactions.
4.02. MORTGAGE EVENT OF DEFAULT
"Mortgage Event of Default" means any of the following events (whatever
the reason for such Mortgage Event of Default and whether such event is
voluntary or involuntary or comes about or is effected by operation of Law or
pursuant to or in compliance with any judgment, decree, or order of any court or
any order, rule, or regulation of any administrative or governmental body):
(a) any Lease Event of Default exists (provided, that any
such Lease Event of Default caused solely by Lessee's failure to pay to Owner
Trustee or Owner Participant when due any Excluded Payment shall not constitute
a Mortgage Event of Default unless Owner Trustee notifies Mortgagee that such
failure shall constitute a Mortgage Event of Default); or
(b) Owner Trustee fails to pay when due any payment of
Original Amount of, interest on, or any Make-Whole Amount or other amount due
and payable under any Equipment Note or hereunder (other than as a result of a
Lease Default), and such failure continues unremedied for 10 days in the case of
any payment of Original Amount or interest or Make-Whole Amount (if any) thereon
and, in the case of any other amount, for 10 Business Days after Owner Trustee
or Owner Participant receives written demand from Mortgagee or any Note Holder;
or
(c) any Lien required to be discharged by FSB pursuant to (S)
4.01(b) hereof, or by FSB or Owner Trustee pursuant to (S) 7.3.1 of the
Participation Agreement, or by Owner Participant pursuant to (S) 7.2.1 of the
Participation Agreement remains undischarged for 30 days after FSB, Owner
Trustee, or Owner Participant (as applicable) receives written notice from
Mortgagee or any Note Holder of such Lien; or
(d) any representation or warranty made by Owner Participant
or Owner Trustee in the Participation Agreement or this Mortgage or in any
certificate furnished by Owner Participant or Owner Trustee to Mortgagee or any
Note Holder in connection with the Transactions proves to have been false or
incorrect when made in any material respect and continues to be material and
adverse to the interests of Mortgagee or the Note Holders; and if such
misrepresentation is capable of being corrected and if such correction is being
sought diligently, such misrepresentation is not corrected within 60 days (or,
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without affecting (S) 4.02(f) hereof, in the case of the representation made in
(S) 6.3.6 or (S) 6.2.6 of the Participation Agreement as to citizenship of FSB
or of Owner Participant, respectively, as soon as is reasonably practicable but
in any event within 30 days) following notice thereof from Mortgagee or any Note
Holder to FSB or Owner Participant (as applicable); or
(e) other than as provided in (c) above or (f) below, Owner
Trustee or Owner Participant fails to observe or perform any of its other
covenants or obligations for the benefit of Mortgagee or the Note Holders in the
Participation Agreement, the Trust Agreement, the Equipment Notes, or this
Mortgage which is not remedied within 60 days after notice thereof is given to
Owner Trustee and Owner Participant; or
(f) FSB or Owner Participant is not a "citizen of the United
States" within the meaning of (S) 40102(a)(15) of the Transportation Code, and
as the result thereof the registration of the Aircraft under the Transportation
Code, and regulations then applicable thereunder, is impermissible or ceases to
be effective (determined without regard to any provision of Law that permits the
U.S. registration of the Aircraft based on restricting the basing location, use,
or operation of the Aircraft); or
(g) at any time either (1) an involuntary case or other
proceeding is commenced in respect of Owner Participant, [OP's guarantor,] Owner
Trustee, the Trust, or the Trust Estate under the Bankruptcy Code, or any other
applicable federal or state bankruptcy, insolvency, or other similar Law in the
United States or seeking the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, or similar official of Owner Participant,
[OP's guarantor,] Owner Trustee, the Trust, or the Trust Estate or for all or
substantially all of its property, or seeking the winding-up or liquidation of
its affairs, and such case or other proceeding continues undismissed and
unstayed for 60 consecutive days; or (2) Owner Participant, [OP's guarantor,]
Owner Trustee, the Trust, or the Trust Estate commences a voluntary case or
proceeding under the Bankruptcy Code, or any other applicable federal or state
bankruptcy, insolvency, or other similar Law in the United States, or Owner
Participant, [OP's guarantor,] Owner Trustee, the Trust, or the Trust Estate
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator, or other similar official of Owner
Participant, [OP's guarantor,] Owner Trustee, the Trust, or the Trust Estate or
for all or substantially all of its property, or Owner Participant, [OP's
guarantor,] Owner Trustee, the Trust, or the Trust Estate makes any assignment
for the benefit of creditors, or Owner Participant, [OP's guarantor,], or Owner
Trustee takes any action to authorize any of the foregoing.
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[(h) OP's guarantor repudiates its obligations under the OP Guarantee.]
4.03. CERTAIN RIGHTS
Mortgagee shall promptly notify the Note Holders, Owner Trustee, and
Owner Participant of any Mortgage Event of Default of which Mortgagee has Actual
Knowledge, and shall give the Note Holders, Owner Trustee, and Owner Participant
not less than 10 Business Days' prior written notice of the date (the
"Enforcement Date") on or after which Mortgagee may (subject to the limitation
in (S) 4.04(a)) commence and consummate the exercise of any remedy or remedies
described in (S) 4.04, (S) 4.05, or (S) 4.06. Without limiting the generality of
the foregoing, Mortgagee shall give Owner Trustee, Owner Participant, and Lessee
at least 10 Business Days' prior written notice (which may be given concurrently
with notice of the Enforcement Date) of any declaration of the Lease to be in
default pursuant to (S) 14 and (S) 15 of the Lease or any cancellation of the
Lease or of the exercise of any remedy or remedies pursuant to (S) 15 of the
Lease. If a Mortgage Event of Default exists, Owner Trustee shall have the
rights set forth below in this (S) 4.03, any of which may be exercised directly
by Owner Participant.
If, as a result of the occurrence of a Mortgage Event of Default
arising from Lessee's nonpayment of Basic Rent due under the Lease, Mortgagee
does not have sufficient funds to make any payment of Original Amount and
interest on any Equipment Note on the day it becomes due and payable, Owner
Trustee may (but shall not be obligated to) pay to Mortgagee before the
Enforcement Date, in the manner provided in (S) 2.04, for application in
accordance with (S) 3.01, an amount equal to the portion of the Original Amount
and interest (including interest, if any, on any overdue payments of such
portion of Original Amount and interest) then due and payable on the Equipment
Notes, and, unless Owner Trustee has cured Mortgage Events of Default in respect
of payments of Basic Rent on each of the three preceding Basic Rent payment
dates, or Owner Trustee has cured six previous Mortgage Events of Default in
respect of payments of Basic Rent, such payment by Owner Trustee shall, solely
for purposes of this Mortgage, be deemed to cure any Mortgage Event of Default
which would otherwise have arisen on account of Lessee's nonpayment of such
installment of Basic Rent (but not any other Mortgage Default that exists).
Owner Trustee may (but shall not be obligated to) cure any Mortgage
Event of Default (other than in respect of the nonpayment of Basic Rent by
Lessee) which can be cured by the payment of money, by making such payment
before the Enforcement Date as is necessary to accomplish the
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observance or performance of the defaulted covenant, condition, or agreement to
the party entitled to the same.
Except as hereinafter in this (S) 4.03 provided, Owner Trustee shall
not, as a result of exercising the right to cure any such Mortgage Event of
Default, obtain any Lien on any of the Mortgaged Property or any Rent payable
under the Lease for or on account of costs or expenses incurred in connection
with the exercise of such right, nor shall any claim of Owner Trustee against
Lessee or any other party for the repayment of such costs or expenses impair the
prior right and security interest of Mortgagee in and to the Mortgaged Property.
Upon any payment by Owner Trustee pursuant to the two preceding paragraphs of
this (S) 4.03, Owner Trustee shall be subrogated to the rights of Mortgagee and
the Note Holders in respect of the Basic Rent which was overdue at the time of
such payment and interest payable by Lessee on account of its being overdue and
any Supplemental Rent in respect of the reimbursement of amounts paid by Owner
Trustee pursuant to the preceding paragraph (but in either case shall have no
rights as a secured party hereunder), and thereafter, Owner Trustee shall be
entitled (so long as no Special Default or Mortgage Event of Default exists) to
receive such overdue Rent and interest thereon upon receipt thereof by
Mortgagee; provided, that (a) if the Original Amount and interest on the
Equipment Notes has become due and payable pursuant to (S) 4.04(b), such
subrogation shall, until the Secured Obligations shall have been paid in full,
be subordinate to the rights of Mortgagee, the Note Holders, and the Mortgage
Indemnitees in respect of such payment of overdue Basic Rent, Supplemental Rent,
and such interest, and (b) Owner Trustee shall not otherwise attempt to recover
any such amount paid by it on behalf of Lessee pursuant to this (S) 4.03 except
by demanding of Lessee payment of such amount, or by commencing an action at law
against Lessee and obtaining and enforcing a judgment against Lessee for the
payment of such amount or taking appropriate action in a pending action at law
against Lessee (provided, that at no time while a Special Default or Mortgage
Event of Default exists shall any such demand be made or shall any such action
be commenced (or continued), and any amounts nevertheless received by Owner
Trustee in respect thereof shall be held in trust for the benefit of, and
promptly paid to, Mortgagee for distribution as provided in (S) 3.03).
Neither Owner Trustee nor Owner Participant shall have the right to
cure any Lease Default except as specified in this (S) 4.03.
4.04. REMEDIES
(a) If a Mortgage Event of Default exists, then and in every
such case Mortgagee may, subject to the second and third paragraphs of this (S)
4.04(a), exercise any or all of the rights and powers and pursue any and all of
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the remedies pursuant to this Article IV, and shall have and may exercise all of
the rights and remedies of a secured party under the Uniform Commercial Code,
and, if such Mortgage Event of Default is also a Lease Event of Default, any and
all of the remedies pursuant to (S) 15 of the Lease and pursuant to any
Permitted Sublease assignment, and may take possession of all or any part of the
properties covered or intended to be covered by the Lien created hereby or
pursuant hereto and may exclude Owner Participant, Owner Trustee, and Lessee and
all persons claiming under any of them wholly or partly therefrom; provided,
that Mortgagee shall give Owner Trustee and Owner Participant 20 days' prior
written notice of its intention to sell the Aircraft (which notice need not wait
until after the expiration of the 10-Business-Day period described in the first
sentence of (S) 4.03). Unless a Mortgage Event of Default not resulting from or
relating to a Lease Event of Default exists, Owner Participant may bid at the
sale and become the purchaser. Without limiting any of the foregoing, Mortgagee
may exercise any right of sale of the Aircraft available to it, even if it has
not taken possession of the Aircraft and does not have possession of the
Aircraft at the time of such sale.
Anything in this Mortgage to the contrary notwithstanding, Mortgagee
shall not be entitled to foreclose the Lien of this Mortgage or exercise any
dispossessory remedy hereunder as a result of a Mortgage Event of Default which
arises solely by reason of one or more Lease Events of Default unless Mortgagee
(as security assignee of Owner Trustee) has exercised or is concurrently
exercising one or more of the dispossessory remedies provided for in (S) 15 of
the Lease with respect to the Aircraft; provided, that such requirement to
exercise one or more of such remedies under the Lease shall not apply in
circumstances where Mortgagee is, and has been, for a continuous period in
excess of 60 days or such other period as shall be specified in Section
1110(a)(1)(A) of the Bankruptcy Code (such 60-day or other period being the "NEW
SECTION 1110 PERIOD"), involuntarily stayed or prohibited by applicable law or
court order from exercising such remedies under the Lease (a "CONTINUOUS STAY
PERIOD"); provided, FURTHER, that the requirement to exercise one or more of
such remedies under the Lease shall nonetheless apply during a Continuous Stay
Period subsequent to the expiration of the New Section 1110 Period to the extent
that the continuation of such Continuous Stay Period subsequent to the
expiration of the New Section 1110 Period (aa) results from an agreement by the
trustee or the debtor-in-possession in such proceeding during the New Section
1110 Period with the approval of the relevant court to perform the Lease in
accordance with Section 1110(a)(1)(A) of the Bankruptcy Code and its continuing
to perform as required by Section 1110(a)(1)(A-B) of the Bankruptcy Code, or
(bb) is an extension of the New Section 1110 Period with the consent of
Mortgagee pursuant to Section 1110(b) of the Bankruptcy Code, or (cc) results
from Lessee's assumption during the New Section 1110 Period (with the approval
of the relevant court) of the Lease pursuant to (S) 365 of the
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Bankruptcy Code, and Lessee's continuous performance of the Lease as so assumed,
or (dd) is the consequence of Mortgagee's own failure to give any requisite
notice to any Person. If Lessee contests Section 1110's applicability to the
Aircraft in judicial proceedings, Mortgagee and Owner Trustee shall have the
right to participate in such proceedings; provided, that no such participation
by Owner Trustee shall affect in any way any rights or remedy of Mortgagee
hereunder.
Subject only to the two preceding paragraphs, Mortgagee's inability
(described in such paragraphs) to exercise any right or remedy under the Lease
shall in no event and under no circumstances prevent Mortgagee from exercising
any or all of its rights, powers, and remedies under this Mortgage, including
this Article IV.
(b) If a Mortgage Event of Default exists, then and in every
such case Mortgagee may (and shall, upon receipt of a written demand therefor
from a Majority in Interest of Note Holders), at any time, by delivery of
written notice(s) to Owner Trustee and Owner Participant, declare all the
Equipment Notes to be due and payable, whereupon the unpaid Original Amount of
all Equipment Notes then outstanding, together with accrued but unpaid interest
thereon together with any Make-Whole Amount and other amounts due thereunder,
shall immediately become due and payable without presentment, demand, protest,
or notice (all of which are hereby waived); provided, that if a Mortgage Event
of Default referred to in (S) 4.02(g) or a Lease Event of Default under (S) 14.5
of the Lease occurs, then and in every such case the unpaid Original Amount then
outstanding, together with accrued but unpaid interest and all other amounts due
thereunder and hereunder, shall immediately and without further act become due
and payable without presentment, demand, protest, or notice (all of which are
hereby waived); provided, FURTHER, that in the event of a reorganization
proceeding involving Lessee instituted under Chapter 11 of the Bankruptcy Code,
if no Lease Event of Default (including any Lease Event of Default in (S) 14.3
of the Lease) and no other Mortgage Event of Default (other than the failure to
pay the Original Amount of the Equipment Notes which by such declaration have
become payable) exists at any time after the consummation of such proceeding,
such declaration shall be automatically rescinded without any further action on
the part of any Note Holder.
This (S) 4.04(b) is subject to the condition that, if at any time after
the Original Amount of the Equipment Notes has become so due and payable, and
before any judgment or decree for the payment of the money so due, or any
thereof, is entered, all overdue payments of interest upon the Equipment Notes
and all other amounts payable under the Equipment Notes (except the Original
Amount of the Equipment Notes which by such declaration shall have become
payable) have been duly paid, and every other Mortgage Default with respect to
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any covenant or provision of this Mortgage has been cured, then and in every
such case a Majority in Interest of Note Holders may (but shall not be obligated
to), by written instrument filed with Mortgagee, rescind and annul Mortgagee's
declaration (or such automatic acceleration) and its consequences; but no such
rescission or annulment shall extend to or affect any subsequent Mortgage
Default or impair any right consequent thereon.
Any acceleration pursuant to this (S) 4.04(b) shall be automatically
rescinded and any related declaration of a Mortgage Event of Default annulled
if, in accordance with (S) 4.03, Owner Trustee cures the Mortgage Event of
Default that resulted in such acceleration or declaration.
(c) The Note Holders shall be entitled, at any sale pursuant
to (S) 15 of the Lease or this (S) 4.04, to credit against any purchase price
bid at such sale by such holder all or any part of the unpaid obligations owing
to such Note Holder and secured by the Lien of this Mortgage (only to the extent
that such purchase price would have been paid to such Note Holder pursuant to
Article III if such purchase price were paid in cash and the foregoing
provisions of this (S) 4.04(c) were not given effect).
(d) In the event of any sale of the Collateral, or any part
thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Mortgage, the unpaid
Original Amount of all Equipment Notes then outstanding, together with accrued
interest thereon together with any Make-Whole Amount, and other amounts due
thereunder, shall immediately become due and payable without presentment,
demand, protest, or notice (all of which are hereby waived).
(e) Notwithstanding anything herein, so long as the
Pass-Through Trustee under any Pass-Through Trust Agreement (or its designee) is
a Note Holder, Mortgagee will not be authorized or empowered to acquire title to
any Mortgaged Property or take any action with respect to any Mortgaged Property
so acquired by it if such acquisition or action would cause any Trust to fail to
qualify as a "grantor trust" for federal income tax purposes.
4.05. RETURN OF AIRCRAFT, ETC.
(a) If a Mortgage Event of Default exists and the Equipment
Notes have been accelerated, subject to (S) 4.03 and unless Owner Trustee or
Owner Participant elects to buy the Equipment Notes, at Mortgagee's request,
Owner Trustee shall promptly execute and deliver to Mortgagee such instruments
of title and other documents as Mortgagee deems necessary or advisable to enable
Mortgagee (or an agent or representative designated by Mortgagee), at such
time(s) and place(s) as Mortgagee specifies, to obtain possession of all or any
part of the Mortgaged Property included in the
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Collateral to which Mortgagee is at the time entitled hereunder. If Owner
Trustee for any reason fails to execute and deliver such instruments and
documents after such request by Mortgagee, Mortgagee may (1) obtain a judgment
conferring on Mortgagee the right to immediate possession and requiring Owner
Trustee to execute and deliver such instruments and documents to Mortgagee, to
the entry of which judgment Owner Trustee hereby specifically consents to the
fullest extent permitted by Law, and (2) pursue all or part of such Mortgaged
Property wherever it may be found and, if a Lease Event of Default exists, may
enter any of Lessee's premises wherever such Mortgaged Property may be or be
supposed to be and search for such Mortgaged Property and take possession of and
remove such Mortgaged Property. All expenses of obtaining such judgment or of
pursuing, searching for, and taking such property shall, until paid, be secured
by the Lien of this Mortgage.
(b) Upon every such taking of possession, Mortgagee may, from
time to time, at the expense of the Mortgaged Property, make all such
expenditures for maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, or modification or alteration to and of the
Mortgaged Property, as it deems proper. In each such case, Mortgagee shall have
the right to maintain, use, operate, store, insure, lease, control, manage,
dispose of, modify, or alter the Mortgaged Property and to carry on the business
and to exercise all rights and powers of Owner Participant and Owner Trustee
relating to the Mortgaged Property, as Mortgagee deems best, including the right
to enter into any and all such agreements with respect to the maintenance, use,
operation, storage, insurance, leasing, control, management, disposition,
modification, or alteration of the Mortgaged Property or any part thereof as
Mortgagee shall determine, and Mortgagee shall be entitled to collect and
receive directly all tolls, rents (including Rent), revenues, issues, income,
and profits of the Mortgaged Property and every part thereof, except Excluded
Payments, without prejudice to Mortgagee's right under any provision of this
Mortgage to collect and receive all cash held by, or required to be deposited
with, Mortgagee hereunder other than Excluded Payments. Such tolls, rents
(including Rent), revenues, issues, income, and profits shall be applied to pay
the expenses of the maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, improvement, modification, or alteration of
the Mortgaged Property and of conducting the business thereof, and to make any
and all payments which Mortgagee may be required or may elect to make for taxes,
assessments, insurance, or other proper charges upon the Mortgaged Property or
any part thereof (including the employment of engineers and accountants to
examine, inspect, and make reports upon Owner Trustee's properties and books and
records), and all other payments which Mortgagee is required or authorized to
make under any provision of this Mortgage, as well as just and reasonable
compensation for
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Mortgagee's services, and of all persons properly engaged and employed by
Mortgagee with respect hereto.
4.06. REMEDIES CUMULATIVE
Each and every right, power, and remedy given to Mortgagee specifically
or otherwise in this Mortgage shall be cumulative and shall be in addition to
every other right, power, and remedy herein specifically given or now or
hereafter existing at Law, and each and every right, power, and remedy whether
specifically herein given or otherwise existing may be exercised from time to
time and as often and in such order as Mortgagee deems expedient, and the
exercise or the beginning of the exercise of any power or remedy shall not waive
the right to exercise at the same time or thereafter any other right, power, or
remedy. No delay or omission by Mortgagee in the exercise of any right, remedy,
or power or in the pursuance of any remedy shall impair any such right, power,
or remedy or waive any default on the part of Owner Trustee or Lessee or
acquiesce therein.
4.07. DISCONTINUANCE OF PROCEEDINGS
If Mortgagee institutes any proceeding to enforce any right, power, or
remedy under this Mortgage by foreclosure, entry, or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to Mortgagee, then and in every such case Owner
Trustee, Mortgagee, and Lessee shall (subject to any determination in such
proceedings) be restored to their former positions and rights hereunder with
respect to the Mortgaged Property, and all rights, remedies, and powers of Owner
Trustee, Mortgagee, or Lessee shall continue as if no such proceedings had been
instituted.
4.08. WAIVER OF PAST DEFAULTS
Upon written instruction from a Majority in Interest of Note Holders,
Mortgagee shall waive any past Mortgage Default and its consequences, and upon
any such waiver such Mortgage Default shall cease to exist and any Mortgage
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Mortgage, but no such waiver shall extend to any subsequent or
other Mortgage Default or impair any right consequent thereon; provided, that in
the absence of written instructions from all the Note Holders, Mortgagee shall
not waive any Mortgage Default (a) in the payment of the Original Amount,
Make-Whole Amount (if any), and interest and other amounts due under any
Equipment Note then outstanding, or (b) in respect of a covenant or provision
hereof which, under Article IX, cannot be modified or amended without the
consent of each Note Holder.
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4.09. APPOINTMENT OF RECEIVER
Mortgagee shall, as a matter of right, be entitled to the appointment
of a receiver (who may be Mortgagee or any successor or nominee thereof) for all
or any part of the Mortgaged Property, whether such receivership is incidental
to a proposed sale of the Mortgaged Property or the taking of possession thereof
or otherwise, and Owner Trustee hereby consents to the appointment of such a
receiver and will not oppose any such appointment. Any receiver appointed for
all or any part of the Mortgaged Property shall be entitled to exercise all
Mortgagee's rights and powers with respect to the Mortgaged Property.
4.10. MORTGAGEE AUTHORIZED TO EXECUTE BILLS OF SALE, ETC.
Subject to the provisions of this Mortgage, Owner Trustee irrevocably
appoints Mortgagee as Owner Trustee's true and lawful attorney-in-fact (which
appointment is coupled with an interest) in its name and stead and on its
behalf, for the purpose of effectuating any sale, assignment, transfer, or
delivery for the enforcement of the Lien of this Mortgage, whether pursuant to
foreclosure or power of sale, assignments, and other instruments as may be
necessary or appropriate, with full power of substitution, Owner Trustee hereby
ratifying and confirming all that such attorney or any substitute shall do by
virtue hereof in accordance with applicable Law. Nevertheless, if so requested
by Mortgagee or any purchaser, Owner Trustee shall ratify and confirm any such
sale, assignment, transfer, or delivery, by executing and delivering to
Mortgagee or such purchaser all bills of sale, assignments, releases, and other
proper instruments to effect such ratification and confirmation as shall be
designated in any such request.
4.11. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Mortgage, the right of any
Note Holder to receive payment of principal of, any Make-Whole Amount on, and
interest on an Equipment Note on or after the respective due dates expressed in
such Equipment Note, or to bring suit for the enforcement of any such payment on
or after such respective dates in accordance with the terms hereof, shall not be
impaired or affected without the consent of such Note Holder.
ARTICLE V
MORTGAGEE'S DUTIES
5.01. NOTICE OF DEFAULT
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If Mortgagee obtains Actual Knowledge of a Mortgage Default, Mortgagee
shall promptly notify Owner Trustee, Owner Participant, Lessee, each Note Holder
and each Certificate Holder. Subject to (S)(S) 2.13, 4.03, 4.04, 4.08, 5.02,
and 5.03, Mortgagee shall take such action, or refrain from taking such action,
with respect to such Mortgage Default (including with respect to the exercise of
any rights or remedies hereunder) in accordance with written instructions
received from a Majority in Interest of Note Holders. Subject to (S) 5.03, if
Mortgagee does not receive instructions as above provided within 20 days after
mailing notice of such Mortgage Default to the Note Holders, Mortgagee may
(subject to instructions thereafter received pursuant to the preceding
provisions of this (S) 5.01) take or refrain from taking such action (but shall
be under no duty to take or refrain from taking any action) with respect to such
Mortgage Default as it determines to be advisable in the best interests of the
Note Holders; provided, that Mortgagee may not sell the Aircraft or any Engine
without the consent of a Majority in Interest of Note Holders. For all purposes
of this Mortgage, unless such Person has Actual Knowledge, Mortgagee, Owner
Trustee, or Owner Participant shall not be deemed to have knowledge of a
Mortgage Default (except that Lessee's failure to pay any installment of Basic
Rent within one Business Day after it becomes due, if any portion of such
installment was then required to be paid to Mortgagee, shall constitute
Mortgagee's knowledge of a Mortgage Default) unless notified in writing by
Lessee, Owner Trustee, Owner Participant, or one or more Note Holders.
5.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND LIMITATIONS
(a) Subject to (S)(S) 2.13, 4.03, 4.04(a), 4.04(b), 4.08,
5.01, and 5.03, upon the written instructions at any time and from time to time
of a Majority in Interest of Note Holders, Mortgagee shall, subject to this (S)
5.02, take such of the following actions as shall be specified in such
instructions: (x) give such notice or direction or exercise such right, remedy,
or power hereunder as specified in such instructions; (y) give such notice or
direction or exercise such right, remedy, or power under the Lease, the
Participation Agreement, the Purchase Agreement, the Purchase Agreement
Assignment, or any other part of the Collateral as specified in such
instructions; and (z) approve as satisfactory to Mortgagee all matters required
by the Lease to be satisfactory to Owner Trustee (and, without the written
instructions of a Majority in Interest of Note Holders, Mortgagee shall not
approve any such matter as satisfactory to Mortgagee); provided, that anything
in the Operative Agreements to the contrary notwithstanding, but subject to the
following paragraph:
(1) Owner Trustee or Owner Participant may, without
Mortgagee's consent, exercise any election or option or make any
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decision or determination or give or receive any notice, consent,
waiver, or approval in respect of any Excluded Payment, or demand,
collect, sue for, or otherwise obtain all amounts included in Excluded
Payments from Lessee, and seek legal or equitable remedies to require
Lessee to maintain the insurance coverage referred to in (S) 11 of the
Lease (or the comparable provisions of any assigned Permitted
Sublease); provided, that the rights referred to in this clause (1)
shall not include the exercise of any remedies provided for in (S) 15
of the Lease other than the right to proceed by appropriate court
action to enforce Lessee's payment of such amounts included in Excluded
Payments or Lessee's performance of such insurance covenant or to
recover damages for the breach thereof or for specific performance of
any other term of the Lease (or the comparable provisions of any
assigned Permitted Sublease);
(2) (aa) Mortgagee shall not, without Owner Trustee's consent,
enter into, execute, or deliver amendments or modifications of the
Lease, any assigned Permitted Sublease, or any Permitted Sublease
assignment, and (bb) unless a Mortgagee Event exists, Mortgagee shall
not, without Owner Trustee's consent (which consent shall not be
withheld if no right or interest of Owner Trustee or Owner Participant
is diminished or impaired thereby), (i) enter into, execute, or deliver
waivers or consents for the Lease, or (ii) approve any accountants,
engineers, appraisers, or counsel as satisfactory to render services
for or issue opinions to Owner Trustee pursuant to the Operative
Agreements; provided, that whether or not any Mortgagee Event exists,
Owner Trustee's consent shall be required with respect to any waiver or
consent as to (S) 5, (S) 7, or (S) 11 of the Lease, or of any other
section of the Lease to the extent such action affects (x) the amount
or timing of, or the right to enforce payment of, any Excluded Payment,
or (y) the amount or timing of any amounts payable by Lessee under the
Lease as originally executed (or as subsequently modified with Owner
Trustee's consent) which, absent the existence of a Mortgage Event of
Default, would be distributable to Owner Trustee under Article III
hereof;
(3) whether or not a Mortgage Default exists, Owner Trustee
and Owner Participant shall have the right, together with Mortgagee,
(1) to receive from Lessee or any Permitted Sublessee certificates and
other documents and information that Lessee is required to give or
furnish to Owner Trustee or the Lessor pursuant to any Operative
Agreement, and (2) to inspect in accordance with the Lease the Airframe
and Engines and all Aircraft Documents;
(4) whether or not a Mortgage Default exists, Owner Trustee
shall have the right to increase Rent, Stipulated Loss Values,
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Termination Values, and EBO Price as provided in (S) 3.2.1 of the
Lease, and to adjust the EBO Date;
(5) if no Mortgagee Event exists, Owner Trustee shall have the
right, to the exclusion of Mortgagee, to adjust Basic Rent, Stipulated
Loss Values, Termination Values, and EBO Price as provided in (S) 3.2
of the Lease or to decrease any installment or amount of Basic Rent,
Stipulated Loss Value, Termination Value, and EBO Price as such
installments and amounts are set forth in Schedules 2, 3, and 4
(respectively) to the Lease, to the extent of the portion of such
installment or amount that would, under (S) 3.01, (S) 3.02, or (S) 3.03
hereof (as applicable) be distributable to Owner Trustee or Owner
Participant;
(6) whether or not a Mortgage Default exists, Owner Trustee
may, without Mortgagee's consent, (aa) solicit and make bids for the
Aircraft under (S) 9 of the Lease in respect of Lessee's termination of
the Lease pursuant to such (S) 9, (bb) determine Fair Market Sales
Value and Fair Market Rental Value under (S) 17 of the Lease for all
purposes except following a Mortgagee Event or the commencement of
exercise of dispossessory remedies pursuant to (S) 15 of the Lease, and
(cc) make an election in accordance with (S) 9.1(b), (S) 9.2, and (S)
9.3 of the Lease; and
(7) if no Mortgage Event of Default exists, Owner Trustee
shall have the right (aa) to the exclusion of Mortgagee (i) to exercise
all rights of Lessor upon the return of the Aircraft under (S) 5 of the
Lease, and (ii) to exercise all rights of Lessor under (S) 17 of the
Lease with respect to the retention by the Lessee of the Aircraft or
Lessee's exercise of Lessee's renewal and purchase options and in
respect of the solicitations of bids under (S) 9 of the Lease, and (bb)
together with Mortgagee (the agreement of both Owner Trustee and
Mortgagee being required for any such action), (i) to exercise all
rights of Lessor with respect to Lessee's use and operation,
modification, or maintenance of the Aircraft and any Engine, and (ii)
to consent to and approve any assignment pursuant to (S) 13 of the
Lease;
Notwithstanding anything to the contrary herein (including this (S)
5.02), Mortgagee shall have the right, to the exclusion of Owner Trustee and
Owner Participant, (xx) to declare the Lease to be in default under (S) 15
thereof, and (yy) subject only to (S) 4.03, (S) 4.04(a), (S) 4.04(b), and (S)
2.13 hereof, to exercise the remedies in such (S) 15 (other than in connection
with Excluded Payments; provided, that each of Owner Trustee, Owner Participant,
and Mortgagee independently retains the rights in (S) 15.1.5(b) (with respect to
Owner Trustee and Owner Participant, solely as to Excluded Payments) and
(subject to (S) 4.03 hereof) (S) 15.3 of the Lease) at any time that a Lease
Event of Default exists.
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Further and for the avoidance of doubt, and notwithstanding anything to the
contrary herein (including this (S) 5.02), in no event may Owner Trustee amend
or otherwise modify (S) 3.2.1(e) of the Lease, or the final sentence of the
definition of Stipulated Loss Value or Termination Value, without Mortgagee's
prior written consent.
Mortgagee will execute and Owner Trustee will file or cause to be filed
such continuation statements with respect to financing statements relating to
the security interest created hereunder in the Collateral as shall be specified
from time to time in written instructions of a Majority in Interest of Note
Holders, accompanied by the form of such continuation statement. Mortgagee will
furnish to each Note Holder and each Certificate Holder (and, during the
continuation of a Mortgagee Event, to Owner Trustee and Owner Participant),
promptly upon receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, and other instruments furnished to Mortgagee
under the Lease or hereunder, including a copy of each report or notice received
pursuant to (S) 9 and (S) E of Annex D of the Lease, respectively, to the extent
not furnished to such holder pursuant hereto or the Lease.
(b) If any Lease Event of Default exists and Owner Trustee
has not fully cured it in accordance with (S) 4.03 hereof, on request of a
Majority in Interest of Note Holders, Mortgagee shall declare the Lease to be in
default pursuant to (S) 15 thereof and exercise those remedies specified by such
Note Holders. Mortgagee shall notify the Note Holders, Owner Trustee, and Owner
Participant of such declaration of default at the same time that it is made.
5.03. INDEMNIFICATION
Mortgagee shall not be required to take any action or refrain from
taking any action under (S) 5.01 (other than the first sentence thereof), (S)
5.02, or Article IV unless Mortgagee is indemnified to its reasonable
satisfaction against any liability, cost, or expense (including counsel fees)
which may be incurred in connection therewith pursuant to a written agreement
with one or more Note Holders. Mortgagee agrees that it shall look solely to the
Note Holders for the satisfaction of any indemnity (except expenses for
foreclosure of the type referred to in clause "First" of (S) 3.03) owed to it
pursuant to this (S) 5.03. Mortgagee shall not be under any obligation to take
any action under this Mortgage or any other Operative Agreement, and nothing
herein or therein shall require Mortgagee to expend or risk its own funds or
otherwise incur the risk of any financial liability in the performance of any of
its rights or powers, if it has reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it (the written indemnity of any Note Holder who is a QIB,
signed by an authorized officer thereof, in favor of, delivered to, and in form
reasonably
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satisfactory to Mortgagee, shall be accepted as reasonable assurance of adequate
indemnity). Mortgagee shall not be required to take any action under (S) 5.01
(other than the first sentence thereof), (S) 5.02, or Article IV, nor shall any
other provision of this Mortgage or any other Operative Agreement impose a duty
on Mortgagee to take any action, if Mortgagee is advised by counsel that such
action is contrary to the terms hereof or of the Lease or is otherwise contrary
to Law.
5.04. NO DUTIES EXCEPT AS SPECIFIED IN MORTGAGE OR INSTRUCTIONS
Mortgagee shall not have any duty or obligation to use, operate, store,
lease, control, manage, sell, dispose of, or otherwise deal with the Aircraft or
any other part of the Collateral, or otherwise to take or refrain from taking
any action under, or in connection with, this Mortgage or any part of the
Collateral, except as expressly provided by this Mortgage or as expressly
provided in written instructions from Note Holders as provided in this Mortgage;
and no implied duties or obligations shall be read into this Mortgage against
Mortgagee. SSB agrees that it will at its own cost and expense (but without any
right of indemnity in respect of any such cost or expense under (S) 7.01)
promptly take such action as shall be necessary duly to discharge all Liens on
any part of the Collateral which result from claims against it in its individual
capacity not related to the ownership of the Aircraft or the administration of
the Collateral or any other transaction pursuant to this Mortgage or any
document included in the Collateral.
5.05. NO ACTION EXCEPT UNDER LEASE, MORTGAGE, OR INSTRUCTIONS
Owner Trustee and Mortgagee shall not use, operate, store, lease,
control, manage, sell, dispose of, or otherwise deal with the Aircraft or any
other part of the Collateral except (a) as required by the Lease or (b) in
accordance with the powers granted to, or the authority conferred upon, Owner
Trustee and Mortgagee pursuant to this Mortgage and in accordance with the
express terms hereof.
5.06. REPLACEMENT AIRFRAMES AND REPLACEMENT ENGINES
At any time an Airframe or Engine is to be replaced pursuant to (S) 10
of the Lease by a Replacement Airframe or Replacement Engine, if no Lease Event
of Default exists, Owner Trustee shall direct Mortgagee to execute and deliver
to Owner Trustee an appropriate instrument releasing such Airframe or Engine
from the Lien of this Mortgage, and Mortgagee shall execute and deliver such
instrument (but only upon compliance by Lessee with the applicable provisions of
(S) 10 of the Lease).
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5.07. MORTGAGE SUPPLEMENTS FOR REPLACEMENTS
If a Replacement Airframe or Replacement Engine is being substituted as
contemplated by (S) 10 of the Lease, Owner Trustee and Mortgagee agree for the
benefit of the Note Holders and Lessee (subject to fulfillment of the conditions
precedent and compliance by Lessee with its obligations in (S) 10 of the Lease
and the requirements of (S) 5.06 hereof with respect to such Replacement
Airframe or Replacement Engine) to execute and deliver a Lease supplement and a
Mortgage supplement, as applicable, as contemplated by (S) 10 of the Lease.
5.08. EFFECT OF REPLACEMENT
In the event of the substitution of an Airframe or of a Replacement
Engine pursuant to (S) 10 of the Lease, all provisions of this Mortgage relating
to the Airframe or Engine(s) being replaced shall apply to such Replacement
Airframe or Replacement Engine(s) with the same force and effect as if such
Replacement Airframe or Replacement Engine(s) were the same airframe or
engine(s) (respectively) as the Airframe or Engine(s) being replaced but for the
Event of Loss with respect to the Airframe or Engine(s) being replaced.
5.09. INVESTMENT OF AMOUNTS HELD BY MORTGAGEE
If Mortgagee holds any amounts as assignee of Owner Trustee's rights to
hold money for security pursuant to (S) 4.4 of the Lease, Mortgagee shall hold
those amounts in accordance with such (S) 4.4, and Mortgagee agrees, for
Lessee's benefit, to perform Owner Trustee's duties under such (S) 4.4. Any
amounts held by Mortgagee pursuant to the proviso to the first sentence of (S)
3.01, pursuant to (S) 3.02, or pursuant to any provision of any other Operative
Agreement providing for amounts to be held by Mortgagee which are not
distributed pursuant to the other provisions of Article III shall be invested by
Mortgagee from time to time in Cash Equivalents as directed by Owner Trustee so
long as Mortgagee may acquire them using its best efforts. All Cash Equivalents
held by Mortgagee pursuant to (S) 4.4 of the Lease or this (S) 5.09 shall either
be (a) registered in the name of, payable to the order of, or specially endorsed
to, Mortgagee, or (b) held in an Eligible Account. Unless otherwise expressly
provided in this Mortgage, any income realized as a result of any such
investment, net of Mortgagee's reasonable fees and expenses in making such
investment, shall be held and applied by Mortgagee in the same manner as the
principal amount of such investment is to be applied, and any losses, net of
earnings and such reasonable fees and expenses, shall be charged against the
principal amount invested. Mortgagee shall not be liable for any loss resulting
from any investment required to be made by it under this Mortgage other than by
reason of its willful misconduct or gross negligence,
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and any such investment may be sold (without regard to its maturity) by
Mortgagee without instructions whenever such sale is necessary to make a
distribution required by this Mortgage.
ARTICLE VI
OWNER TRUSTEE AND MORTGAGEE
6.01. ACCEPTANCE OF TRUSTS AND DUTIES
Mortgagee accepts the duties hereby created and applicable to it,
agrees to perform them (but only upon the terms of this Mortgage), and agrees to
receive and disburse all funds constituting part of the Collateral in accordance
with the terms hereof. Neither SSB nor FSB shall be answerable or accountable
under any circumstances, except (a) for its own willful misconduct or gross
negligence (other than for the handling of funds, for which the standard of
accountability shall be willful misconduct or negligence), (b) in the case of
SSB, as provided in the fourth sentence of (S) 2.04(a) and the last sentence of
(S) 5.04, and (c) for liabilities that may result, in the case of FSB, from the
inaccuracy of any representation or warranty expressly made in its individual
capacity in the Participation Agreement or in (S) 4.01(b) or (S) 6.03 hereof (or
in any certificate furnished to Mortgagee or any Note Holder in connection with
the Transactions) or, in the case of SSB, from the inaccuracy of any
representation or warranty made in its individual capacity in the Participation
Agreement or hereunder. Neither Owner Trustee or FSB, on the one hand, nor
Mortgagee or SSB, on the other, shall be liable for any action or inaction of
the other trustee or the other institution acting as trustee or of Owner
Participant.
6.02. ABSENCE OF DUTIES
In the case of Mortgagee, except in accordance with written
instructions furnished pursuant to (S) 5.01 or (S) 5.02, and except as provided
in (and without limiting the generality of) (S) 5.03, (S) 5.04, and (S) 6.08,
and, in the case of Owner Trustee, except as provided in (S) 4.01(b), Owner
Trustee and Mortgagee shall have no duty (a) to see to any registration of the
Aircraft or any recording or filing of the Lease or of this Mortgage or any
other document, or to see to the maintenance of any such registration,
recording, or filing, (b) to see to any insurance on the Aircraft or to effect
or maintain any such insurance, whether or not Lessee is in default with respect
thereto, (c) to see to the payment or discharge of any Lien against any part of
the Trust Estate or the Collateral, (d) to confirm, verify, or inquire into the
failure to receive any financial statements from Lessee, or (e) to inspect the
Aircraft at any time or to ascertain or inquire as to the performance or
observance of any of Lessee's covenants under the Lease or any of the Permitted
Sublessee's covenants under any assigned
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Permitted Sublease with respect to the Aircraft. Owner Participant shall not
have any duty or responsibility hereunder, including any of the duties mentioned
in clauses (a) through (e) above; provided, that nothing in this sentence shall
limit any obligations of Owner Participant under the Participation Agreement or
relieve Owner Participant from any restriction under (S) 4.03 hereof.
6.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR DOCUMENTS
NEITHER MORTGAGEE NOR SSB NOR OWNER TRUSTEE NOR FSB MAKES OR SHALL BE
DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE
WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION,
MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT
DISCOVERABLE), AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK,
OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, except FSB warrants
that (a) Owner Trustee has received on the Delivery Date whatever title was
conveyed to it, and (b) the Aircraft is free and clear of Lessor Liens
attributable to FSB. Neither Owner Trustee nor FSB nor Mortgagee nor SSB makes
or shall be deemed to have made any representation or warranty as to the
validity, legality, or enforceability of this Mortgage, the Trust Agreement, the
Participation Agreement, the Equipment Notes, the Lease, the Purchase Agreement,
or the Purchase Agreement Assignment, or as to the correctness of any statement
in any thereof, except for FSB's and SSB's representations and warranties, in
each case expressly made in this Mortgage or in the Participation Agreement. The
Loan Participants, the Note Holders, and Owner Participant make no
representation or warranty hereunder whatsoever.
6.04. NO SEGREGATION OF MONEY; NO INTEREST
Any money paid to or retained by Mortgagee pursuant to this Mortgage,
and not then required to be distributed to the Note Holders, Lessee, or Owner
Trustee as provided in Article III, need not be segregated in any manner except
to the extent required by Law or (S) 4.4 of the Lease and (S) 5.09 hereof, and
may be deposited under such general conditions as prescribed by Law, and
Mortgagee shall not be liable for any interest thereon (except that Mortgagee
shall invest all funds held as directed by Lessee while no Lease Default exists
(or in the absence of such direction, by the Majority In Interest of Note
Holders) in Cash Equivalents; provided, that Mortgagee shall account for any
payment that it receives, or applies hereunder, so that it is identifiable as to
its source.
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6.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL
Neither Owner Trustee nor Mortgagee shall incur any liability to anyone
in acting upon any signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond, or other document or paper that it
believed to be genuine and to be signed by the proper party or parties. Owner
Trustee and Mortgagee may accept a copy of a resolution of the Board of
Directors (or Executive Committee thereof) of any party to the Participation
Agreement, certified by the Secretary or an Assistant Secretary thereof as duly
adopted and in full force and effect, as conclusive evidence that such
resolution was duly adopted and is in full force and effect. As to the aggregate
unpaid Original Amount of Equipment Notes outstanding on any date, Owner Trustee
may for all purposes hereof rely on a certificate signed by any Vice President
or other authorized corporate trust officer of Mortgagee. As to any fact or
matter relating to Lessee that this Mortgage does not specifically describe how
to ascertain, Owner Trustee and Mortgagee may for all purposes hereof rely on a
certificate, signed by a duly-authorized officer of Lessee, as to such fact or
matter, and such certificate shall constitute full protection to Owner Trustee
and Mortgagee for any action that they take or omit to take in good faith in
reliance thereon. Mortgagee shall assume, and shall be fully protected in
assuming, that Owner Trustee is authorized by the Trust Agreement to enter into
this Mortgage and to take all action to be taken by it pursuant to the
provisions hereof, and shall not inquire into the authorization of Owner Trustee
with respect thereto. In administering the trusts hereunder, each of Owner
Trustee and Mortgagee (x) may execute any of the trusts or powers hereof and
perform its powers and duties hereunder directly or through agents or attorneys,
(y) may, at the expense of the Collateral, consult with counsel, accountants,
and other skilled persons to be selected and retained by it, and (z) shall not
be liable for anything that it does, suffers, or omits in good faith in
accordance with the written advice or written opinion of any such counsel,
accountants, or other skilled persons.
6.06. CAPACITY IN WHICH ACTING
Owner Trustee acts hereunder solely as trustee as herein and in the
Trust Agreement provided, and not in its individual capacity, except as
otherwise expressly provided herein, in the Trust Agreement, and in the
Participation Agreement.
6.07. COMPENSATION
SSB shall be entitled to reasonable compensation, including expenses
and disbursements (including the reasonable fees and expenses of counsel), for
all services rendered hereunder, and shall, on and after a Mortgage Event of
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Default, have a right to payment of such compensation as provided in (S) 3.03,
to the extent that Lessee does not pay such compensation, and shall have the
right, on and after a Mortgage Event of Default, to use or apply any funds held
by it hereunder in the Collateral toward such payments. SSB agrees that it shall
have no right against the Loan Participants, the Note Holders, Owner Trustee, or
Owner Participant for any fee as compensation for its services as trustee under
this Mortgage.
6.08. INSTRUCTIONS FROM NOTE HOLDERS
In the administration of the trusts created hereunder, Mortgagee shall
have the right to seek instructions from a Majority in Interest of Note Holders
if any provision of this Mortgage appears to conflict with any other provision
herein or if Mortgagee's duties or obligations hereunder are unclear, and
Mortgagee shall incur no liability in refraining from acting until it receives
such instructions. Mortgagee shall be fully protected for acting in accordance
with any instructions received under this (S) 6.08.
ARTICLE VII
INDEMNIFICATION OF MORTGAGEE BY OWNER TRUSTEE
7.01. SCOPE OF INDEMNIFICATION
Owner Trustee hereby agrees, whether or not any of the Transactions are
consummated, except as to matters covered by any indemnity furnished as
contemplated by (S) 5.03 and except as otherwise provided in (S) 2.03 or (S)
2.04(b), to assume liability for, and hereby indemnifies, protects, saves, and
keeps harmless Mortgagee and SSB, and their successors, assigns, and agents,
from and against any and all liabilities, obligations, losses, damages,
penalties, taxes (excluding any taxes payable by SSB on or measured by any
compensation that it receives for its services under this Mortgage), 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 Mortgagee or SSB (whether or not also indemnified
against by any other Person under any other document) in any way relating to or
arising out of any Operative Agreement to which it is a party or the enforcement
of any of the terms of any thereof, or in any way relating to or arising out of
the manufacture, purchase, acceptance, non-acceptance, rejection, ownership,
delivery, lease, possession, use, operation, condition, sale, return, or other
disposition of the Aircraft or any Engine (including latent or other defects,
whether or not discoverable, and any claim for patent, trademark, or copyright
infringement), or in any way relating to or arising out of the administration of
the Collateral or the action or inaction of Mortgagee or SSB hereunder, except
only in the case of willful misconduct or gross negligence (or negligence in the
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case of handling funds) of Mortgagee or SSB in the performance of its duties
hereunder or resulting from the inaccuracy of any representation or warranty of
SSB referred to in (S) 6.03 hereof, or as provided in (S) 6.01 hereof or in the
last sentence of (S) 5.04 hereof, or as otherwise excluded by (S) 9.1 or (S) 9.3
of the Participation Agreement from Lessee's indemnities under such sections. In
addition, if necessary, Mortgagee and SSB shall be entitled to indemnification
from the Collateral for any liability, obligation, loss, damage, penalty, claim,
action, suit, cost, expense, or disbursement indemnified against pursuant to
this (S) 7.01 to the extent not reimbursed by Lessee or others, but without
releasing any of them from their agreements of reimbursement; and to assure the
same Mortgagee and SSB shall have the rights provided in (S) 3.03. Without
limiting the foregoing, each of Mortgagee and SSB agrees that, before seeking
indemnification from the Collateral, it will demand, and diligently pursue in
good faith (but with no duty to exhaust all legal remedies therefor),
indemnification available to it from Lessee under the Lease or the Participation
Agreement.
ARTICLE VIII
SUCCESSOR AND SEPARATE TRUSTEES
8.01. NOTICE OF SUCCESSOR OWNER TRUSTEE
In the case of any appointment of a successor to the institution acting
as Owner Trustee pursuant to the Trust Agreement (including upon any merger,
conversion, consolidation, or sale of substantially all of the corporate trust
business of the institution acting as Owner Trustee pursuant to the Trust
Agreement), the successor institution shall give prompt written notice thereof
to Mortgagee, Lessee, and the Note Holders.
8.02. RESIGNATION OF MORTGAGEE; APPOINTMENT OF SUCCESSOR
(a) The institution acting as Mortgagee or any successor
thereto may resign at any time without cause by giving at least 30 days' prior
written notice to Lessee, Owner Trustee, Owner Participant, and each Note
Holder, such resignation to be effective upon the acceptance of the trusteeship
by a successor institution. In addition, a Majority in Interest of Note Holders
may at any time (but only with the consent of Lessee, which consent shall not be
unreasonably withheld, except that such consent shall not be necessary if a
Lease Event of Default exists) remove the institution acting as Mortgagee
without cause by an instrument in writing delivered to Owner Trustee, Lessee,
Owner Participant, and Mortgagee, and Mortgagee shall promptly notify each Note
Holder thereof in writing, such removal to be effective upon the acceptance of
the trusteeship by a successor institution. In the case of the resignation or
removal of the institution acting as Mortgagee, a Majority in
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Interest of Note Holders may appoint a successor by an instrument signed by such
holders, which successor (if no Lease Event of Default exists) shall be subject
to Lessee's reasonable approval. If a successor is not appointed within 30 days
after such notice of resignation or removal, Mortgagee, Owner Trustee, Owner
Participant, or any Note Holder may apply to any court of competent jurisdiction
to appoint a successor to act until such time, if any, as a successor is
appointed as provided above. The court-appointed successor shall immediately and
without further act be superseded by any successor appointed by a Majority in
Interest of Note Holders as provided above.
(b) Any successor institution acting as Mortgagee, however
appointed, shall execute and deliver to Owner Trustee, the predecessor
institution acting as Mortgagee, and Lessee an instrument accepting such
appointment and assuming the obligations of Mortgagee under the Participation
Agreement arising from and after the time of such appointment, and thereupon,
without further act, such successor shall become vested with all the estates,
properties, rights, powers, and duties of the predecessor hereunder in the trust
hereunder applicable to it with like effect as if originally named Mortgagee
herein; but nevertheless upon the written request of such successor, such
predecessor shall execute and deliver an instrument transferring to such
successor, upon the trusts herein expressed applicable to it, all the estates,
properties, rights, and powers of such predecessor, and such predecessor shall
duly assign, transfer, deliver, and pay over to such successor all money or
other property then held by such predecessor hereunder.
(c) Any successor institution acting as Mortgagee, however
appointed, shall be a bank or trust company that has its principal place of
business in the Borough of Manhattan, New York, NY; Chicago, IL; Hartford, CT;
Wilmington, DE; or Boston, MA, and that has (or whose obligations under the
Operative Agreements are guaranteed by an affiliated entity that has) a combined
capital and surplus of at least $250,000,000, if such an institution is then
willing, able, and legally qualified to perform the duties of Mortgagee
hereunder upon reasonable or customary terms.
(d) Any corporation into which the institution acting as
Mortgagee is merged or converted or with which it is consolidated, or any
corporation resulting from any merger, conversion, or consolidation to which the
institution acting as Mortgagee is a party, or any corporation to which
substantially all the corporate trust business of the institution acting as
Mortgagee is transferred, shall, subject to (S) 8.02(c), be a successor
Mortgagee and Mortgagee under this Mortgage without further act.
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8.03. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES
(a) Whenever (1) Mortgagee deems it necessary or desirable in
order to conform to any Law of any jurisdiction in which all or any part of the
Collateral is situated or to make any claim or bring any suit with respect to or
in connection with the Collateral, this Mortgage, any other Mortgage Agreement,
the Equipment Notes, or any of the Transactions, (2) Mortgagee is advised by
counsel satisfactory to it that it is so necessary or prudent in the interests
of the Note Holders (and Mortgagee so advises Owner Trustee and Lessee), or (3)
Mortgagee is requested to do so by a Majority in Interest of Note Holders, then
in any such case, Mortgagee and (upon Mortgagee's written request) Owner Trustee
shall execute and deliver an indenture supplemental hereto and such other
instruments as may from time to time be necessary or advisable either (x) to
constitute one or more bank or trust companies or one or more persons approved
by Mortgagee, either to act jointly with Mortgagee as additional trustee or
trustees of all or any part of the Collateral, or to act as separate trustee or
trustees of all or any part of the Collateral, in each case with such rights,
powers, duties, and obligations consistent with this Mortgage as are provided in
such supplemental indenture or other instruments as Mortgagee or a Majority in
Interest of Note Holders deem necessary or advisable, or (y) to clarify, add to,
or subtract from the rights, powers, duties, and obligations theretofore granted
any such additional or separate trustee, subject in each case to the remaining
provisions of this (S) 8.03. If Owner Trustee has not taken any action requested
of it under this (S) 8.03(a) that is permitted or required by its terms within
15 days after receiving a written request from Mortgagee to do so, or if a
Mortgage Event of Default exists, Mortgagee may act under the foregoing
provisions of this (S) 8.03(a) without Owner Trustee's concurrence, and Owner
Trustee hereby irrevocably appoints (which appointment is coupled with an
interest) Mortgagee as Owner Trustee's agent and attorney-in-fact to act for
Owner Trustee under the foregoing provisions of this (S) 8.03(a) in either of
such contingencies. In such capacity, Mortgagee may execute, deliver, and
perform any such supplemental indenture, or any such instrument, as may be
required to appoint any such additional or separate trustee or to clarify, add
to, or subtract from the rights, powers, duties, or obligations theretofore
granted to any such additional or separate trustee. If any additional or
separate trustee appointed under this (S) 8.03(a) dies, becomes incapable of
acting, resigns, or is moved, all the assets, property, rights, powers, trusts,
duties, and obligations of such additional or separate trustee shall revert to
Mortgagee until a successor additional or separate trustee is appointed as
provided in this (S) 8.03(a).
(b) No additional or separate trustee shall be entitled to
exercise any of the rights, powers, duties, and obligations conferred upon
Mortgagee in respect of the custody, investment, and payment of money, and any
such additional or separate trustee shall promptly pay over to Mortgagee all
money that such additional or separate trustee receives from or constituting
part of
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<PAGE>
the Collateral or otherwise payable to Mortgagee under any Operative Agreement.
All other rights, powers, duties, and obligations conferred or imposed upon any
additional or separate trustee shall be exercised or performed by Mortgagee and
such additional or separate trustee jointly, except to the extent that
applicable Law of any jurisdiction in which any particular act is to be
performed renders Mortgagee incompetent or unqualified to perform such act, in
which event such rights, powers, duties, and obligations (including the holding
of title to all or part of the Collateral in any such jurisdiction) shall be
exercised and performed by such additional or separate trustee. No additional or
separate trustee shall take any discretionary action except on the instructions
of Mortgagee or a Majority in Interest of Note Holders. No trustee hereunder
shall be personally liable by reason of any act or omission of any other trustee
hereunder, except that Mortgagee shall be liable for the consequences of its
lack of reasonable care in selecting, and Mortgagee's own actions in acting
with, any additional or separate trustee. Each additional or separate trustee
appointed pursuant to this (S) 8.03 shall be subject to, and shall have the
benefit of, Articles IV through VIII and Article X insofar as they apply to
Mortgagee. The powers of any additional or separate trustee appointed pursuant
to this (S) 8.03 shall not in any case exceed those of Mortgagee hereunder.
(c) If at any time Mortgagee deems it no longer necessary or
in order to conform to any such Law or take any such action or shall be advised
by such counsel that it is no longer so necessary or desirable in the interest
of the Note Holders, or if Mortgagee is requested to do so in writing by a
Majority in Interest of Note Holders, Mortgagee and (upon Mortgagee's written
request) Owner Trustee shall execute and deliver an indenture supplemental
hereto and all other instruments and agreements necessary or proper to remove
any additional or separate trustee. Mortgagee may act on behalf of Owner Trustee
under this (S) 8.03(c) when and to the extent it could so act under (S) 8.03(a).
ARTICLE IX
SUPPLEMENTS AND AMENDMENTS TO THIS MORTGAGE AND OTHER DOCUMENTS
9.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS
(a) Except as provided in (S) 5.02 hereof, Owner Trustee
agrees that it shall not enter into any amendment of or supplement to the Lease,
the Purchase Agreement, the Purchase Agreement Assignment, the Consent and
Agreement, or the Engine Consent and Agreement, or execute and deliver any
written waiver or modification of, or consent under, any such document, unless
such supplement, amendment, waiver, modification, or consent is consented to in
writing by Mortgagee and a Majority in Interest of Note Holders. Anything to
52
<PAGE>
the contrary herein notwithstanding, without the necessity of the consent of any
of the Note Holders or Mortgagee, (1) any Excluded Payments payable to Owner
Participant may be modified, amended, changed, or waived in such manner as is
agreed to by Owner Participant and Lessee, and (2) Owner Trustee and Lessee may
enter into amendments of or additions to the Lease to modify (S) 5 (except to
the extent that such amendment would affect the rights or exercise of remedies
under (S) 15 of the Lease) or (S) 17 of the Lease so long as such amendments,
modifications, and changes do not and would not affect
53
<PAGE>
the time of, or reduce the amount of, Rent payments (except to the extent
expressly permitted by (S) 5.02 hereof) until after the payment in full of all
Secured Obligations or otherwise adversely affect the Note Holders.
(b) Without limiting (S) 9.01, Mortgagee agrees with the Note
Holders that it shall not enter into any amendment, waiver, or modification of,
supplement or consent to, this Mortgage, the Lease, the Purchase Agreement, the
Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and
Agreement, the Participation Agreement, or any other agreement included in the
Collateral, unless such supplement, amendment, waiver, modification, or consent
is consented to in writing by a Majority in Interest of Note Holders, but upon
the written request of a Majority in Interest of Note Holders, Mortgagee shall
from time to time enter into any such supplement or amendment, or execute and
deliver any such waiver, modification, or consent, as is specified in such
request and as is (in the case of any such amendment, supplement, or
modification), to the extent such agreement is required, agreed to by Owner
Trustee and Lessee or (if applicable) Airframe Manufacturer or Engine
Manufacturer; provided, that, without the consent of each holder of an affected
Equipment Note then outstanding and of Liquidity Provider, no such amendment of
or supplement to this Mortgage, the Lease, the Purchase Agreement, the Purchase
Agreement Assignment, the Consent and Agreement, the Engine Consent and
Agreement, or the Participation Agreement, or waiver or modification of, or
consent under, any thereof, shall (1) modify this (S) 9.01, or Article II or III
or (S) 4.02, 4.04(c), 4.04(d), 5.02, or 5.06 hereof, (S) 13.3, 14 (except to add
a Mortgage Event of Default) or 16 of the Lease, (S) 15.1 of the Participation
Agreement, the definitions of "Mortgage Event of Default", "Mortgage Default",
"Lease Event of Default", "Lease Default", "Majority in Interest of Note
Holders", "Make-Whole Amount", or "Note Holder", or the percentage of Note
Holders required to take or approve any action hereunder, (2) reduce the amount,
or change the time of payment or method of calculation of any amount, of
Original Amount, Make-Whole Amount, or interest with respect to any Equipment
Note, or alter or modify Article III hereof with respect to the order of
priorities in which distribution thereunder shall be made as among the Note
Holders, Owner Trustee, and Lessee, (3) reduce, modify, or amend any indemnities
in favor of Owner Trustee, FSB, Mortgagee, SSB, or the Note Holders (except that
FSB or SSB may consent to any waiver or reduction of an indemnity payable to it)
or the other Mortgage Indemnitees, (4) consent to any change in the Mortgage or
the Lease which would permit redemption of Equipment Notes earlier than
permitted under (S) 2.10 or (S) 2.11 hereof or the purchase or exchange of the
Equipment Notes other than as permitted by (S) 2.13 hereof, (5) except as
contemplated by the Lease or the Participation Agreement, reduce the amount or
extend the time of payment of Basic Rent, Stipulated Loss Value, or Termination
Value for the Aircraft in each case as set
54
<PAGE>
forth in the Lease, or modify, amend, or supplement the Lease or consent to any
assignment of the Lease, in either case releasing Lessee from its obligations in
respect of the payment of Basic Rent, Stipulated Loss Value, or Termination
Value for the Aircraft or altering the absolute and unconditional character of
the obligations of Lessee to pay Rent as set forth in (S) 3 and (S) 16 of the
Lease, or (6) permit the creation of any Lien on the Collateral or any part
thereof other than Permitted Liens, or deprive any Note Holder of the benefit of
the Lien of this Mortgage on the Collateral, except as provided in connection
with the exercise of remedies under Article IV; FURTHER, provided, that, without
the consent of the majority in interest of the holders of each Series of
Equipment Notes, no such amendment, modification, consent, or waiver shall
modify (S) 7.1.1, 7.2.7, 7.3, or 11, or Annex D or Schedule 5, of the Lease, (S)
7.6.11 of the Participation Agreement, or any definition in Annex A of the
Participation Agreement relating to subleasing, re-registration, or insurance of
the Aircraft.
(c) At any time, Owner Trustee and Mortgagee may enter into
one or more agreements supplemental hereto without the consent of any Note
Holder for any of the following purposes: (1) (aa) to cure any defect or
inconsistency herein or in the Equipment Notes, or to make any change not
inconsistent with the provisions hereof (if such change does not adversely
affect the interests of any Note Holder in its capacity solely as Note Holder),
or (bb) to cure any ambiguity or correct any mistake; (2) to evidence the
succession of another party as Owner Trustee in accordance with the Trust
Agreement, or to evidence the succession of a new trustee hereunder pursuant
hereto, the removal of the trustee hereunder, or the appointment of any
co-trustee or co-trustees or any separate or additional trustee or trustees; (3)
to convey, transfer, assign, mortgage, or pledge any property to or with
Mortgagee, or to make any other provisions with respect to matters or questions
arising hereunder, so long as such action shall not adversely affect the
interests of the Note Holders in their capacity solely as Note Holders; (4) to
correct or amplify the description of any property at any time subject to the
Lien of this Mortgage, or better to assure, convey, and confirm to Mortgagee any
property subject or required to be subject to the Lien of this Mortgage,
including the Airframe or Engines or any Replacement Airframe or Replacement
Engine; (5) to add to the covenants of Owner Trustee for the benefit of the Note
Holders, or to surrender any rights or power herein conferred upon Owner
Trustee, Owner Participant, or Lessee; (6) to add to the rights of the Note
Holders; and (7) to include on the Equipment Notes any legend as may be required
by Law.
9.02. TRUSTEES PROTECTED
If, in the opinion of the institution acting as Owner Trustee under the
Trust Agreement or the institution acting as Mortgagee hereunder, any
55
<PAGE>
document required to be executed by it pursuant to (S) 9.01 affects any right,
duty, immunity, or indemnity of such institution under this Mortgage or the
Lease, such institution may in its discretion decline to execute such document.
9.03. DOCUMENTS MAILED TO NOTE HOLDERS
Promptly after Owner Trustee or Mortgagee executes any document entered
into pursuant to (S) 9.01, Mortgagee shall mail (by first class mail, postage
prepaid) a copy thereof to Lessee and to each Note Holder at its address last
set forth in the Equipment Note Register, but Mortgagee's failure to mail such
copies shall not impair or affect the validity of such document.
9.04. NO REQUEST NECESSARY FOR LEASE SUPPLEMENT OR MORTGAGE
SUPPLEMENT
No written request or consent of Mortgagee, the Note Holders or Owner
Participant pursuant to (S) 9.01 shall be required to enable Owner Trustee to
enter into any Lease supplement specifically required by the Lease or to execute
and deliver a Mortgage supplement specifically required by the terms hereof.
ARTICLE X
MISCELLANEOUS
10.01. TERMINATION OF MORTGAGE
Upon (or at any time after) payment in full of the Original Amount of,
Make-Whole Amount (if any), interest on, and all other amounts due under all
Equipment Notes, and provided that no other Secured Obligations are then due to
the Mortgage Indemnitees, the Note Holders, the Certificate Holders, and
Mortgagee hereunder or under the Participation Agreement or any other Operative
Agreement, Owner Trustee shall direct Mortgagee to execute and deliver to or as
directed in writing by Owner Trustee an appropriate instrument releasing the
Aircraft and the Engines from the Lien of this Mortgage and releasing the Lease,
the Purchase Agreement, and the Purchase Agreement Assignment from the
assignment and Lien hereunder, and Mortgagee shall execute and deliver such
instrument and notify Lessee; provided, that this Mortgage and the trusts
created hereby shall terminate earlier, and this Mortgage shall be of no further
force or effect, upon any sale or other final disposition by Mortgagee of all
property constituting part of the Collateral, and Mortgagee's final distribution
of all money or other property or proceeds constituting part of the Collateral
in accordance with the terms hereof. Except as otherwise provided in this (S)
10.01, this Mortgage and the trusts created
56
<PAGE>
hereby shall continue in full force and effect in accordance with the terms
hereof.
10.02. NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDER
No holder of an Equipment Note shall have legal title to any part of
the Collateral. No transfer (by operation of law or otherwise) of any Equipment
Note or other right, title, and interest of any Note Holder in and to the
Collateral or hereunder shall terminate this Mortgage or entitle such holder or
any successor or transferee of such holder to an accounting or to the transfer
to it of any legal title to any part of the Collateral.
10.03. MORTGAGEE'S SALE OF AIRCRAFT IS BINDING
Any sale or other conveyance of the Collateral, or any part thereof
(including any part thereof or interest therein), by Mortgagee made pursuant to
this Mortgage shall bind the Note Holders and shall be effective to transfer or
convey all right, title, and interest of the Trustee, Owner Trustee, Owner
Participant, and such holders in and to such Collateral or part thereof. No
purchaser or other grantee shall be required to inquire as to the authorization,
necessity, expediency, or regularity of such sale or conveyance or as to the
application of any sale or other proceeds with respect thereto by Mortgagee.
10.04. MORTGAGE FOR BENEFIT OF OWNER TRUSTEE, MORTGAGEE, OWNER
PARTICIPANT, NOTE HOLDERS, AND THE OTHER MORTGAGE INDEMNITEES
Nothing in this Mortgage, whether express or implied, shall give any
person other than Owner Trustee, Mortgagee, Owner Participant, the Note Holders,
and the other Mortgage Indemnitees any legal or equitable right, remedy, or
claim under or in respect of this Mortgage.
10.05. NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers, and other
communications required or permitted to be made, given, furnished, or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in (S) 15.7 of the Participation Agreement.
10.06. SEVERABILITY
Any provision of this Mortgage that is prohibited or unenforceable in
any jurisdiction
57
<PAGE>
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability, without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
10.07. NO ORAL MODIFICATION OR CONTINUING WAIVER
No term or provision of this Mortgage or the Equipment Notes may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by Owner Trustee and Mortgagee, in compliance with (S) 9.01. Any
waiver of the terms hereof or of any Equipment Note shall be effective only in
the specific instance and for the specific purpose given.
10.08. SUCCESSORS AND ASSIGNS
All covenants and agreements herein shall bind and benefit each of the
parties hereto and the permitted successors and assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver, or other instrument
or action by any Note Holder shall bind the successors and assigns of such
holder. This Mortgage and the Collateral 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 Mortgage to
the Trust Agreement shall mean the Trust Agreement as amended and supplemented
from time to time to the extent permitted hereby, thereby, and by the
Participation Agreement. Each Note Holder by its acceptance of an Equipment Note
agrees to be bound by this Mortgage and all provisions of the Participation
Agreement applicable to a Loan Participant or a Note Holder.
10.09. HEADINGS
The headings of the articles and sections herein and in the table of
contents hereto are for convenience of reference only, and do not define or
limit any of the terms or provisions hereof.
10.10. NORMAL COMMERCIAL RELATIONS
Anything in this Mortgage to the contrary notwithstanding, FSB, SSB,
any Participant, or any bank or other Affiliate of such Participant may conduct
any banking or other financial transactions, and have banking or other
commercial relationships, with Lessee or any Permitted Sublessee, fully to the
same extent as if this Mortgage were not in effect, including the making of
loans or other extensions of credit to Lessee for any purpose whatsoever,
whether related to any of the transactions contemplated hereby or otherwise.
58
<PAGE>
10.11. GOVERNING LAW; COUNTERPART FORM
THIS MORTGAGE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE. THIS MORTGAGE IS BEING
DELIVERED IN THE STATE OF NEW YORK. This Mortgage may be executed in separate
counterparts (or upon separate signature pages bound together into one or more
counterparts), each fully-executed set of which shall be an original.
10.12. VOTING BY NOTE HOLDERS
All votes of the Note Holders shall be governed by a vote of a Majority
in Interest of Note Holders, except as otherwise provided herein.
10.13. BANKRUPTCY
Owner Trustee and Mortgagee intend that Owner Trustee, as lessor under
the Lease (and Mortgagee as assignee of Owner Trustee hereunder), shall be
entitled to the benefits of Section 1110 with respect to the right to take
possession of the Aircraft, Airframe, Engines, and Parts as provided in the
Lease in the event of a case under Chapter 11 of the Bankruptcy Code in which
Lessee is a debtor. In any instance where more than one construction is possible
of the terms and conditions hereof or any other pertinent Operative Agreement, a
construction which would preserve such benefits shall control over any
construction which would not preserve such benefits.
59
<PAGE>
IN WITNESS WHEREOF, Owner Trustee and Mortgagee have executed
this Trust Indenture and Mortgage N9__AT.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, NOT IN ITS INDIVIDUAL
CAPACITY EXCEPT AS EXPRESSLY PROVIDED
HEREIN, BUTSOLELY AS TRUSTEE, as Owner
Trustee
By___________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCI-
ATION, as Mortgagee
By__________________________________
Name:
Title:
<PAGE>
EXHIBIT A
AIRCRAFT DESCRIPTION
The Aircraft is a Boeing model 717-200 aircraft, consisting of (1) an airframe
bearing FAA registration no. N9__AT and manufacturer's serial no. 550__, (2) two
BMW Rolls-Royce model BR715 engines (each of which has 750 or more rated takeoff
horsepower or its equivalent), bearing manufacturer's serial nos. __________ and
__________, and (3) all appliances, parts, instruments, appurtenances,
accessories, furnishings, and other equipment or property incorporated in such
airframe and engines.
<PAGE>
EXHIBIT B
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE.
ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER
THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS
IS AVAILABLE.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS OWNER TRUSTEE
UNDER TRUST AGREEMENT N9__AT DATED AS OF ______________, ____
Series 1999-1_ Equipment Note due ___________ 1, 201_, issued in
connection with the Boeing model 717-200 aircraft bearing United
States registration mark N9__AT
No. ____ ________________, _____
$_____________________
Interest Rate Maturity Date
------------- -------------
_______% ________________, 201_
First Security Bank, National Association, not in its individual
capacity but solely as trustee (in such capacity, "OWNER TRUSTEE") under Trust
Agreement N9__AT (as supplemented or amended from time to time, the "TRUST
AGREEMENT"), dated as of ______________, ____, between [Owner Participant's
name] and First Security Bank, National Association, hereby promises to pay to
_________________________________ (or its registered assignee) the principal sum
of $____________ (the "Original Amount"), together with interest at the Debt
Rate on the unpaid balance of the Original Amount (calculated on the basis of a
360-day year of twelve 30-day months) from the date hereof until paid in full.
The Original Amount of this Equipment Note shall be payable in installments on
the dates in Schedule I hereto equal to the corresponding percentage of the
Original Amount of this Equipment Note in Schedule I hereto. Accrued but unpaid
interest shall be due and payable in semiannual installments, starting
_____________ 1, 2000, and on each April 1 and October 1 thereafter, to and
including ___________ 1, 201_. Notwithstanding the foregoing, the final payment
made on this Equipment Note shall be amount sufficient to discharge in full the
unpaid Original Amount and all accrued and unpaid interest on, and any other
amounts due under, this Equipment Note. If any date on which a payment under
this Equipment Note becomes due and payable is not a Business Day, then such
payment shall not be made on such scheduled date but shall be made on the
following Business Day, and if such payment is made on such following Business
Day, no interest shall accrue on the amount of such payment during such
extension.
<PAGE>
The "Mortgage" is Trust Indenture and Mortgage N9__AT, dated as of
________________, _____, between Owner Trustee and State Street Bank and Trust
Company of Connecticut, National Association ("Mortgagee"), as amended or
supplemented from time to time. All terms used in this Equipment Note, if
defined in the Mortgage and not in this Equipment Note, have the same meanings
as in the Mortgage.
This Equipment Note shall bear interest, payable on demand, at the
Past-Due Rate (calculated on the basis of a 360-day year of twelve 30-day
months) on any overdue Original Amount, any overdue Make-Whole Amount, and (to
the extent permitted by applicable Law) any overdue interest and any other
amounts payable hereunder which are overdue, in each case for the period that it
is overdue. Amounts shall be overdue if not paid when due (whether at stated
maturity, by acceleration, or otherwise).
All payments of Original Amount, interest, Make-Whole Amount (if any),
and other amounts (if any) to be made by Owner Trustee hereunder, under the
Mortgage, or under the Participation Agreement shall be payable only from the
income and proceeds from the Trust Estate to the extent included in the
Collateral and only to the extent that Owner Trustee has sufficient income or
proceeds from the Trust Estate (to the extent included in the Collateral) to
enable Mortgagee to make such payments in accordance with (S) 2.03 and Article
III of the Mortgage, and each holder hereof, by its acceptance of this Equipment
Note, agrees (1) that it will look solely to the income and proceeds from the
Collateral to the extent available for distribution to the holder hereof as
above provided, and (2) that neither Owner Participant nor Owner Trustee nor
Mortgagee is personally liable or liable in any manner extending to any assets
other than the Collateral to the holder hereof for any amounts payable or any
liability under this Equipment Note or, except as provided in the Mortgage or in
the Participation Agreement, for any liability under the Mortgage or the
Participation Agreement; provided, that nothing herein shall limit, restrict, or
impair Mortgagee's right (subject to the terms of the Mortgage) to accelerate
the maturity of this Equipment Note, if a Mortgage Event of Default exists, in
accordance with (S) 4.04(b) of the Mortgage, to bring suit and obtain a judgment
against Owner Trustee on this Equipment Note for purposes of realizing upon the
Collateral, and to exercise all rights and remedies provided under the Mortgage
or otherwise realize upon the Collateral as provided under the Mortgage.
An Equipment Note Register shall be maintained at Mortgagee's Corporate
Trust Office (or at the office of any successor), for the purpose of registering
transfers and exchanges of Equipment Notes, in the manner provided in (S) 2.07
of the Mortgage.
<PAGE>
The Original Amount and interest and other amounts due hereunder shall
be payable in Dollars in immediately available funds at Mortgagee's Corporate
Trust Office, or as otherwise provided in the Mortgage. Each such payment shall
be made without any presentment or surrender of this Equipment Note. However,
this Equipment Note shall be surrendered to Mortgagee for cancellation promptly
after any final payment.
The holder hereof, by its acceptance of this Equipment Note, agrees
that (except as otherwise provided in the Mortgage) each payment of the Original
Amount, Make-Whole Amount (if any), and interest received by it hereunder shall
be applied: first, to pay accrued interest on this Equipment Note (as well as
any interest on any overdue Original Amount, any overdue Make-Whole Amount, or
(to the extent permitted by Law) any overdue interest and other amounts
hereunder) to the date of such payment, second, to pay the Original Amount of
this Equipment Note then due, third, to pay any Make-Whole Amount and any other
amount due hereunder or under the Mortgage, and fourth, the balance, if any,
remaining thereafter, to pay installments of the Original Amount of this
Equipment Note remaining unpaid in the inverse order of their maturity.
This Equipment Note is one of the Equipment Notes referred to in the
Mortgage which have been or are to be issued by Owner Trustee pursuant to the
Mortgage. The Collateral is held by Mortgagee as security, in part, for the
Equipment Notes. The provisions of this Equipment Note are subject to the
Mortgage. Refer to the Mortgage for a complete statement of (1) the rights and
obligations of the holder of this Equipment Note, and the nature and extent of
the security for this Equipment Note, (2) the rights and obligations of the
holders of any other Equipment Notes executed and delivered under the Mortgage,
and the nature and extent of the security for any other Equipment Notes executed
and delivered under the Mortgage, and (3) a statement of the terms and
conditions of the Trust created by the Mortgage, to all of which terms and
conditions in the Mortgage each holder hereof agrees by its acceptance of this
Equipment Note.
As provided in the Mortgage and subject to certain limitations therein,
this Equipment Note is exchangeable for a like aggregate Original Amount of
Equipment Notes of different authorized denominations, as requested by the
holder surrendering it.
Before this Equipment Note is duly presented for registration of
transfer, Owner Trustee and Mortgagee shall treat the person in whose name this
Equipment Note is registered as the owner hereof for all purposes, whether or
not this Equipment Note is overdue, and neither Owner Trustee nor Mortgagee
shall be affected by notice to the contrary.
<PAGE>
This Equipment Note is subject to redemption as provided in (S) 2.10,
(S) 2.11, and (S) 2.12 of the Mortgage, but not otherwise. This Equipment Note
is also subject to exchange and to purchase by Owner Participant or Owner
Trustee as provided in (S) 2.13 of the Mortgage, but not otherwise. In addition,
this Equipment Note may be accelerated as provided in (S) 4.04 of the Mortgage.
[The indebtedness evidenced by this Equipment Note is, to the extent
and in the manner provided in the Mortgage, subordinate and subject in right of
payment to the prior payment of certain Secured Obligations (as defined in the
Mortgage) in respect of [Series A Equipment Notes](1) [Series A and Series B
Equipment Notes](2), and this Equipment Note is issued subject to such
provisions. By accepting this Equipment Note, the Note Holder (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs Mortgagee on such
Note Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Mortgage, and (c) appoints
Mortgagee such Note Holder's attorney-in-fact for such purpose.](3)
Unless the certificate of authentication hereon has been executed by or
on behalf of Mortgagee by manual signature, this Equipment Note shall not be
entitled to any benefit under the Mortgage or be valid or obligatory for any
purpose.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
- ----------
1. To be inserted in the case of a Series B Equipment Note.
2. To be inserted in the case of a Series C Equipment Note.
3. To be inserted for each Equipment Note other than any Series A
Equipment Note.
<PAGE>
IN WITNESS WHEREOF, Owner Trustee has executed this Equipment Note.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity but solely as owner trustee
By: _________________________________
Name:
Title:
<PAGE>
MORTGAGEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the Mortgage (as
defined in the foregoing Equipment Note).
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, as Mortgagee
By: __________________________________
Name:
Title:
<PAGE>
Schedule I
----------
to
--
Equipment Note
--------------
Equipment Note Amortization
---------------------------
Percentage of Original
Payment Date Amount to be Paid
------------ -----------------
[See Schedule I to Mortgage,
which is inserted upon issuance]
<PAGE>
SCHEDULE I
MATURITY DATE ORIGINAL AMOUNT INTEREST RATE
------------- ---------------- -------------
Series A: 10.41%
Series B: 10.81%
Series C: 11.42%
<PAGE>
Equipment Note Amortization
Percentage of Original
Payment Date Amount to be Paid
-------------------- -----------------------
<PAGE>
Exhibit C-1 to
Note Purchase Agreement
------------------------------------------------------
CONFIDENTIAL: SUBJECT TO RESTRICTIONS ON DISSEMINATION
SET FORTH IN (S) 7 OF THIS AGREEMENT
------------------------------------------------------
================================================================================
PARTICIPATION AGREEMENT N9__AT
dated as of ___________, ____
between
AIRTRAN AIRWAYS, INC.,
Owner,
and
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity except as expressly provided
herein, but solely as Mortgagee, Subordination Agent
under the Intercreditor Agreement, and Pass-Through
Trustee under each of the Pass-Through Trust Agreements
----------------------------
One Boeing model 717-200 aircraft
bearing manufacturer's serial no. 55___
and U.S. registration no. N9__AT
================================================================================
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CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1. DEFINITIONS AND CONSTRUCTION...........................................................................2
2. SECURED LOANS; CLOSING.................................................................................2
2.1 Making of Loans and Issuance of Equipment Notes...............................................2
3. CLOSING CONDITIONS.....................................................................................2
3.1 Conditions to Pass-Through Trustees' Obligations..............................................2
3.2 Conditions to Mortgagee's Obligations.........................................................6
3.3 Conditions to Owner's Obligations.............................................................7
3.4 Post-Registration Opinion.....................................................................8
4. REPRESENTATIONS AND WARRANTIES.........................................................................8
4.1 Owner's Representations and Warranties........................................................8
4.2 SSB's Representations and Warranties..........................................................12
5. COVENANTS..............................................................................................15
5.1 Owner's Covenants.............................................................................15
5.2 SSB's Covenants...............................................................................17
5.3 Note Holders' Covenants.......................................................................18
5.4 Other Agreements..............................................................................19
6. CONFIDENTIALITY........................................................................................23
7. INDEMNIFICATION AND EXPENSES...........................................................................24
7.1 General Indemnity.............................................................................24
7.2 Expenses......................................................................................30
7.3 General Tax Indemnity.........................................................................30
7.4 Payments......................................................................................40
7.5 Interest......................................................................................40
7.6 Benefit of Indemnities........................................................................40
8. ASSIGNMENT OR TRANSFER OF INTEREST.....................................................................40
8.1 Note Holders..................................................................................40
8.2 Effect of Transfer............................................................................40
8.3 Sale-Leaseback Transaction....................................................................41
9. SECTION 1110...........................................................................................43
10. CHANGE OF CITIZENSHIP.................................................................................43
10.1 Generally....................................................................................43
10.2 Mortgagee....................................................................................43
11. MISCELLANEOUS.........................................................................................43
11.1 Amendments...................................................................................43
11.2 Severability.................................................................................43
11.3 Survival.....................................................................................44
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
11.4 Reproduction of Documents....................................................................44
11.5 Counterparts.................................................................................44
11.6 No Waiver....................................................................................44
11.7 Notices......................................................................................45
11.8 Governing Law; Submission to Jurisdiction; Venue.............................................45
11.9 Third-Party Beneficiary......................................................................46
11.10 Entire Agreement............................................................................46
11.11 Further Assurances..........................................................................46
</TABLE>
SCHEDULES AND EXHIBITS
SCHEDULE 1 - Accounts; Addresses
SCHEDULE 2 - Commitments
SCHEDULE 3 - Certain Terms
SCHEDULE 4 - Permitted Countries
EXHIBIT A - Opinion of special counsel to Owner and Holdings
EXHIBIT B - Opinion of corporate counsel to Owner and Holdings
EXHIBIT C - Opinion of special counsel to Mortgagee
and to the Pass-Through Trustees
EXHIBIT D - Opinion of FAA Counsel
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PARTICIPATION AGREEMENT N9__AT
This Participation Agreement N9__AT (this "Agreement") is entered into
as of ___________, ____ among (a) AirTran Airways, Inc. ("OWNER"), a Delaware
corporation, (b) State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity
(except as expressly provided herein), but solely as Mortgagee (in its capacity
as Mortgagee, "Mortgagee" and in its individual capacity, "SSB"), (c) State
Street Bank and Trust Company of Connecticut, National Association, not in its
individual capacity (except as expressly provided herein), but solely as
Pass-Through Trustee under each of the Pass-Through Trust Agreements (each, a
"Pass-Through Trustee"), and (d) State Street Bank and Trust Company of
Connecticut, National Association, not in its individual capacity (except as
expressly provided herein), but solely as Subordination Agent under the
Intercreditor Agreement ("Subordination Agent").
RECITALS
A. Owner and Airframe Manufacturer entered into the Purchase Agreement,
pursuant to which Airframe Manufacturer agreed to manufacture and sell certain
aircraft (including the Aircraft) to Owner and Owner agreed to purchase certain
aircraft (including the Aircraft) from Airframe Manufacturer.
B. Pursuant to each of the Pass-Through Trust Agreements, on the
Issuance Date, the Pass-Through Trusts were created and the Pass-Through
Certificates were issued and sold.
C. Pursuant to the Note Purchase Agreement, each Pass-Through Trustee
agreed to use a portion of the proceeds from the issuance and sale of the
Pass-Through Certificates issued by each Pass-Through Trust to purchase from
Owner, on behalf of the related Pass-Through Trust, the Equipment Note bearing
the same interest rate as the Pass-Through Certificates issued by such
Pass-Through Trust.
D. Owner and Mortgagee are entering into the Mortgage for the benefit
of the Note Holders, pursuant to which Owner agrees (1) to issue Equipment
Notes, in the amounts and otherwise as provided in the Mortgage, and (2) to
mortgage, pledge, and assign to Mortgagee all of Owner's right, title, and
interest in the Collateral to secure the Secured Obligations, including Owner's
obligations under the Equipment Notes.
E. The parties to this Agreement want to set forth in this Agreement
the terms and conditions upon and subject to which the foregoing transactions
shall be effected.
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The parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION
The terms defined in Annex A to the Mortgage, when capitalized as in
Annex A, have the same meanings when used in this Agreement. Annex A to the
Mortgage also contains rules of usage that control construction in this
Agreement.
2. SECURED LOANS; CLOSING
2.1 MAKING OF LOANS AND ISSUANCE OF EQUIPMENT NOTES
Subject to the terms and conditions of this Agreement, on the date
hereof or on such other date agreed to by the parties hereto (the "CLOSING
DATE"):
(a) each Pass-Through Trustee listed on Schedule 2 shall make a
secured loan to Owner in the amount in Dollars opposite such
Trustee's name on Schedule 2; and
(b) pursuant to Article II of the Mortgage, Owner shall issue to
Subordination Agent, as the registered holder on behalf of
each such Pass-Through Trustee, one or more Equipment Notes,
dated the Closing Date, of the Series set forth opposite such
Trustee's name on Schedule 2, in an aggregate principal amount
equal to the secured loan made by each such Pass-Through
Trustee.
2.2 CLOSING
(a) The Closing of the transactions contemplated hereby shall take
place at the offices of Troutman Sanders LLP, 5200 Bank of America Plaza,
Atlanta, GA 30308-2216, or at such other place as the parties shall agree.
(b) All payments pursuant to this (S) 2 shall be made in immediately
available funds to such accounts set forth in Schedule 1 hereto.
3. CLOSING CONDITIONS
3.1 CONDITIONS TO PASS-THROUGH TRUSTEES' OBLIGATIONS
Each Pass-Through Trustee's obligation to make the secured loan
described in (S) 2.1(a) and to participate in the Transactions is subject to the
fulfillment, before or on the Closing Date, of the following conditions:
3.1.1 EQUIPMENT NOTES
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Owner tenders the Equipment Notes to be issued to such Pass-Through
Trustees to Mortgagee for authentication, and Mortgagee authenticates such
Equipment Notes and tenders them to Subordination Agent on behalf of such
Pass-Through Trustee, against receipt of the loan proceeds, in accordance with
(S) 2.1.
3.1.2 DELIVERY OF DOCUMENTS
Subordination Agent (on behalf of each such Pass-Through Trustee)
receives executed counterparts or conformed copies of the following documents
and such counterparts (x) have been duly authorized, executed, and delivered by
the parties thereto and (y) are in full force and effect:
(a) this Agreement;
(b) the Mortgage;
(c) the broker's report and insurance certificates required by (S) 4.06
of the Mortgage;
(d) the Consent and Agreement and the Engine Consent and Agreement;
(e) the Bills of Sale;
(f) the Guarantee;
(g) (aa) a copy of Owner's articles of incorporation, by-laws, and
resolutions, in each case certified as of the Closing Date by the
Secretary or an Assistant Secretary of Owner, duly authorizing Owner's
execution, delivery, and performance of the Operative Agreements to
which it is party required to be executed and delivered by Owner on or
before the Closing Date in accordance with the provisions hereof and
thereof; (bb) a copy of Holdings's articles of incorporation, by-laws,
and resolutions, in each case certified as of the Closing Date by the
Secretary or an Assistant Secretary of Holdings, duly authorizing
Holdings's execution, delivery, and performance of the Operative
Agreements to which it is party required to be executed and delivered
by Holdings on or before the Closing Date in accordance with the
provisions hereof and thereof; (cc) incumbency certificates of Owner
and Holdings as to the person(s) authorized to execute and deliver the
Operative Agreements on its behalf; and (dd) good-standing certificates
for Owner for Delaware and Florida and for Holdings for Nevada and
Florida;
(h) Officer's Certificates of Owner and Holdings, dated as of the
Closing Date, stating that its representations and warranties in this
Agreement
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or the Guarantee (respectively) are true and correct as of the Closing
Date (or, to the extent that any such representation and warranty
expressly relates to an earlier date, true and correct as of such
earlier date);
(i) the Financing Statements;
(j) the following opinions of counsel, in each case dated the
Closing Date:
(1) an opinion of Troutman Sanders LLP, special counsel
to Owner and Holdings, substantially in the form of Exhibit
A;
(2) an opinion of Owner's and Holdings's Legal
Department, substantially in the form of Exhibit B;
(3) an opinion of Bingham Dana LLP, special counsel to
Mortgagee and to the Pass-Through Trustees, substantially in
the form of Exhibit C;
(4) an opinion of FAA Counsel, substantially in the form
of Exhibit D;
(k) a copy of a duly-executed application for registration of
the Aircraft with the FAA in Owner's name; and
(l) such other documents as such Pass-Through Trustee
reasonably requests.
3.1.3 PERFECTED SECURITY INTEREST
After giving effect to the filing of the FAA-Filed Documents and the
Financing Statements, Mortgagee shall have a duly-perfected first-priority
security interest in all of Owner's right, title, and interest in the Aircraft
and all other then-existing Collateral, subject only to Permitted Liens not of
record.
3.1.4 VIOLATION OF LAW
No change occurs after the date of this Agreement in any applicable Law
that makes it a violation of Law for (a) Owner, any Pass-Through Trustee,
Subordination Agent, or Mortgagee to execute, deliver, and perform the Operative
Agreements to which any of them is a party, or (b) any Pass-Through Trustee to
make the loan contemplated by (S) 2.1, to acquire an Equipment Note, or to
realize the benefits of the security afforded by the Mortgage.
3.1.5 REPRESENTATIONS, WARRANTIES, AND COVENANTS
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The representations and warranties of each other party to this
Agreement made, in each case, in any Operative Agreement to which it is a party,
are true and accurate in all material respects as of the Closing Date (unless
any such representation and warranty was made with reference to a specified
date, in which case such representation and warranty was true and accurate as of
such specified date), and each other party to this Agreement has performed and
observed, in all material respects, all of its covenants, obligations, and
agreements in each Operative Agreement to which it is a party to be observed or
performed by it as of the Closing Date.
3.1.6 NO DEFAULT
On the Closing Date, no Default exists or would result from the
mortgaging of the Aircraft, and no "Event of Default" exists with respect to any
other aircraft financed through the issuance of Pass-Through Certificates.
3.1.7 NO EVENT OF LOSS
No Event of Loss with respect to the Airframe or any Engine has
occurred, and no circumstance, condition, act, or event has occurred that, with
the giving of notice or lapse of time, would give rise to or constitute an Event
of Loss with respect to the Airframe or any Engine.
3.1.8 TITLE
Owner has good and marketable title (subject to filing and recordation
of the FAA Bill of Sale with the FAA) to the Aircraft, free and clear of all
Liens, except Permitted Liens.
3.1.9 CERTIFICATION
The Aircraft has been duly certificated by the FAA as to type and has
(or, upon registration in Owner's name, will be eligible for) an FAA
airworthiness certificate.
3.1.10 SECTION 1110
Mortgagee is entitled to the benefits of Section 1110 (as currently in
effect) with respect to the right to take possession of the Airframe and Engines
as provided in the Mortgage in the event of a case under Chapter 11 of the
Bankruptcy Code in which Owner is a debtor.
3.1.11 FILING
The FAA-Filed Documents are in the process of being duly filed for
recordation with the FAA in accordance with the Transportation Code, and
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each Financing Statement has been duly filed or is in the process of being duly
filed in the appropriate jurisdiction.
3.1.12 NO PROCEEDINGS
No action or proceeding has been instituted, nor is any action
threatened in writing, before any Government Entity, nor has any order,
judgment, or decree been issued or proposed to be issued by any Government
Entity, to set aside, restrain, enjoin, or prevent the completion and
consummation of any Operative Agreement or the Transactions.
3.1.13 GOVERNMENTAL ACTION
All appropriate action required to have been taken before the Closing
Date by the FAA, or any other Government Entity of the United States, in
connection with the Transactions has been taken, and all orders, permits,
waivers, authorizations, exemptions, and approvals of such entities required to
be in effect on the Closing Date in connection with the Transactions have been
issued.
3.1.14 NOTE PURCHASE AGREEMENT
The conditions to the obligations of the Pass-Through Trustees and the
other requirements relating to the Aircraft and the Equipment Notes in the Note
Purchase Agreement have been satisfied.
3.1.15 PERFECTED SECURITY INTEREST
After giving effect to the filing of the FAA-Filed Documents and the
Financing Statements, Mortgagee shall have a duly-perfected first-priority
security interest in the Aircraft and all other then-existing Collateral,
subject only to Permitted Liens not of record.
3.1.16 NO MATERIALLY ADVERSE CHANGE
Since the date of Holdings's balance sheet referred to in (S) 4.1.7,
there has been no materially adverse change in Holdings's financial condition or
operations, except for matters disclosed in the financial statements referred to
in (S) 4.1.7.
3.2 CONDITIONS TO MORTGAGEE'S OBLIGATIONS
Mortgagee's obligation to authenticate the Equipment Notes on the
Closing Date is subject to the satisfaction (or Mortgagee's waiver), on or
before the Closing Date, of the conditions in this (S) 3.2.
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3.2.1 DOCUMENTS
Mortgagee receives executed originals of the documents described in (S)
3.1.2, except as specifically provided therein, unless the failure to receive
any such document is the result of any action or inaction by Mortgagee.
3.2.2 OTHER CONDITIONS
Each of the conditions in (S)(S) 3.1.4, 3.1.5, 3.1.6, and 3.1.10 are
satisfied, unless the failure of any such condition to be satisfied is the
result of any action or inaction by Mortgagee.
3.3 CONDITIONS TO OWNER'S OBLIGATIONS
Owner's obligation to participate in the transaction contemplated
hereby on the Closing Date is subject to the satisfaction (or Owner's waiver),
on or before the Closing Date, of the conditions in this (S) 3.3.
3.3.1 DOCUMENTS
Owner receives executed originals of the documents described in (S)
3.1.2, except as specifically provided therein, and they are satisfactory to
Owner, unless the failure to receive any such document is the result of any
action or inaction by Owner. In addition, Owner receives the following:
(a) (1) an incumbency certificate of SSB as to the person(s)
authorized to execute and deliver the Operative Agreements on behalf of
SSB, and (2) a copy of SSB's certificate of incorporation, by-laws, and
general authorizing resolution of the board of directors (or executive
committee) or other satisfactory evidence of authorization, certified
as of the Closing Date by the Secretary or Assistant or Attesting
Secretary of SSB, which authorize SSB's execution, delivery, and
performance of the Operative Agreements to which it is a party; and
(b) an Officer's Certificate of SSB, dated as of the Closing
Date, stating that its representations and warranties in its individual
capacity or as Mortgagee, a Pass-Through Trustee, or Subordination
Agent (as applicable) in this Agreement are true and correct as of the
Closing Date (or, to the extent that any such representation and
warranty expressly relates to an earlier date, true and correct as of
such earlier date);
3.3.2 OTHER CONDITIONS
Each of the conditions in (S)(S) 3.1.4, 3.1.5, 3.1.6, 3.1.7, 3.1.8,
3.1.9, 3.1.10, 3.1.11, 3.1.12, and 3.1.13 have been satisfied or waived by
Owner,
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unless the failure of any such condition to be satisfied is the result of any
action or inaction by Owner.
3.4 POST-REGISTRATION OPINION
Promptly after the registration of the Aircraft and the recordation of
the FAA-Filed Documents, Owner will cause FAA Counsel to deliver to Owner, each
Pass-Through Trustee, and Mortgagee a favorable opinion or opinions addressed to
each of them with respect to such registration and recordation.
4. REPRESENTATIONS AND WARRANTIES
4.1 OWNER'S REPRESENTATIONS AND WARRANTIES
Owner represents and warrants to each Pass-Through Trustee,
Subordination Agent, and Mortgagee that:
4.1.1 ORGANIZATION; QUALIFICATION
Owner is a corporation duly incorporated, validly existing, and in good
standing under the Laws of Delaware, and has the corporate power and authority
to conduct the business in which it is currently engaged and to own or hold
under lease its properties and to enter into and perform its obligations under
the Operative Agreements. Owner is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the nature and extent
of the business conducted by it, or the ownership of its properties, requires
such qualification, except where the failure to be so qualified would not give
rise to a Materially Adverse Change to Owner.
4.1.2 CORPORATE AUTHORIZATION
Owner has taken, or caused to be taken, all necessary corporate action
(including obtaining any consent or approval of stockholders required by its
articles of incorporation or by-laws) to authorize the execution, delivery, and
performance of its obligations under of each of the Operative Agreements to
which it is party.
4.1.3 NO VIOLATION
Owner's execution, delivery, and performance of its obligations under
the Operative Agreements to which it is party do not and will not (a) violate
any provision of Owner's articles of incorporation or by-laws, (b) violate any
Law applicable to or binding on Owner, or (c) violate or constitute any default
under (other than any violation or default that would not result in a Materially
Adverse Change to Owner), or result in the creation of any Lien (other than as
permitted under the Mortgage) upon the Aircraft or the other Collateral under,
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any lease, loan. or other material agreement to which Owner is a part or by
which Owner or any of its properties is bound.
4.1.4 APPROVALS
Owner's execution, delivery, and performance of its obligations under
the Operative Agreements to which it is party do not and will not require the
consent or approval of, the giving of notice to, the registration with, the
recording or filing of any documents with, or the taking of any other action in
respect of (a) any trustee or other holder of any Debt of Owner, or (b) any
Government Entity, other than (x) the FAA-Filed Documents and the Financing
Statements (and continuation statements periodically), and (y) filings,
recordings, notices, or other ministerial actions pursuant to any routine
recording, contractual, or regulatory requirements.
4.1.5 VALID AND BINDING AGREEMENTS
The Operative Agreements to which Owner is a party have been duly
authorized, executed, and delivered by Owner and, assuming the due
authorization, execution, and delivery thereof by the other party or parties
thereto, constitute legal, valid, and binding obligations of Owner and are
enforceable against Owner in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, and other similar Laws
affecting the rights of creditors generally and general principles of equity.
4.1.6 LITIGATION
Except as set forth in Holdings's most recent Annual Report on Form
10-K, filed by Owner with the SEC before the Issuance Date, or in any Quarterly
Report on Form 10-Q or Current Report on Form 8-K filed by Holdings with the SEC
subsequent to such Form 10-K but before the Issuance Date, no action, claim, or
proceeding is now pending or, to Owner's Actual Knowledge, threatened, against
Owner, Holdings, or any of their Affiliates, before any Government Entity, that
is reasonably likely to be determined adversely to Owner and if determined
adversely to Owner would result in a Materially Adverse Change.
4.1.7 FINANCIAL CONDITION
Holdings's audited consolidated balance sheet for its most-recent
fiscal year ended before the Issuance Date, included in Holdings's most-recent
Annual Report on Form 10-K filed by Holdings with the SEC, and the related
consolidated statements of operations and cash flows for the period then ended,
have been prepared in accordance with GAAP and fairly present in all material
respects the financial condition of Holdings and its consolidated
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subsidiaries as of such date and the results of its operations and cash flows
for such period, and since the date of such balance sheet, there has been no
materially adverse change in such financial condition or operations, except for
matters disclosed in (a) the financial statements referred to above, or (b) any
subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by
Holdings with the SEC before the Issuance Date.
4.1.8 REGISTRATION AND RECORDATION
Except for [(a) registering the Aircraft with the FAA in Owner's name,]
(b) filing for recordation (and recording) the FAA-Filed Documents, (c) filing
the Financing Statements (and continuation statements relating thereto at
periodic intervals), and (d) affixing the nameplates referred to in (S) 4.02(f)
of the Mortgage, no further action, including filing or recording any document
(including any financing statement under UCC Article 9) is necessary in order to
establish and perfect Mortgagee's Lien on the Aircraft, as against Owner and any
other Person, in any applicable jurisdictions in the United States. On the
Delivery Date, subject to making the filings described above, Mortgagee shall
have a duly-perfected first-priority Lien on all of the then-existing items of
the Collateral (subject to no Liens other than Permitted Liens not of record).
4.1.9 UCC LOCATION
Owner's chief executive office and chief place of business (as defined
in UCC Article 9) are located at 9955 AirTran Blvd., Orlando, FL 32807.
4.1.10 NO DEFAULT
No Default exists.
4.1.11 NO EVENT OF LOSS
No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to Owner's Actual Knowledge, no circumstance, condition, act, or
event has occurred that, with the giving of notice or lapse of time, gives rise
to or constitutes an Event of Loss to the Airframe or any Engine.
4.1.12 COMPLIANCE WITH LAWS
(a) Owner is a Citizen of the United States and a U.S. Air Carrier.
(b) Owner holds all licenses, permits, and franchises from the
appropriate Government Entities necessary to authorize Owner to engage in air
transportation and to carry on scheduled commercial passenger service as
currently conducted, except where the failure to hold any such license, permit,
or franchise would not give rise to a Materially Adverse Change to Owner.
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(c) Owner is not an "investment company" or a company controlled by an
"investment company" within the meaning of the Investment Company Act of 1940.
4.1.13 SECURITIES LAWS
Neither Owner nor any Person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft, or any of the Equipment Notes or any other
interest in or security under the Mortgage, for sale to, or solicited any offer
to acquire any such interest or security from, or has sold any such interest or
security to, any Person in violation of the Securities Act.
4.1.14 BROKER'S FEES
No Person acting on behalf of Owner is or will be entitled to any
broker's fee, commission, or finder's fee in connection with the Transactions,
other than the fees and expenses payable by Owner in connection with the sale of
the Pass-Through Certificates.
4.1.15 SECTION 1110
Mortgagee will be entitled to the benefits of Section 1110 (as
currently in effect) with respect to the right to take possession of the
Airframe and Engines, as provided in the Mortgage, in the event of a case under
Chapter 11 of the Bankruptcy Code in which Owner is a debtor.
4.1.16 TITLE
On the Closing Date, Owner will have good and marketable title to the
Aircraft, free and clear of all Liens except Permitted Liens not of record.
4.1.17 CONDITION OF AIRCRAFT
The Aircraft is fully equipped to operate in commercial service, does
not require any modifications, additions, or improvements for its intended use
by Owner, and complies with all governmental requirements governing the service
in which the Aircraft is being used and is anticipated to be used by Owner and
is in the condition required by the Mortgage. The Aircraft has been duly
certificated by the FAA as to type. A current and valid airworthiness
certificate issued by the FAA is in effect with respect to the Aircraft (or, if
not yet in effect because the Aircraft has not yet been FAA-registered, the
Aircraft is in such condition as to be immediately eligible for an FAA
airworthiness certificate upon FAA registration).
4.1.18 INSURANCE
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On the Delivery Date, the insurance required by the Mortgage is in full
force and effect, and all premiums which have become due or are due with respect
to the insurance required to be provided by Owner in respect of the Aircraft or
required under (S) 4.06 of the Mortgage have been paid.
4.1.19 MARGIN REQUIREMENTS
Owner will not directly or indirectly use any of the proceeds from the
issuance of the Equipment Notes so as to result in a violation of Regulation T,
U, or X of the Board of Governors of the Federal Reserve System.
4.1.20 ERISA
No Plan maintained by Owner or any entity required to be aggregated
with Owner under Code (S) 414(b) or (c) (an "ERISA Affiliate") has incurred an
"accumulated funding deficiency" (within the meaning of ERISA), and neither
Owner nor any ERISA Affiliate of Owner has incurred any material liability to
the Pension Benefit Guaranty Corporation.
4.2 SSB'S REPRESENTATIONS AND WARRANTIES
SSB represents and warrants (with respect to (S) 4.2.10, solely in its
capacity as Subordination Agent) to Owner that:
4.2.1 ORGANIZATION, ETC.
SSB is a national banking association duly organized, validly existing,
and in good standing under the Laws of the United States, with banking and trust
authority to execute, deliver, and perform its obligations under the
Pass-Through Trustee Agreements and the Operative Agreements to which it is a
party.
4.2.2 CORPORATE AUTHORIZATION
SSB has taken (or caused to be taken) all necessary corporate action
(including obtaining any consent or approval of stockholders required by Law or
by its articles of association or by-laws) to authorize the execution and
delivery by SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(as applicable) of the Pass-Through Trustee Agreements and the Operative
Agreements to which it is a party and the performance by SSB, Mortgagee, each
Pass-Through Trustee, and Subordination Agent (as applicable) of its obligations
thereunder.
4.2.3 NO VIOLATION
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The execution and delivery by SSB, Mortgagee, each Pass-Through
Trustee, and Subordination Agent (as applicable) of the Pass-Through Trustee
Agreements and the Operative Agreements to which it is a party, and the
performance by SSB, Mortgagee, each Pass-Through Trustee, and Subordination
Agent (as applicable) of its obligations thereunder, do not and will not (a)
violate any provision of SSB's articles of association or by-laws, (b) violate
any Law applicable to or binding on SSB governing SSB's banking or trust powers
or (except in the case of any Law relating to any Plan) Mortgagee, any
Pass-Through Trustee, or Subordination Agent, or (c) violate or constitute any
default under, or result in the creation of any Lien (other than the Lien of the
Mortgage) upon any property of SSB, Mortgagee, any Pass-Through Trustee,
Subordination Agent, or any of SSB's subsidiaries under any lease, loan, or
other agreement to which SSB, Mortgagee, any Pass-Through Trustee, or
Subordination Agent, is a party or by which SSB, Mortgagee, any Pass-Through
Trustee, Subordination Agent, or any of their properties is bound.
4.2.4 APPROVALS
The execution and delivery by SSB, Mortgagee, each Pass-Through
Trustee, and Subordination Agent (as applicable) of the Pass-Through Trustee
Agreements and the Operative Agreements to which it is a party, and the
performance by SSB, Mortgagee, each Pass-Through Trustee, and Subordination
Agent (as applicable) of its obligations thereunder, do not and will not require
the consent, approval, or authorization of, the giving of notice to, the
registration with, the recording or filing of any documents with, or the taking
of any other action in respect of (a) any trustee or other holder of any Debt of
SSB, or (b) any federal or Connecticut Government Entity governing the banking
or trust powers of SSB.
4.2.5 VALID AND BINDING AGREEMENTS
The Pass-Through Trustee Agreements and the Operative Agreements to
which it is a party have been duly authorized, executed, and delivered by SSB,
Mortgagee, each Pass-Through Trustee, and Subordination Agent (as Applicable),
and (assuming the due authorization, execution, and delivery by the other
parties thereto) constitute legal, valid, and binding obligations of SSB,
Mortgagee, each Pass-Through Trustee, and Subordination Agent (as applicable),
and are enforceable against SSB, Mortgagee, each Pass-Through Trustee, and
Subordination Agent (as applicable) in accordance with their terms, except as
such enforceability may be limited by bankruptcy, insolvency, or other similar
Laws affecting the rights of creditors generally and general principles of
equity.
4.2.6 CITIZENSHIP
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SSB is a Citizen of the United States.
4.2.7 NO LIENS
There are no Liens attributable to SSB in respect of all or any part of
the Collateral (other than Liens created by the Operative Agreements).
4.2.8 LITIGATION
There are no pending or, to SSB's Actual Knowledge, threatened actions
or proceedings against SSB, Mortgagee, any Pass-Through Trustee, or
Subordination Agent, before any Government Entity that, if determined adversely
to SSB, Mortgagee, any Pass-Through Trustee, or Subordination Agent, would
materially adversely affect the ability of SSB, Mortgagee, any Pass-Through
Trustee, or Subordination Agent to perform its obligations under any of
Mortgagee Agreements, the Pass-Through Trustee Agreements, or Subordination
Agent Agreements.
4.2.9 SECURITIES LAWS
Neither SSB nor any Person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Collateral or any of the
Equipment Notes or any other interest in or security under the Collateral for
sale to, or solicited any offer to acquire any such interest or security from,
or has sold any such interest or security to, any Person other than
Subordination Agent and the Pass-Through Trustees, except for the offering and
sale of the Pass-Through Certificates.
4.2.10 INVESTMENT
Subordination Agent has not directly or indirectly offered any
Equipment Note for sale to any Person or solicited any offer to acquire any
Equipment Notes from any Person, nor has the Subordination Agent authorized
anyone to act on its behalf to offer directly or indirectly any Equipment Note
for sale to any Person, or to solicit any offer to acquire any Equipment Note
from any Person; and Subordination Agent is not in default under any Liquidity
Facility.
4.2.11 TAXES
There are no Taxes payable by any Pass-Through Trustee or SSB imposed
by Connecticut or any political subdivision or taxing authority of either state
in connection with such Pass-Through Trustee's or SSB's execution, delivery, and
performance of this Agreement or any of the Pass-Through Trustee Agreements
(other than franchise or other taxes based on or measured by any fees or
compensation received by any such Pass-Through Trustee or SSB for services
rendered in connection with the transactions contemplated by any of the
Pass-Through Trust Agreements), and there are no Taxes payable by any
Pass-Through
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Trustee or SSB imposed by Connecticut or any political subdivision or taxing
authority of such state in connection with the acquisition, possession, or
ownership by any such Pass-Through Trustee of any of the Equipment Notes (other
than franchise or other taxes based on or measured by any fees or compensation
received by any such Pass-Through Trustee or SSB for services rendered in
connection with the transactions contemplated by any of the Pass-Through Trust
Agreements), and, assuming that the trusts created by the Pass-Through Trust
Agreements will not be taxable as corporations, but, rather, that each will be
characterized as a grantor trust under subpart E, Part I of Subchapter J of the
Code or as a partnership under Subchapter K of the Code, such trusts will not be
subject to any Taxes imposed by Connecticut or any political subdivision of such
state.
4.2.12 BROKER'S FEES
No Person acting on behalf of SSB, Mortgagee, any Pass-Through Trustee,
or Subordination Agent is or will be entitled to any broker's fee, commission,
or finder's fee in connection with the Transactions.
5. COVENANTS
5.1 OWNER'S COVENANTS
Owner agrees, for the benefit of Note Holder and Mortgagee, as follows:
5.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER
Owner shall at all times maintain its corporate existence, except as
permitted by (S) 4.07 of the Mortgage, and shall at all times remain a U.S. Air
Carrier.
5.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE
Owner will give to Mortgagee timely written notice (but in any event at
least 30 days before the expiration of the period of time specified under
applicable Law to prevent lapse of perfection) of any relocation of its chief
executive office (as defined in UCC Article 9), and will promptly take any
action required by (S) 5.1.3(c) as a result of such relocation.
5.1.3 CERTAIN ASSURANCES
(a) Owner shall duly execute, acknowledge, and deliver (or cause to be
executed, acknowledged, and delivered) all such further documents, and shall do
and cause to be done such further things, as Mortgagee reasonably requests
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to accomplish the purposes of the Operative Agreements, provided that any
document so executed by Owner will not expand any obligations or limit any
rights of Owner in respect of the Transactions.
(b) Owner shall promptly take such action with respect to the
recording, filing, re-recording, and re-filing of the Mortgage, and any
supplements thereto, as shall be necessary to continue the perfection and
priority of the Lien created by the Mortgage.
(c) Owner will cause the FAA-Filed Documents, the Financing Statements,
and all continuation statements (and any amendments necessitated by any
combination, consolidation, or merger of Owner, or any relocation of its chief
executive office) in respect of the Financing Statements to be prepared and,
subject only to Mortgagee's execution and delivery thereof, duly and timely
filed and recorded, or filed for recordation, to the extent permitted under the
Transportation Code (with respect to the FAA-Filed Documents) or the UCC or
similar law of any other applicable jurisdiction (with respect to such other
documents).
(d) If the Aircraft is registered in a country other than the United
States pursuant to (S) 4.02(e) of the Mortgage and (S) 5.4.5, Owner will furnish
to Mortgagee annually while the Aircraft is not U.S.-registered (starting with
the calendar year after such registration is effected) an opinion of special
counsel reasonably satisfactory to Mortgagee stating that, in the opinion of
such counsel, either (1) such action has been taken with respect to the
recording, filing, re-recording, and re-filing of the Operative Agreements and
any supplements and amendments thereto as is necessary to establish, perfect,
and protect the Lien created by the Mortgage, reciting the details of such
actions, or (2) no such action is necessary to maintain the perfection of such
Lien.
5.1.4 SECURITIES LAWS
Neither Owner nor any Person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in any of the Equipment Notes or any
other interest in or security under the Mortgage, for sale to, or solicit any
offer to acquire any such interest or security from, or sell any such interest
or security to, any Person in violation of the Securities Act or applicable
state or foreign securities Laws.
5.1.5 ASSET DISPOSITIONS
Owner will not transfer or assign assets, or pay dividends to any
Affiliate, subsidiary, or related company, if such a transfer, assignment, or
payment
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would materially impair Owner's ability to meet its obligations under the
Operative Agreements.
5.2 SSB'S COVENANTS
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
agree, for Owner's benefit, as follows:
5.2.1 LIENS
SSB (a) will not directly or indirectly create, incur, assume, or
suffer to exist any Lien attributable to it on or with respect to all or any
part of the Collateral or the Aircraft (other than Liens created by the
Operative Agreements), (b) will, at its own cost and expense, promptly take such
action as is necessary to discharge any such Lien attributable to SSB on all or
any part of the Collateral or the Aircraft, and (c) will personally hold
harmless and indemnify Owner, each Note Holder, each of their respective
Affiliates, successors, and permitted assigns, and the Collateral from and
against (1) any and all Expenses, and (2) any interference with the possession,
operation, or other use of all or any part of the Aircraft, imposed on, incurred
by, or asserted against any of the foregoing as a consequence of any such Lien.
5.2.2 SECURITIES ACT
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(respectively) will not offer any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Collateral, or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicit any offer to acquire any such interest or security from, or sell
any such interest or security to, any Person in violation of the Securities Act
or applicable state or foreign securities Laws, provided, that the foregoing
shall not impose on SSB any responsibility with respect to any such offer, sale,
or solicitation by any other party hereto or the initial sale of the Equipment
Notes to Subordination Agent.
5.2.3 PERFORMANCE OF AGREEMENTS
SSB, Mortgagee, each Pass-Through Trustee, and Subordination Agent
(respectively) shall perform its obligations under the Pass-Through Trustee
Agreements and the Operative Agreements in accordance with their terms.
5.2.4 WITHHOLDING TAXES
SSB shall indemnify (on an after-tax basis) and hold harmless Owner
against any United States withholding taxes (and related interest, penalties,
and additions to tax) as a result of SSB's failure to withhold on payments to
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any Note Holder who does not provide to Mortgagee necessary certificates or
forms to substantiate the right to exemption from such withholding tax.
5.3 NOTE HOLDERS' COVENANTS
Each Note Holder (including Subordination Agent) as to itself only,
agrees for the benefit of Owner and Mortgagee as follows:
5.3.1 WITHHOLDING TAXES
Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on
an after-tax basis) and hold harmless Owner and Mortgagee against any United
States withholding taxes (and related interest, penalties, and additions to tax)
as a result of the inaccuracy or invalidity of any certificate or form provided
by such Note Holder to Mortgagee in connection with such withholding taxes. Any
amount payable under this (S) 5.3.2 shall be paid within 30 days after the
pertinent Note Holder receives a written demand therefor.
5.3.2 TRANSFER; COMPLIANCE
(a) Such Note Holder will (1) not transfer any Equipment Note or
interest therein in violation of the Securities Act or applicable state or
foreign securities Law; provided, that the foregoing provisions of this (S)
5.3.2 shall not impose on such Note Holder any responsibility for any such
offer, sale, or solicitation by any other party hereto, and (2) perform and
comply with the obligations specified to be imposed on it (as a Note Holder)
under the Mortgage and the Equipment Notes.
(b) Such Note Holder will not sell, assign, convey, exchange, or
otherwise transfer any Equipment Note or any interest in, or represented by, any
Equipment Note (this provision not being applicable to the Pass-Through
Certificates) unless the proposed transferee thereof first provides Owner with
the following:
(1) a written representation and covenant that either (aa) no
portion of the funds it uses to purchase, acquire and hold such
Equipment Note or interest directly or indirectly constitutes, or may
be deemed under the Code or ERISA or any rulings, regulations, or court
decisions thereunder to constitute, the assets of any Plan, or (bb) the
transfer, and subsequent holding, of such Equipment Note or interest
shall not involve or give rise to a transaction that constitutes a
prohibited transaction within the meaning of ERISA (S) 406 or Code (S)
4975(c)(1) involving Owner, a Pass-Through Trustee, Subordination
Agent, or the proposed transferee (other than a transaction that is
exempted from the prohibitions of such sections by applicable
provisions of ERISA or the
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Code or administrative exemptions or regulations issued thereunder);
and
(2) a written covenant that it will not transfer any Equipment
Note or any interest in, or represented by, any Equipment Note unless
the subsequent transferee also makes the representation described in
clause (1) of this (S) 5.3.2(b) and agrees to comply with this clause
(2).
5.4 OTHER AGREEMENTS
5.4.1 [INTENTIONALLY OMITTED]
5.4.2 CONSENTS
Each of each Pass-Through Trustee, Subordination Agent, and Mortgagee
covenants and agrees, for Owner's benefit, that it shall not unreasonably
withhold its consent to any consent or approval requested of it under the terms
of any of the Operative Agreements which by its terms is not to be unreasonably
withheld.
5.4.3 INSURANCE
Each of each Pass-Through Trustee, Subordination Agent, Mortgagee, and
each Note Holder agrees not to obtain or maintain insurance for its own account
as permitted by (S) 4.06 of the Mortgage if such insurance would limit, increase
the cost of, or otherwise adversely affect the coverage of any insurance
required to be obtained or maintained by Owner pursuant to (S) 4.06 of the
Mortgage.
5.4.4 EXTENT OF NOTE HOLDER'S INTEREST
A Note Holder shall not, as such, have any further interest in, or
other right with respect to, the Collateral when and if the principal and
Make-Whole Amount (if any) of and interest on the Equipment Note held by such
Holder, and all other sums, then due and payable to such Holder under any
Operative Agreement, have been paid in full.
5.4.5 FOREIGN REGISTRATION
(a) Each Note Holder and Mortgagee hereby agree, for Owner's benefit
that, subject to (S) 4.02(b) of the Mortgage, Owner shall be entitled to
register the Aircraft or cause the Aircraft to be registered in a country other
than the United States, if Mortgagee receives at least 30 days' prior written
notice of such proposed re-registration, and if:
(1) no Special Default exists at the time of such
registration;
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(2) such proposed change of registration is made in connection
with a Permitted Lease;
(3) such country is a country with which the United States
then maintains normal diplomatic relations or, if Taiwan, the United
States then maintains diplomatic relations at least as good as those in
effect on the Issuance Date;
(4) any import or export permits necessary to take the
Aircraft into such country and any exchange permits necessary to allow
all Rent and other payments provided for under the Operative Agreements
shall be in full force and effect;
(5) all insurance provided for in the Mortgage shall be in
full force and effect before, at the time of, and after such change in
registration, and Mortgagee receives a certificate of Owner's or a
Permitted Lessee's insurance broker to such effect;
(6) the courts of such jurisdiction would provide
substantially equivalent protection to Mortgagee as provided under U.S.
law in respect of the exercise of remedies, including that there are no
possessory rights in favor of Owner, any Permitted Lessee, or any third
party, including any Government Entity, which would, upon bankruptcy or
other default by Owner or any Permitted Lessee, prevent the return of
the Aircraft to Mortgagee in accordance with and when permitted by the
terms of the Mortgage upon Mortgagee's exercise of its remedies
thereunder, or, if such possessory rights exist, they are not
materially greater than those available to borrowers and lessees under
United States law and there are no procedural impediments to the return
of the Aircraft to Mortgagee greater than under United States law, and
upon termination of any Permitted Lease, registration shall be
terminable without material burden or delay and there is no material
impediment under the laws of such country of registration to the
enforceability (other than immaterial differences in procedures of
enforcement) of the rights and remedies of Mortgagee provided for under
the Operative Agreements (it being understood that, in the absence of
restrictions similar to those imposed under (S)(S) 362 and 363 of the
Bankruptcy Code, rights and remedies similar to those available under
Section 1110 are not required);
(7) Mortgagee receives evidence reasonably satisfactory to it
that such country imposes, or Owner agrees to cause the Aircraft to be
maintained in accordance with, a Maintenance Program as required by (S)
4.02(d) of the Mortgage;
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(8) no Liens (except Permitted Liens) on the Collateral shall
arise by reason of such re-registration, and the Mortgage shall
continue as a first-priority Lien on the Aircraft;
(9) any export licenses, certificates of deregistration, and
powers of attorney required in connection with any repossession or
return of the Aircraft will be able to be obtained in the normal course
without material delay, and without material burden on Mortgagee
(however, Owner shall be responsible for the cost thereof);
(10) the Aircraft has been duly certificated as to type and
airworthiness by the appropriate aviation authority of such country;
(11) all action is taken as Mortgagee deems reasonably
necessary (including any increase in or changes in types of insurance
coverage or change in indemnities to take into account differences in
applicable Laws) to ensure that all insurance and indemnities provided
for in the Operative Agreements shall be in full force and effect prior
to, at the time of, and following such re-registration; and
(12) Mortgagee receives an opinion of counsel (subject to
customary exceptions) reasonably satisfactory to Mortgagee, addressed
to Mortgagee, each Note Holder, and each Certificate Holder, to the
effect that:
(aa) such country recognizes Owner's ownership
interest in the Aircraft;
(bb) Owner's obligations, and Mortgagee's rights and
remedies, under the Mortgage are valid, binding and
enforceable under the laws of such jurisdiction (or the laws
of the jurisdiction to which the laws of such jurisdiction
would refer as the applicable governing law);
(cc) after giving effect to such change in
registration, the Lien of the Mortgage on Owner's right,
title, and interest in and to the Aircraft continue as a valid
and duly-perfected first-priority security interest and all
filing, recording, or other action necessary to protect the
same shall have been accomplished (or, if such opinion cannot
be given at the time of such proposed change in registration
because such change in registration is not yet effective, (1)
the opinion shall detail what filing, recording, or other
action is necessary, and (2) Mortgagee receive a certificate
from Owner that all possible preparations to accomplish such
filing, recording, and other action are done, and such filing,
recording, and other action
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are accomplished, and a supplemental opinion to that effect
shall be delivered to Mortgagee promptly after the effective
date of such change in registration;
(dd) unless Owner or the Permitted Lessee agrees to
provide insurance covering the risk of requisition of use of
the Aircraft by the government of such country (so long as the
Aircraft is registered under the laws of such country), the
laws of such country require fair compensation by the
government of such country payable in currency freely
convertible into Dollars and freely removable from such
country (without license or permit, unless Owner before such
proposed reregistration has obtained such license or permit)
for the taking or requisition by such government of such use;
(ee) it is not necessary, solely as a consequence of
such change in registration and without giving effect to any
other activity of Mortgagee (or any Affiliate of Mortgagee),
for Mortgagee to qualify to do business in such jurisdiction
as a result of such re-registration in order to exercise any
rights or remedies with respect to the Aircraft pursuant to
the Mortgage;
(ff) neither Mortgagee nor any Note Holder nor any
Certificate Holder will be subjected to any adverse tax
consequences as a result of such re-registration for which
Owner is not required to indemnify such Person, unless Owner
agrees to indemnify such Person therefor by means of an
indemnity agreement reasonably satisfactory to such Person
(and Holdings guarantees such indemnity pursuant to the
Guarantee); and
(gg) to the effect set forth in clauses (5), (7), (9)
(including an annual filing opinion), (10), and (11), subject
to then-customary assumptions, exceptions, and limitations,
and stating that such country maintains normal diplomatic
relations with the United States.
(b) In addition, as a condition to any change in registration Owner
shall have given to Mortgagee assurances reasonably satisfactory to Mortgagee:
(1) that the provisions of (S) 4.06 of the Mortgage have been
complied with after giving effect to such change of registration;
(2) of Owner's payment of all reasonable out-of-pocket
expenses of each Note Holder and Mortgagee in connection with such
change of registry, including (aa) the reasonable fees and
disbursements of counsel
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to Mortgagee, (bb) any filing or recording fees, Taxes, or similar
payments incurred in connection with the change of registration of the
Aircraft and the creation and perfection of the security interest
therein in favor of Mortgagee for the benefit of Note Holders, and (cc)
all costs and expenses incurred in connection with any filings
necessary to continue in the United States the perfection of the
security interest in the Aircraft in favor of Mortgagee for the benefit
of Note Holders; and
(3) to the effect that the tax and other indemnities in favor
of each Person named as an indemnitee under any other Operative
Agreement afford each such Person substantially the same protection as
provided before such change of registration (or Owner agrees to provide
additional indemnities that, together with such original indemnities,
in the reasonable judgment of Mortgagee, afford such protection).
5.4.6 INTEREST IN CERTAIN ENGINES
Each Note Holder and Mortgagee agree, for the benefit of each lessor,
conditional seller, or secured party of any airframe or engine leased to,
purchased by, or owned by Owner or any Permitted Lessee subject to a lease,
conditional sale, or other security agreement that it will not acquire or claim,
as against such lessor, conditional seller, 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, conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.
6. CONFIDENTIALITY
Owner, Note Holders, and Mortgagee shall keep the Participation
Agreement and Annex B to the Mortgage confidential and shall not disclose, or
cause to be disclosed, the same to any Person, except (a) to Certificate
Holders, (b) to prospective and permitted transferees of Owner's, a Note
Holder's, Liquidity Provider's, Mortgagee's, a Certificate Holder's, or other
Mortgage Indemnitee's interest or their counsel, independent insurance brokers,
auditors, or other agents who agree to hold such information confidential, (c)
to Owner's, a Note Holder's, Liquidity Provider's, a Pass-Through Trustee's,
Mortgagee's, or other Mortgage Indemnitee's counsel, independent insurance
brokers, auditors, or other agents, Affiliates, or investors who agree to hold
such information confidential, (d) as may be required by any statute, court, or
administrative order or decree, legal process, or governmental ruling or
regulation, including those of any applicable insurance regulatory bodies
(including the National Association of Insurance Commissioners), federal or
state banking examiners, Internal Revenue Service auditors, or any stock
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exchange, (e) with respect to a Note Holder or any Pass-Through Trustee, to a
nationally-recognized rating agency for the purpose of obtaining a rating on the
Equipment Notes or the Pass-Through Certificates or to support an NAIC rating
for the Equipment Notes, or (f) to such other Persons as are reasonably deemed
necessary by the disclosing party in order to protect the interests of such
party or for the purposes of enforcing such documents by such party; provided,
that any and all disclosures permitted by clauses (d), (e), and (f) above shall
be made only to the extent necessary to meet the specific requirements or needs
of the Persons making such disclosures.
7. INDEMNIFICATION AND EXPENSES
7.1 GENERAL INDEMNITY
7.1.1 INDEMNITY
Whether or not any of the Transactions are consummated, Owner shall
indemnify, protect, defend, and hold harmless each Indemnitee from, against, and
in respect of, and shall pay on a net after-tax basis, any and all Expenses of
any kind or nature whatsoever that may be imposed on, incurred by, or asserted
against any Indemnitee, relating to, resulting from, or arising out of or in
connection with any one or more of the following:
(a) the Operative Agreements, the Note Purchase Agreement, the
Pass-Through Agreements, or the enforcement of any of the
terms of any of the Operative Agreements, the Note Purchase
Agreement, or the Pass-Through Agreements;
(b) the Aircraft, the Airframe, any Engine, or any Part,
including, with respect thereto, (1) the manufacture, design,
purchase, acceptance, nonacceptance, rejection, ownership,
registration, reregistration, deregistration, delivery,
nondelivery, lease, sublease, assignment, possession, use,
non-use, operation, maintenance, testing, repair, overhaul,
condition, alteration, modification, addition, improvement,
storage, airworthiness, replacement, repair, sale,
substitution, return, abandonment, redelivery, or other
disposition of the Aircraft, any Engine, or any Part, (2) any
claim or penalty arising out of violations of applicable Laws
by Owner (or any Permitted Lessee), (3) tort liability,
whether or not arising out of the negligence of any Indemnitee
(whether active, passive, or imputed), (4) death or property
damage of passengers, shippers, or others, (5) environmental
control, noise, or pollution, and (6) any Liens in respect of
the Aircraft, any Engine, or any Part;
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(c) the offer, sale, assumption, or delivery of any Equipment
Notes, the Note Purchase Agreement, Pass-Through Certificates,
or any interest therein or represented thereby; and
(d) any breach of or failure to perform or observe, or any other
noncompliance with, any covenant, agreement, or other
obligation to be performed by Owner under any Operative
Agreement to which it is party or any Pass-Through Agreement
or the falsity of any representation or warranty of Owner in
any Operative Agreement to which it is party or any
Pass-Through Agreement.
7.1.2 EXCEPTIONS
Notwithstanding anything in (S) 7.1.1, Owner shall not be required to
indemnify, protect, defend, and hold harmless any Indemnitee pursuant to (S)
7.1.1 against any Expense of such Indemnitee:
(a) for any Taxes or a loss of Tax benefit, whether or not Owner
is required to indemnify therefor pursuant to (S) 7.3;
(b) except to the extent attributable to acts or events occurring
prior to such required termination, acts or events (other than
acts or events related to Owner's performance of its
obligations pursuant to the terms of the Operative Agreements)
that occur after the Mortgage is required to be terminated in
accordance with (S) 11.01 of the Mortgage; provided, that
nothing in this clause (b) shall exclude or limit any
Indemnitee's claim under applicable Law by reason of an Event
of Default or for damages from Owner for breach of Owner's
covenants in the Operative Agreements, or release Owner from
any of its obligations under the Operative Agreements that
expressly provide for performance after termination of the
Mortgage;
(c) to the extent attributable to any Transfer (voluntary or
involuntary) by or on behalf of such Indemnitee of any
Equipment Note or interest therein, except for out-of-pocket
costs and expenses incurred as a result of any such Transfer
pursuant to the exercise of remedies under any Operative
Agreement;
(d) to the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as
defined at the end of this (S) 7.1.2) (other than gross
negligence or willful misconduct imputed to such Person by
reason of its interest in the Aircraft or any Operative
Agreement);
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(e) to the extent attributable to the incorrectness or breach of
any representation or warranty, of such Indemnitee or any
related Indemnitee, contained in or made pursuant to any
Operative Agreement or any Pass-Through Agreement;
(f) to the extent attributable to the failure, by such Indemnitee
or any related Indemnitee, to perform or observe any
agreement, covenant, or condition on its part to be performed
or observed in any Operative Agreement or any Pass-Through
Agreement;
(g) to the extent attributable to the offer or sale, by such
Indemnitee or any related Indemnitee, of any interest in the
Aircraft, the Equipment Notes, the Pass-Through Certificates,
or any similar interest, in violation of the Securities Act or
other applicable federal, state, or foreign securities Laws
(other than any thereof caused by acts or omissions of Owner);
(h) (1) with respect to any Indemnitee other than Mortgagee, to
the extent attributable to Mortgagee's failure to distribute
funds received and distributable by it in accordance with the
Mortgage, (2) with respect to any Indemnitee other than
Subordination Agent, to the extent attributable to
Subordination Agent's failure to distribute funds received and
distributable by it in accordance with the Intercreditor
Agreement, (3) with respect to any Indemnitee other than the
Pass-Through Trustees, to the extent attributable to a
Pass-Through Trustee's failure to distribute funds received
and distributable by it in accordance with the Pass-Through
Trust Agreements, (4) with respect to any Indemnitee other
than Escrow Agent, to the extent attributable to Escrow
Agent's failure to pay funds received and payable by it in
accordance with any Escrow Agreement, (5) with respect to any
Indemnitee other than Paying Agent, to the extent attributable
to Paying Agent's failure to distribute funds received and
distributable by it in accordance with any Escrow Agreement,
(6) to the extent attributable to Depository's failure to pay
funds payable by it in accordance with any Deposit Agreement,
(7) with respect to Mortgagee, to the extent attributable to
its negligence or willful misconduct in the distribution of
funds received and
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distributable by it in accordance with the Mortgage, (8) with
respect to Subordination Agent, to the extent attributable to
its negligence or willful misconduct in the distribution of
funds received and distributable by it in accordance with the
Intercreditor Agreement, (9) with respect to any Pass-Through
Trustees, to the extent attributable to its negligence or
willful misconduct in the distribution of funds received and
distributable by it in accordance with the Pass-Through Trust
Agreements, (10) with respect to Escrow Agent, to the extent
attributable to its negligence or willful misconduct in the
payment of funds received and payable by it in accordance with
any Escrow Agreement, and (11) with respect to Paying Agent,
to the extent attributable to its negligence or willful
misconduct in the distribution of funds received and
distributable by it in accordance with any Escrow Agreement;
(i) other than during the existence of an Event of Default, to the
extent attributable to the authorization or giving or
withholding of any future amendments, supplements, waivers, or
consents with respect to any Operative Agreement or
Pass-Through Agreement, other than any requested by Owner or
required by or made pursuant to the terms of the Operative
Agreements or Pass-Through Agreements (unless such requirement
results from the actions of an Indemnitee not required by or
made pursuant to the Operative Agreements or the Pass-Through
Agreements);
(j) to the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees
shall not be paid by or be reimbursed by Owner;
(k) to the extent that it is an ordinary and usual operating or
overhead expense;
(l) for any Lien attributable to such Indemnitee or any related
Indemnitee that Owner is not obligated to discharge under the
Operative Agreements;
(m) if another provision of an Operative Agreement or a
Pass-Through Agreement specifies the extent of Owner's
responsibility or obligation with respect to such Expense, to
the extent arising from a cause other than Owner's failure to
comply with such specified responsibility or obligation; or
(n) to the extent incurred by or asserted against an Indemnitee as
a result of any "prohibited transaction", within the meaning
of ERISA (S) 406 or Code (S) 4975(c)(1).
For purposes of this (S) 7.1, a Person shall be considered a "related
Indemnitee" of an Indemnitee if that Person is an Affiliate or employer of such
Indemnitee, a director, officer, employee, agent, or servant of such Indemnitee
or any such Affiliate, or a successor or permitted assignee of any of the
foregoing.
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7.1.3 SEPARATE AGREEMENT
This Agreement constitutes a separate agreement with respect to each
Indemnitee, and is enforceable directly by each such Indemnitee.
7.1.4 NOTICE
If an Indemnitee make a claim for any Expense indemnifiable under this
(S) 7.1, such Indemnitee shall give prompt written notice thereof to Owner.
Notwithstanding the foregoing, any Indemnitee's failure to notify Owner as
provided in this (S) 7.1.4, or in (S) 7.1.5, shall not release Owner from any of
its obligations to indemnify such Indemnitee hereunder, except to the extent
that such failure results in an additional Expense to Owner (in which event
Owner shall not be responsible for such additional expense) or materially
impairs Owner's ability to contest such claim.
7.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS;
LIMITATIONS
(a) If any action, suit, or proceeding for which Owner is responsible
under this (S) 7.1 is brought against any Indemnitee, such Indemnitee shall
notify Owner of the commencement thereof, and Owner may, at its expense,
participate in and, to the extent that it so desires (subject to the provisions
of the following paragraph), assume and control the defense thereof and, subject
to (S) 7.1.5(c), settle or compromise it.
(b) Owner or its insurer(s) shall have the right, at its or their
expense, to investigate or, if Owner or its insurer(s) agree not to dispute
liability to the Indemnitee giving notice of such action, suit, or proceeding
under this (S) 7.1.5 for indemnification hereunder or under any insurance
policies pursuant to which coverage is sought, control the defense of, any
action, suit, or proceeding, relating to any Expense for which indemnification
is sought pursuant to this (S) 7.1, and each Indemnitee shall cooperate with
Owner or its insurer(s) with respect thereto; provided, that Owner shall not be
entitled to control the defense of any such action, suit, or proceeding, or to
compromise any such Expense, while any Event of Default under (S) 5.01(a) of the
Mortgage exists. In connection with any such Owner-controlled action, suit, or
proceeding, such Indemnitee shall have the right to participate therein, at its
sole cost and expense, with counsel reasonably satisfactory to Owner, provided
that such Indemnitee's participation does not, in the reasonable opinion of the
independent counsel appointed by Owner or its insurers to conduct such
proceedings, interfere with the defense of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without Owner's prior written consent
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(which shall not be unreasonably withheld or delayed), unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this (S)
7.1.
(d) To the extent that any Expense indemnified by Owner hereunder may
be covered by insurance maintained by Owner, at Owner's expense, each Indemnitee
agrees to cooperate with the insurers in the exercise of their rights to
investigate, defend, or compromise such Expense as may be required to retain the
benefits of such insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this Agreement, Owner may
require such Indemnitee to agree in writing to the terms of this (S) 7 and (S)
11.8 before making any payment to such Indemnitee under this (S) 7.
(f) Nothing in this (S) 7.1.5 shall require an Indemnitee to contest
any Expense or to assume responsibility for or control of any judicial
proceeding with respect thereto.
7.1.6 INFORMATION
Owner will provide the relevant Indemnitee with such information not
within the control of such Indemnitee (but in Owner's control or reasonably
available to Owner) which such Indemnitee reasonably requests, and will
otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under (S) 7.1.5. The Indemnitee shall supply Owner with
such information not within the control of Owner (but in such Indemnitee's
control or reasonably available to such Indemnitee) which Owner reasonably
requests to control or participate in any proceeding to the extent permitted by
(S) 7.1.5.
7.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER
ASSURANCES
Upon payment in full by or on behalf of Owner of any indemnity provided
for under this Agreement, Owner, without any further action and to the full
extent permitted by Law, will be subrogated to all rights and remedies of the
Person indemnified (other than with respect to any of such Indemnitee's
insurance policies or in connection with any indemnity claim of such Indemnitee
under (S) 6.03 or (S) 8.01 of the Mortgage) in respect of the matter as to which
such indemnity was paid. Each Indemnitee will give such further assurances or
agreements and cooperate with Owner to permit Owner to pursue such claims, to
the extent reasonably requested by Owner and at Owner's expense.
7.1.8 REFUNDS
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If an Indemnitee receives any refund, in whole or in part, with respect
to any Expense paid by Owner hereunder, that Indemnitee will promptly pay the
amount refunded (but not an amount in excess of the amount Owner or any of its
insurers has paid in respect of such Expense) over to Owner unless an Event of
Default exists, in which case such amount shall be paid over to Mortgagee to
hold as security for Owner's obligations under the Operative Agreements or, if
requested by Owner, applied to satisfy those obligations.
7.2 EXPENSES
7.2.1 INVOICES AND PAYMENT
Mortgagee, the Pass-Through Trustees, and Subordination Agent shall
promptly submit to Owner for its prompt approval (which shall not be
unreasonably withheld) copies of invoices in reasonable detail of the
Transaction Expenses for which it is responsible for providing information as
they are received (but in no event later than the 90th day after the Closing
Date). If so submitted and approved, Owner agrees promptly (and not later than
the 105th day after the Closing Date) to pay Transaction Expenses.
7.2.2 PAYMENT OF OTHER EXPENSES
Owner shall pay (a) the ongoing fees and expenses of Mortgagee, and (b)
all reasonable out-of-pocket costs and expenses (including the reasonable fees
and disbursements of counsel) incurred by Mortgagee or any Note Holder
attributable to any waiver, amendment, or modification of any Operative
Agreement to the extent requested by Owner.
7.3 GENERAL TAX INDEMNITY
7.3.1 GENERAL
Except as provided in (S) 7.3.2, Owner agrees that each payment paid by
Owner under the Equipment Notes, and any other payment or indemnity paid by
Owner to a Tax Indemnitee under any Operative Agreement, shall be free of all
withholdings or deductions with respect to Taxes of any nature, and if Owner is
required by applicable law to make any such withholding or deduction for any
such payment, (a) Owner shall make all such withholdings or deductions, (b) the
amount payable by Owner shall be increased so that, after making all required
withholdings or deductions, such Tax Indemnitee receives the same amount that it
would have received had no such withholdings or deductions been made, and (c)
Owner shall pay the full amount withheld or deducted to the relevant Taxing
Authority in accordance with applicable law. Except as provided in (S) 7.3.2,
and whether or not any of the transactions contemplated hereby are consummated,
Owner shall pay, indemnify, protect,
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defend, and hold harmless each Tax Indemnitee from all Taxes imposed by any
Taxing Authority imposed on or asserted against any Tax Indemnitee or the
Aircraft, the Airframe, any Engine, or any Part, or any interest in any of the
foregoing (whether or not indemnified against by any other Person), upon or with
respect to the Operative Agreements or the transactions or payments contemplated
thereby, including any Tax imposed upon or with respect to (x) the Aircraft, the
Airframe, any Engine, any Part, any Operative Agreement (including any Equipment
Notes), any data, or any other thing delivered or to be delivered under an
Operative Agreement, (y) the purchase, manufacture, acceptance, rejection, sale,
transfer of title, return, ownership, mortgaging, delivery, transport, charter,
rental, lease, re-lease, sublease, assignment, possession, repossession,
presence, use, condition, storage, preparation, maintenance, modification,
alteration, improvement, operation, registration, transfer or change of
registration, reregistration, repair, replacement, overhaul, location, control,
imposition of any Lien, financing, refinancing requested by Owner, abandonment,
or other disposition of the Aircraft, the Airframe, any Engine, any Part, any
data, or any other thing delivered or to be delivered under an Operative
Agreement or (z) interest, fees, or other income, proceeds, receipts, or
earnings, whether actual or deemed, arising upon, in connection with, or in
respect of any of the Operative Agreements (including the property or income or
other proceeds with respect to property held as part of the Collateral) or the
transactions contemplated thereby.
7.3.2 CERTAIN EXCEPTIONS
The provisions of (S) 7.3.1 shall not apply to, and Owner shall have no
liability hereunder for, Taxes:
(a) imposed on a Tax Indemnitee by the federal government of the
United States or any Taxing Authority or governmental
subdivision of the United States or therein (including any
state or local Taxing Authority) (1) on, based on, or measured
by gross or net income or gross or net receipts, including
capital gains taxes, excess profits taxes, minimum taxes from
tax preferences, alternative minimum taxes, branch profits
taxes, accumulated earnings taxes, personal holding company
taxes, succession taxes and estate taxes, and any withholding
taxes on, based on, or measured by gross or net income or
receipts, or (2) on, or with respect to, or measured by
capital or net worth or in the nature of a franchise tax or a
tax for the privilege of doing business (other than, in the
case of clause (1) or (2), sales, use, license, or property
Taxes);
(b) imposed on a Tax Indemnitee by any Taxing Authority or
governmental subdivision thereof or therein outside of the
United
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States (including any Taxing Authority in or of a territory,
possession or commonwealth of the United States) (1) on, based
on, or measured by gross or net income or gross or net
receipts, including capital gains taxes, excess profits taxes,
minimum taxes from tax preferences, alternative minimum taxes,
branch profits taxes, accumulated earnings taxes, personal
holding company taxes, succession taxes and estate taxes, and
any withholding taxes on, based on, or measured by gross or
net income or receipts, or (2) on, or with respect to, or
measured by capital or net worth or in the nature of a
franchise tax or a tax for the privilege of doing business
(other than, in the case of clause (1) or (2), (aa) sales,
use, license, or property Taxes, or (bb) any Taxes imposed by
any Taxing Authority (other than a Taxing Authority within
whose jurisdiction such Tax Indemnitee is incorporated or
organized or maintains its principal place of business) if
such Tax Indemnitee would not have been subject to Taxes of
such type by such jurisdiction but for (i) the location, use,
or operation of the Aircraft, the Airframe, any Engine, or any
Part thereof by an Owner Person within the jurisdiction of the
Taxing Authority imposing such Tax, or (ii) the activities of
any Owner Person in such jurisdiction, including use of any
other aircraft by Owner in such jurisdiction, (iii) the status
of any Owner Person as a foreign entity or as an entity owned
in whole or in part by foreign persons, (iv) Owner having made
(or having been deemed to have made) payments to such Tax
Indemnitee from the relevant jurisdiction, or (v) in the case
of the Pass-Through Trustees, the Note Holders, or any related
Tax Indemnitee, Owner's being incorporated or organized or
maintaining a place of business or conducting activities in
such jurisdiction);
(c) on, with respect to, or measured by any trustee fees,
commissions, or compensation received by the Pass-Through
Trustee, Subordination Agent, or Mortgagee;
(d) that are being contested as provided in (S) 7.3.4;
(e) imposed on any Tax Indemnitee to the extent that such Taxes
result from the gross negligence or willful misconduct of such
Tax Indemnitee or any Affiliate thereof;
(f) imposed on or with respect to a Tax Indemnitee (including the
transferee in those cases in which the Tax on transfer is
imposed on, or is collected from, the transferee) as a result
of a transfer or other disposition (including a deemed
transfer or disposition) by
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such Tax Indemnitee or a related Tax Indemnitee of any
interest in the Aircraft, the Airframe, any Engine, or any
Part, any interest arising under the Operative Agreements, or
any Equipment Note, or as a result of a transfer or
disposition (including a deemed transfer or disposition) of
any interest in a Tax Indemnitee (other than (1) a
substitution or replacement of the Aircraft, the Airframe, any
Engine, or any Part by an Owner Person that is treated for Tax
purposes as a transfer or disposition, or (2) a transfer
pursuant to an exercise of remedies upon a then-existing Event
of Default);
(g) in excess of those that would have been imposed had there not
been a transfer or other disposition by or to such Tax
Indemnitee or a related Tax Indemnitee described in clause (f)
of this (S) 7.3.2;
(h) consisting of any interest, penalties, or additions to tax
imposed on a Tax Indemnitee as a result (in whole or in part)
of a failure of such Tax Indemnitee or a related Tax
Indemnitee to file any return properly and timely, unless such
failure is caused by Owner's failure to fulfill its
obligations (if any) under (S) 7.3.6 with respect to such
return;
(i) resulting from, or that would not have been imposed but for,
any Liens arising as a result of claims against, or acts or
omissions of, or otherwise attributable to such Tax Indemnitee
or a related Tax Indemnitee that Owner is not obligated to
discharge under the Operative Agreements;
(j) imposed on any Tax Indemnitee as a result of the breach by
such Tax Indemnitee or a related Tax Indemnitee of any
covenant of such Tax Indemnitee or any Affiliate thereof
contained in any Operative Agreement or the inaccuracy of any
representation or warranty by such Tax Indemnitee or any
Affiliate thereof in any Operative Agreement;
(k) in the nature of an intangible or similar Tax upon or with
respect to the value or principal amount of the interest of
any Note Holder in any Equipment Note or the loan evidenced
thereby, but only if such Taxes are in the nature of franchise
Taxes or result from the conduct of business by such Tax
Indemnitee in the taxing jurisdiction and are imposed because
of the place of incorporation or the activities unrelated to
the Transactions in the taxing jurisdiction of such Tax
Indemnitee;
(l) imposed on a Tax Indemnitee by a Taxing Authority of a
jurisdiction outside the United States, to the extent that
such
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Taxes would not have been imposed but for a connection between
the Tax Indemnitee or a related Tax Indemnitee and such
jurisdiction imposing such Tax unrelated to the Transactions;
or
(m) relating to ERISA or to Code (S) 4975.
For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees who
are successors, assigns, agents, or Affiliates of such Tax Indemnitee shall be
related Tax Indemnitees.
7.3.3 PAYMENT
(a) Owner's indemnity obligation to a Tax Indemnitee under this (S) 7.3
shall equal the amount which, after taking into account any Tax imposed upon the
receipt or accrual of the amounts payable under this (S) 7.3 and any tax
benefits actually recognized by such Tax Indemnitee as a result of the
indemnifiable Tax (including any benefits recognized as a result of such Tax
Indemnitee's use of an indemnifiable Tax as a credit against Taxes not
indemnifiable under this (S) 7.3), shall equal the amount of the Tax
indemnifiable under this (S) 7.3.
(b) At Owner's request, the computation of the amount of any indemnity
payment owed by Owner or any amount owed by a Tax Indemnitee to Owner pursuant
to this (S) 7.3 shall be verified and certified by an independent public
accounting firm selected by such Tax Indemnitee and reasonably satisfactory to
Owner. Such verification shall be binding. The costs of such verification
(including the fee of such public accounting firm) shall be borne by Owner
unless such verification results in an adjustment in Owner's favor of 5% or more
of the net present value of the payment as computed by such Tax Indemnitee, in
which case the costs shall be paid by such Tax Indemnitee.
(c) Each Tax Indemnitee shall provide Owner with such certifications,
and such information and documentation in such Tax Indemnitee's possession, and
Owner reasonably requests to minimize any indemnity payment pursuant to this (S)
7.3; provided, that notwithstanding anything to the contrary in this (S)
7.3.3(c), no Tax Indemnitee shall be required to provide Owner with any Tax
returns.
(d) Each Tax Indemnitee shall promptly forward to Owner any written
notice, bill, or advice that such Tax Indemnitee receives from any Taxing
Authority concerning any Tax for which it seeks indemnification under this (S)
7.3. Owner shall pay any amount for which it is liable pursuant to this (S) 7.3
directly to the appropriate Taxing Authority if legally permissible, or, upon
demand of a Tax Indemnitee, to such Tax Indemnitee within 30 days of such
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demand (or, if a contest occurs in accordance with (S) 7.3.4, within 30 days
after a Final Determination (as defined below)), but in no event more than one
Business Day before the related Tax is due. If requested by a Tax Indemnitee in
writing, Owner shall furnish to the appropriate Tax Indemnitee the original or a
certified copy of a receipt for Owner's payment of any Tax paid by Owner, or
such other evidence of payment of such Tax as is acceptable to such Tax
Indemnitee. Owner shall also furnish promptly upon written request such data as
any Tax Indemnitee reasonably requires to enable such Tax Indemnitee to comply
with the requirements of any taxing jurisdiction, unless such data are not
reasonably available to Owner or (unless such data are specifically requested by
a Taxing Authority) are not customarily furnished by domestic air carriers under
similar circumstances. For purposes of this (S) 7.3, a "Final Determination" is
(1) a decision, judgment, decree, or other order by any court of competent
jurisdiction that occurs pursuant to the provisions of (S) 7.3.4, which
decision, judgment, decree, or other order has become final and unappealable,
(2) a closing agreement or settlement agreement entered into in accordance with
(S) 7.3.4 that has become binding and is not subject to further review or appeal
(absent fraud, misrepresentation, etc.), or (3) the termination of
administrative proceedings and the expiration of the time for instituting a
claim in a court proceeding.
(e) If any Tax Indemnitee actually realizes a tax savings by reason of
any Tax paid or indemnified by Owner pursuant to this (S) 7.3 (whether such tax
savings arise by means of a foreign tax credit, depreciation or cost recovery
deduction, or otherwise), and such savings is not otherwise taken into account
in computing such payment or indemnity, such Tax Indemnitee shall pay to Owner
an amount equal to the lesser of (1) the amount of such tax savings, plus any
additional tax savings recognized as the result of any payment made pursuant to
this sentence, when, as, if, and to the extent realized, and (2) the amount of
all payments pursuant to this (S) 7.3 by Owner to such Tax Indemnitee (less any
payments previously made by such Tax Indemnitee to Owner pursuant to this (S)
7.3.3 (e)) (and the excess, if any, of the amount described in clause (1) over
the amount described in clause (2) shall be carried forward and applied to
reduce pro tanto any subsequent obligations of Owner to make payments to such
Tax Indemnitee pursuant to this (S) 7.3); provided, that such Tax Indemnitee
shall not be required to make any payment pursuant to this sentence so long as
an Event of Default of a monetary nature exists. If a tax benefit is later
disallowed or denied, the disallowance or denial shall be treated as a Tax
indemnifiable under (S) 7.3.1 without regard to the provisions of (S) 7.3.2
(other than (S) 7.3.2 (f)). Each such Tax Indemnitee shall in good faith use
reasonable efforts in filing its tax returns and in dealing with Taxing
Authorities to seek and claim any such tax benefit.
7.3.4 CONTEST
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(a) If a written claim is made against a Tax Indemnitee for Taxes with
respect to which Owner could be liable for payment or indemnity hereunder, or if
a Tax Indemnitee determines that a Tax is due for which Owner could have an
indemnity obligation hereunder, such Tax Indemnitee shall promptly notify Owner
in writing of such claim (provided, that failure so to notify Owner shall not
relieve Owner of its indemnity obligations hereunder unless the failure to
notify effectively forecloses Owner's rights to require a contest of such
claim), and shall take no action with respect to such claim without Owner's
prior written consent for 30 days following Owner's receipt of such notice;
provided, that, if applicable law requires such Tax Indemnitee to take action
before the end of such 30-day period, such Tax Indemnitee shall, in such notice
to Owner, so inform Owner, and such Tax Indemnitee shall take no action for as
long as it is legally able to avoid taking action (and a Tax Indemnitee shall be
entitled to pay the Tax claimed and sue for a refund before the end of such
30-day period if (1)(aa) the failure to pay the Tax would result in substantial
penalties (unless immediately reimbursed by Owner) and the act of paying the Tax
would not materially prejudice the right to contest, or (bb) the failure to pay
would result in criminal penalties, and (2) such Tax Indemnitee shall take any
action so required in connection with so paying the Tax in a manner that is the
least prejudicial to the pursuit of the contest). In addition, such Tax
Indemnitee shall (provided that Owner shall have agreed to keep such information
confidential other than to the extent necessary in order to contest the claim)
furnish Owner with copies of any requests for information from any Taxing
Authority relating to such Taxes with respect to which Owner may be required to
indemnify hereunder. If requested by Owner in writing within 30 days after its
receipt of such notice, such Tax Indemnitee shall, at Owner's expense (including
all reasonable costs, expenses, and reasonable attorneys' and accountants' fees
and disbursements), in good faith contest (or, if permitted by applicable law,
allow Owner to contest) through appropriate administrative and judicial
proceedings the validity, applicability, or amount of such Taxes by (x)
resisting payment thereof, (y) not paying the Taxes except under protest if
protest is necessary and proper, or (z) if the payment is made, using reasonable
efforts to obtain a refund thereof in an appropriate administrative or judicial
proceeding. If requested to do so by Owner, the Tax Indemnitee shall appeal any
adverse administrative or judicial decision, except that the Tax Indemnitee
shall not be required to pursue any appeals to the United States Supreme Court.
If and to the extent that the Tax Indemnitee is able to separate the contested
issue or issues from other issues arising in the same administrative or judicial
proceeding that are unrelated to the Transactions without (in such Tax
Indemnitee's good faith judgment) adversely affecting such Tax Indemnitee, such
Tax Indemnitee shall permit Owner to control the conduct of any such proceeding
and shall provide to Owner (at Owner's cost and expense) with such information
or data in such Tax Indemnitee's control or possession and
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reasonably necessary to conduct such contest. If the contest is being controlled
by a Tax Indemnitee, such Tax Indemnitee shall consult with Owner in good faith
regarding the manner of contesting such claim, and shall keep Owner reasonably
informed regarding the progress of such contest. A Tax Indemnitee shall not fail
to take any action expressly required by this (S) 7.3.4 (including any action
regarding any appeal of an adverse determination with respect to any claim) or
settle or compromise any claim without Owner's prior written consent (except as
contemplated by (S) 7.3.4(b) or (c)).
(b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee
be required to pursue any contest (or to permit Owner to pursue any contest)
unless (1) Owner agrees to pay such Tax Indemnitee on demand all reasonable
costs and expenses that such Tax Indemnitee incurs in connection with contesting
such Taxes, including all reasonable out-of-pocket costs and expenses and
reasonable attorneys' and accountants' fees and disbursements, (2) if such
contest involves the payment of the claim, Owner advances the amount thereof (to
the extent indemnified hereunder) plus interest, penalties, and additions to tax
with respect thereto that are required to be paid before commencing the contest
on an interest-free after-tax basis to such Tax Indemnitee (and such Tax
Indemnitee shall promptly pay to Owner any net realized tax benefits resulting
from such advance, including any tax benefits resulting from making such
payment), (3) such Tax Indemnitee does not reasonably determine that the action
to be taken will result in any material risk of forfeiture, sale, or loss of the
Aircraft (unless Owner makes provisions to protect the interests of any such Tax
Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee)
(provided, that such Tax Indemnitee shall notify Owner in writing promptly after
it becomes aware of any such risk), (4) no Lease Event of Default exists, unless
Owner has provided security for its obligations hereunder by advancing to such
Tax Indemnitee, before proceeding or continuing with such contest, the amount of
the Tax being contested, plus any interest and penalties and an amount estimated
in good faith by such Tax Indemnitee for expenses, and (5) before commencing any
judicial action controlled by Owner, Owner acknowledges its liability for such
claim hereunder, provided, that Owner shall not be bound by its acknowledgment
if the Final Determination articulates conclusions of law and fact that
demonstrate that Owner has no liability for the contested amounts hereunder.
Notwithstanding the foregoing, if any Tax Indemnitee releases, waives,
compromises, or settles any claim that may be indemnifiable by Owner pursuant to
this (S) 7.3 without Owner's written permission, Owner's obligation to indemnify
such Tax Indemnitee with respect to such claim (and all directly-related claims,
and claims based on the outcome of such claim) shall terminate, subject to (S)
7.3.4(c), and subject to (S) 7.3.4(c), such Tax Indemnitee shall repay to Owner
any amount previously paid or advanced to such Tax
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Indemnitee with respect to such claim, plus interest at the rate that would have
been payable by the relevant Taxing Authority on a refund of such Tax.
(c) Notwithstanding anything contained in this (S) 7.3, a Tax
Indemnitee will not be required to contest the imposition of any Tax, and shall
be permitted to settle or compromise any claim without Owner's consent, if such
Tax Indemnitee (1) waives its right to indemnity under this (S) 7.3 with respect
to such Tax (and any directly-related claim, and any claim the outcome of which
is determined based upon the outcome of such claim), (2) pays to Owner any
amount previously paid or advanced by Owner pursuant to this (S) 7.3 with
respect to such Tax, plus interest at the rate that would have been payable by
the relevant Taxing Authority on a refund of such Tax, and (3) agrees to discuss
with Owner the views or positions of any relevant Taxing Authority with respect
to the imposition of such Tax.
7.3.5 REFUND
If any Tax Indemnitee receives a refund of, or is entitled to a credit
against other liability for, all or any part of any Taxes paid, reimbursed, or
advanced by Owner, such Tax Indemnitee shall pay to Owner within 30 days of such
receipt an amount equal to the lesser of (a) the amount of such refund or credit
plus any net tax benefit (taking into account any Taxes incurred by such Tax
Indemnitee by reason of the receipt of such refund or realization of such
credit) actually realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence (including this clause (a)),
and (b) such tax payment, reimbursement, or advance by Owner to such Tax
Indemnitee theretofore made pursuant to this (S) 7.3 (and the excess, if any, of
the amount described in clause (a) over the amount described in clause (b) shall
be carried forward and applied to reduce pro tanto any subsequent obligation of
Owner to make payments to such Tax Indemnitee pursuant to this (S) 7.3). If, in
addition to such refund or credit, such Tax Indemnitee receives (or is credited
with) an amount representing interest on the amount of such refund or credit,
such Tax Indemnitee shall pay to Owner within 30 days after receiving or
realizing such credit that proportion of such interest fairly attributable to
Taxes paid, reimbursed, or advanced by Owner before the receipt of such refund
or realization of such credit.
7.3.6 TAX FILING
Owner shall timely file any report, return, or statement that is
required to be filed with respect to any Tax which is subject to indemnification
under this (S) 7.3 (except for any such report, return, or statement which a Tax
Indemnitee has timely notified Owner in writing that such Tax Indemnitee intends
to file, or for which such Tax Indemnitee is required by law to file, in its
38
<PAGE>
own name); provided, that the relevant Tax Indemnitee shall furnish Owner with
any information in such Tax Indemnitee's possession or control that is
reasonably necessary to file any such return, report, or statement and that
Owner reasonably requests in writing (but the Tax Indemnitee shall not be
required to furnish copies of its actual tax returns, although it may be
required to furnish relevant information contained therein). Owner shall either
file such report, return, or statement and send a copy to such Tax Indemnitee,
or, if Owner is not permitted to file such report, return, or statement, it
shall notify such Tax Indemnitee of such requirement and prepare and deliver
such report, return, or statement to such Tax Indemnitee in a manner reasonably
satisfactory to such Tax Indemnitee within a reasonable time before the time
such report, return, or statement is to be filed.
7.3.7 FORMS
Each Tax Indemnitee agrees to furnish from time to time to Owner,
Mortgagee, or such other Person as Owner or Mortgagee shall designate, at
Owner's or Mortgagee's request, such duly-executed and properly-completed forms
as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(a) such reduction or exemption is available to such Tax Indemnitee, and (b)
Owner has provided such Tax Indemnitee with any information necessary to
complete such form not otherwise reasonably available to such Tax Indemnitee.
7.3.8 NON-PARTIES
If a Tax Indemnitee is not a party to this Agreement, Owner may require
the Tax Indemnitee to agree in writing, in a form reasonably acceptable to
Owner, to the terms of this (S) 7.3 and (S) 11.8 before making any payment to
such Tax Indemnitee under this (S) 7.3.
7.3.9 SUBROGATION
Upon payment of any Tax by Owner pursuant to this (S) 7.3 to or on
behalf of a Tax Indemnitee, without any further action, Owner shall be
subrogated to any claims that such Tax Indemnitee may have relating to that Tax.
Such Tax Indemnitee shall cooperate with Owner (to the extent such cooperation
does not result in any unreimbursed cost, expense, or liability to such Tax
Indemnitee) to permit Owner to pursue such claims.
7.4 PAYMENTS
Any payments made pursuant to (S) 7.1 or (S) 7.3 shall be due on the
60/th/ day after demand, and shall be made directly to the relevant Indemnitee
or Tax Indemnitee or to Owner, in immediately available funds at such bank or to
39
<PAGE>
such account as specified by such Indemnitee or Tax Indemnitee or Owner (as
applicable) in written directives to the payor, or, if no such direction has
been given, by check of the payor payable to the order of, and mailed to, such
Indemnitee or Tax Indemnitee or Owner (as applicable) by certified mail, postage
prepaid, at its address as set forth in this Agreement.
7.5 INTEREST
If any amount, payable by Owner, any Indemnitee, or any Tax Indemnitee
under (S) 7.1 or (S) 7.3 is not paid when due, the Person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the Person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the amount is paid, at
the Past-Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.
7.6 BENEFIT OF INDEMNITIES
Owner's obligations for indemnities, obligations, adjustments, and
payments in (S) 7.1 or (S) 7.3 are expressly made for the benefit of, and shall
be enforceable by, the Indemnitee or Tax Indemnitee entitled thereto,
notwithstanding any provision of the Mortgage.
8. ASSIGNMENT OR TRANSFER OF INTEREST
8.1 NOTE HOLDERS
Subject to (S) 5.3.2 hereof and (S) 2.06 of the Mortgage, any Note
Holder may, at any time, Transfer or grant participations in all or any portion
of the Equipment Notes or all or any portion of its beneficial interest in its
Equipment Notes to any Person (the sale or issuance of Pass-Through Certificates
by a Pass-Through Trustee not being considered a Transfer or participation);
provided, that any participant in any such participations shall not have any
direct rights under the Operative Agreements or any Lien on all or any part of
the Aircraft or the Collateral, and Owner shall not have any increased liability
or obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be bound by all of the covenants of Note Holders in the
Operative Agreements.
8.2 EFFECT OF TRANSFER
Upon any Transfer in accordance with (S) 8.1 (other than any Transfer
by any Note Holder, to the extent it only grants participations in Equipment
Notes or in its beneficial interest therein), Transferee shall be deemed a "Note
Holder"
40
<PAGE>
for all purposes of the Operative Agreements, and the transferring Note Holder
shall be released from all of its liabilities and obligations under the
Operative Agreements to the extent such liabilities and obligations arise after
such Transfer and, in each case, to the extent such liabilities and obligations
are assumed by the Transferee; provided, that such transferring Note Holder (and
its Affiliates, successors, assigns, agents, representatives, directors, and
officers) will continue to have the benefit of any rights or indemnities under
any Operative Agreement vested or relating to circumstances, conditions, acts,
or events before such Transfer.
8.3 SALE-LEASEBACK TRANSACTION
Notwithstanding anything to the contrary in any Operative Agreement
(except the following paragraph), but subject to (S) 2(c) of the Note Purchase
Agreement and to the non-existence of any Special Default, upon not less than 10
days' prior written notice to the parties hereto, Owner shall have the right, no
later than April 1, 2000, to sell the Aircraft and transfer title to the
Aircraft to an owner trustee for the benefit of an owner participant in a
transaction in which such owner trustee assumes all of Owner's obligations under
the Equipment Notes and the Trust Indenture on a non-recourse basis (with Owner
being released from such obligations, except to the extent accrued before the
assumption), leases the Aircraft to Owner, and assigns such lease to Mortgagee
pursuant to an amended and restated trust indenture (a "Sale-Leaseback"). In
connection with such Sale-Leaseback, each of the parties hereto (or their
successors) will execute and deliver appropriate documentation permitting the
owner trustee to assume Owner's obligations under the Equipment Notes and the
Trust Indenture on a non-recourse basis, releasing Owner from all obligations in
respect of the Equipment Notes and the Trust Indenture (except to the extent
accrued before the assumption), and take all other actions as are reasonably
necessary to permit such assumption by the owner trustee. In connection with any
such Sale-Leaseback, (a) the documents shall include (1) a participation
agreement substantially in the form of the Leased Aircraft Participation
Agreement (as defined in the Note Purchase Agreement), among the parties hereto
(or their successors), the owner trustee, and the owner participant, with (x)
changes to reflect the assumption of the Equipment Notes by the owner trustee on
a non-recourse basis (rather than the issuance thereof by the owner trustee and
purchase thereof by the Pass-Through Trustees), and also to reflect the release
of Owner from all obligations under the Equipment Notes and the Trust Indenture
(except to the extent accrued before the assumption), and (y) other changes
permitted by the Note Purchase Agreement applicable to the revision of the
Leased Aircraft Participation Agreement in connection with a leveraged lease,
(2) a lease agreement, substantially in the form of the Lease (as defined in the
Note Purchase Agreement), between Owner and the owner trustee, with changes
permitted by the Note Purchase
41
<PAGE>
Agreement in connection with a leveraged lease, (3) an amended and restated
trust indenture (amending and restating the Trust Indenture), substantially in
the form of the Leased Aircraft Indenture (as defined in the Note Purchase
Agreement), between the owner trustee and Mortgagee, with (x) changes to reflect
Owner's assumption of Owner's obligations under the Equipment Notes and the
Mortgage on a non-recourse basis and the release of Owner's obligations under
the Equipment Notes and the Mortgage, and (y) other changes permitted by the
Note Purchase Agreement applicable to the revision of the Leased Aircraft
Indenture in connection with a leveraged lease, (4) a purchase agreement
assignment, substantially in the form of the Aircraft Purchase Agreement
Assignment (as defined in the Note Purchase Agreement), between Owner and the
owner trustee, with changes permitted by the Note Purchase Agreement applicable
to the Aircraft Purchase Agreement Assignment in connection with a leveraged
lease, and (5) a trust agreement, substantially in the form of the Leased
Aircraft Trust Agreement (as defined in the Note Purchase Agreement), between
the owner trustee and the owner participant, with changes permitted by the Note
Purchase Agreement applicable to the Trust Agreement in connection with a
leveraged lease; and (b) the Equipment Notes shall be delivered to Mortgagee for
cancellation in exchange for new equipment notes to be issued to the Note
Holders by the owner trustee, such new equipment notes to be substantially in
the form of Exhibit B to the Leased Aircraft Indenture (as defined in the Note
Purchase Agreement). Such new equipment notes will have the same payment terms
as the Equipment Notes, except that if Owner enters into a Sale-Leaseback by
April 1, 2000, Owner may reoptimize the new equipment notes to be issued to the
Note Holders by the owner trustee in compliance with the Mandatory Economic
Terms.
Notwithstanding the foregoing, Owner shall not have the right to enter
into a Sale-Leaseback unless Owner causes to be delivered to Mortgagee and
Certificate Holders (aa) an opinion of Troutman Sanders LLP, or other
independent tax counsel chosen by Owner and reasonably acceptable to Mortgagee
and the Certificate Holders, to the effect that the Note Holders and Certificate
Holders should not recognize income, gain, or loss for federal income tax
purposes as a result of such assumption and release, and should be subject to
federal income tax in the same amounts, in the same manner, and at the same time
as would have been the case if such assumption and release had not occurred, and
that the Pass-Through Trusts will not be subject to federal income taxation as a
result of such assumption and release. In addition, Owner agrees to comply with
(S) 1(c) of the Note Purchase Agreement in connection with any Sale-Leaseback;
and (bb) an indemnity, on an After-Tax Basis, from Owner for any adverse tax
consequences to the Note Holders or such Certificate Holder resulting from such
assumption, in form and substance reasonably acceptable to the Note Holders and
the Certificate Holders.
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<PAGE>
9. SECTION 1110
Owner, the Note Holders (such intention being evidenced by each of
their acceptance of an Equipment Note), and Mortgagee intend that Mortgagee
shall be entitled to the benefits of Section 1110 in the event of a case under
Chapter 11 of the Bankruptcy Code in which Owner is a debtor.
10. CHANGE OF CITIZENSHIP
10.1 GENERALLY
Without prejudice to the representations, warranties, or covenants as
to any party's status as a Citizen of the United States, each of Owner, SSB, and
Mortgagee agrees that, immediately upon obtaining knowledge of any facts that
would cast doubt upon its continuing status as a Citizen of the United States,
and promptly upon public disclosure of negotiations in respect of any
transaction which would or might adversely affect such status, it will notify
all parties hereto of all relevant matters in connection therewith.
10.2 MORTGAGEE
If SSB gives any notice under (S) 10.1, Mortgagee shall (if such
citizenship is necessary under the Transportation Code or, if it is not
necessary, if Mortgagee's citizenship could have any adverse effect on Owner or
any Note Holder), subject to (S) 8.02 of the Mortgage, resign as Mortgagee
promptly upon its ceasing to be such a citizen.
11. MISCELLANEOUS
11.1 AMENDMENTS
No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated, or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate, or otherwise vary and is signed by the party against whom the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination, or variance is sought. Each such amendment, supplement, waiver,
modification, discharge, termination, or variance shall be effective only in the
specific instance and for the specific purpose for which it is given. No
provision of this Agreement shall be varied or contradicted by oral
communication, course of dealing or performance, or other manner not set forth
in writing and signed by the party against whom enforcement of the same is
sought.
11.2 SEVERABILITY
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<PAGE>
If any provision of this Agreement is held invalid, illegal, or
unenforceable in any respect in any jurisdiction, then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such jurisdiction, and (b) such invalidity, illegality, or unenforceability
shall not affect the validity, legality, or enforceability of such provision in
any other jurisdiction. If, however, any Law pursuant to which such provisions
are held invalid, illegal, or unenforceable may be waived, the parties hereto
hereby waive that Law to the full extent permitted, to the end that this
Agreement shall be a valid and binding agreement in all respects, enforceable in
accordance with its terms.
11.3 SURVIVAL
The indemnities in this Agreement shall survive the delivery or return
of the Aircraft, the Transfer of any interest by any Note Holder of its
Equipment Note, and the expiration or other termination of any Operative
Agreement, except to the extent otherwise provided therein.
11.4 REPRODUCTION OF DOCUMENTS
This Agreement (including all schedules and exhibits hereto) and all
documents relating hereto, including (a) future consents, waivers, and
modifications, and (b) past and future financial statements, certificates, and
other information furnished to any party hereto, may be reproduced by any party
by any photographic, photostatic, microfilm, micro-card, miniature photographic,
or other similar process, and such party may destroy any original documents so
reproduced. Any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original exists and whether or not such party made the reproduction in the
regular course of business), and any enlargement, facsimile, or further
reproduction of such reproduction also shall be so admissible in evidence.
11.5 COUNTERPARTS
This Agreement and any amendments, waivers, consents, or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each fully-executed set of
which shall be an original.
11.6 NO WAIVER
No failure on the part of any party hereto to exercise, and no delay by
any party hereto in exercising, any of its rights, powers, remedies, or
privileges under this Agreement or otherwise available to it shall impair,
prejudice, or waive any such right, power, remedy, or privilege or be construed
as a waiver of
44
<PAGE>
any breach hereof or default hereunder or as an acquiescence therein, nor shall
any single or partial exercise of any such right, power, remedy, or privilege
preclude any other or further exercise thereof by it or the exercise of any
other right, power, remedy, or privilege by it. No notice to or demand on any
party hereto in any case shall, unless otherwise required under this Agreement,
entitle such party to any other or further notice or demand in similar or other
circumstances, or waive the rights of any party hereto to any other or further
action in any circumstances without notice or demand.
11.7 NOTICES
Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers, and other
communications required or permitted to be made, given, furnished, or filed
hereunder shall be in writing (and the specification of a writing in certain
instances and not in others does not imply an intention that a writing is not
required as to the latter), shall refer specifically to this Agreement, and
shall be personally delivered, sent by fax or telecommunication transmission
(which in either case provides written confirmation to the sender of its
delivery), sent by registered mail or certified mail, return receipt requested,
postage prepaid, or sent by next-business-day courier service, in each case to
the address or fax number set forth for such party in Schedule 1, or to such
other address or number as such party hereafter specifies by notice to the other
parties hereto. Each such notice, request, demand, authorization, direction,
consent, waiver, or other communication shall be effective when received or, if
made, given, furnished, or filed by fax or telecommunication transmission, when
confirmed.
11.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE
(A) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND
PERFORMANCE.
(B) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS, AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT, OR PROCEEDING
WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH
THE OPERATIVE AGREEMENTS.
(C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND DOCUMENTS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION, OR PROCEEDING MAY BE MADE BY
MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESS SET FORTH PURSUANT TO
45
<PAGE>
(S) 11.7. EACH PARTY HERETO HEREBY AGREES THAT SERVICE UPON IT, OR ANY OF ITS
AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS (S) 11.8(C), SHALL CONSTITUTE VALID
AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY
AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE
TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF SUCH
SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED
THEREON.
(D) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER, OR THAT
ANY OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.
(E) EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING
OUT OF OR RELATING TO THE OPERATIVE AGREEMENTS.
11.9 THIRD-PARTY BENEFICIARY
This Agreement is not intended to, and shall not, provide any Person
not a party hereto (other than the Mortgage Indemnitees and Certificate Holders
(each of whom is an intended third-party beneficiary of (S) 7.1) and the Persons
referred to in (S) 5.4.6 (who are intended third-party beneficiaries of (S)
5.4.6) with any rights of any nature whatsoever against any of the parties
hereto, and no Person not a party hereto (other than the Mortgage Indemnitees
and Certificate Holders as to (S) 7.1, and the Persons referred to in (S) 5.4.6
as to (S) 5.4.6) shall have any right, power, or privilege in respect of any
party hereto, or have any benefit or interest, arising out of this Agreement.
11.10 ENTIRE AGREEMENT
This Agreement, together with the other Operative Agreements, on and as
of the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior understandings or
agreements, whether written or oral, among any of the parties hereto with
respect to such subject matter are hereby superseded in their entireties.
11.11 FURTHER ASSURANCES
Each party hereto shall execute, acknowledge, and deliver (or shall
cause to be executed, acknowledged, and delivered) all such further agreements,
instruments, certificates, or other documents, and shall do and cause to be done
such further things, as any other party hereto reasonably requests in
46
<PAGE>
connection with the administration of, or to carry out more effectively the
purposes of, or to assure and confirm better to such other party the rights and
benefits to be provided under, this Agreement and the other Operative
Agreements.
[The rest of this page is intentionally left blank]
47
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Participation
Agreement N9__AT.
AIRTRAN AIRWAYS, INC.,
Owner
By_______________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
Mortgagee
By_______________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
Pass-Through Trustee under the Pass-
Through Trust Agreement for the
AirTran Airways Pass-Through Trust,
1999-1A
By________________________________
Name:
Title:
<PAGE>
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
Pass-Through Trustee under the Pass-
Through Trust Agreement for the
AirTran Airways Pass-Through Trust,
1999-1B
By_________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
Pass-Through Trustee under the Pass-
Through Trust Agreement for the
AirTran Airways Pass-Through Trust,
1999-1C
By_________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION,
not in its individual capacity, except as
expressly provided herein, but solely as
Subordination Agent
By_______________________________
Name:
Title:
<PAGE>
----------------------
SCHEDULE 1
TO
PARTICIPATION
AGREEMENT
----------------------
ACCOUNTS; ADDRESSES
<TABLE>
<CAPTION>
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
<S> <C> <C>
AIRTRAN Sun Trust Bank AirTran Airways, Inc.
AIRWAYS, INC. Central Florida, N.A. 9955 AirTran Blvd.
200 South Orange Avenue Orlando, FL 32807
Orlando, FL 32801 Attention: Treasurer
Account no.: _______________ fax: (407) 251-5567
ABA#: 063102152
Attention: __________________
voice: (407) ____________
fax: (407) ____________
Reference: AirTran Lease N9__AT
THE BOEING The Chase Manhattan Bank The Boeing Company
COMPANY New York, NY 10081 P.O. Box 3707
account no.: 910-1-012764 Seattle, WA 98124-3707
ABA#: 021-000021 Attention: Treasurer
Attention: Paul Trupia M/S 68-34
voice: 212-552-2829 fax: (206) 237-8746
fax: 212-552-0107
Reference: AirTran Lease N9__AT
STATE STREET State Street Bank and Trust Company State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: 9903-990-1 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011-000-028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-1897
MORTGAGEE
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCOUNT FOR PAYMENTS ADDRESS FOR NOTICES
-------------------- -------------------
<S> <C> <C>
STATE STREET State Street Bank and Trust Company State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: 9903-990-1 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011-000-028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-1897
SUBORDINATION
AGENT
STATE STREET State Street Bank and Trust Company State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: 9903-9901-1 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011-000-028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-1897
PASS-THROUGH
TRUSTEE FOR THE
1999-1A PASS-
THROUGH TRUST
STATE STREET State Street Bank and Trust Company State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: 9903-9901-1 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011-000-028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-1897
PASS-THROUGH
TRUSTEE FOR THE
1999-1B PASS-
THROUGH TRUST
STATE STREET State Street Bank and Trust Company State Street Bank and Trust Company of
BANK AND TRUST Boston, MA Connecticut, National Association
COMPANY OF account no.: 9903-990-1 225 Asylum Street, 23rd Floor
CONNECTICUT, ABA#: 011-000-028 Hartford, CT 06103
NATIONAL Attention: Corporate Trust Administration Attention: Corporate Trust Administration
ASSOCIATION, AS Reference: AirTran Lease N9__AT fax: (860) 244-1897
PASS-THROUGH
TRUSTEE FOR THE
1999-1C PASS-
THROUGH TRUST
</TABLE>
<PAGE>
------------------------------
SCHEDULE 2 - COMMITMENTS
PARTICIPATION AGREEMENT
------------------------------
COMMITMENTS
PASS-THROUGH SERIES OF DOLLAR AMOUNT
TRUSTEE EQUIPMENT NOTES OF LOAN
- ------------------------- --------------- -----------------
1999-1A PASS- SERIES A $10,500,000.00
THOUGH TRUSTEE
1999-1B PASS- SERIES B $2,950,479.23
THOUGH TRUSTEE
1999-1C PASS- SERIES C $4,405,950.49
THOUGH TRUSTEE
<PAGE>
------------------------------
SCHEDULE 3 - CERTAIN TERMS
PARTICIPATION AGREEMENT
------------------------------
CERTAIN TERMS
DEFINED TERM DEFINITION
------------ -----------
Minimum Liability Insurance Amount $550,000,000
Threshold Amount $2,000,000
<PAGE>
--------------------------------
SCHEDULE 4 - PERMITTED COUNTRIES
PARTICIPATION AGREEMENT
--------------------------------
PERMITTED COUNTRIES
Argentina Luxembourg
Australia Malaysia
Austria Malta
Bahamas Mexico
Belgium Morocco
Brazil Netherlands
Canada New Zealand
Chile Norway
Denmark Paraguay
Egypt People's Republic of China
Ecuador Philippines
Finland Portugal
France Republic of China (Taiwan)
Germany Singapore
Greece South Africa
Hungary South Korea
Iceland Spain
India Sweden
Indonesia Switzerland
Ireland Thailand
Italy Tobago
Japan Trinidad
<PAGE>
United Kingdom
Uruguay
Venezuela
<PAGE>
Exhibit C-2 to
Note Purchase Agreement
================================================================================
TRUST INDENTURE AND MORTGAGE N9__AT
dated as of ____________, ____
between
AIRTRAN AIRWAYS, INC.,
Owner
and
STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION
not in its individual capacity, except as expressly
provided herein, but solely as trustee,
Mortgagee
--------------------------------------------------------
Equipment Notes covering one Boeing model 717-200
aircraft bearing United States registration no. N9__AT
and manufacturer's serial no. 55___
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
GRANTING CLAUSE ..................................................................................................1
I DEFINITIONS ...................................................................................................4
II THE EQUIPMENT NOTES...........................................................................................5
2.01. Form of Equipment Notes...........................................................................5
2.02. Issuance and Terms of Equipment Notes.............................................................5
2.03. Method of Payment.................................................................................7
2.04. Application of Payments...........................................................................9
2.05. Termination of Interest in Collateral.............................................................9
2.06. Registration, Transfer, and Exchange of Equipment Notes..........................................10
2.07. Mutilated, Destroyed, Lost, or Stolen Equipment Notes............................................11
2.08. Payment of Expenses on Transfer; Cancellation....................................................12
2.10. Mandatory Redemptions of Equipment Notes.........................................................12
2.11. Voluntary Redemptions of Equipment Notes.........................................................12
2.12. Redemptions; Notice of Redemption................................................................12
2.13. Subordination....................................................................................13
III RECEIPT, DISTRIBUTION, AND APPLICATION OF PAYMENTS..........................................................14
3.01. Basic Distributions..............................................................................14
3.02. Event of Loss; Replacement; Optional Redemption..................................................15
3.03. Payments After Event of Default..................................................................16
3.04. Certain Payments.................................................................................19
3.05. Other Payments...................................................................................20
3.06. Application of Payments Under Guarantee..........................................................20
IV OWNER'S COVENANTS............................................................................................20
4.01. Liens............................................................................................20
4.02. Possession; Operation and Use; Maintenance; Registration; Markings...............................20
4.03. Inspection.......................................................................................28
4.04. Replacement and Pooling of Parts; Alterations, Modifications, and Additions; Substitution
of Engines...................................................................................29
4.05. Loss, Destruction, or Requisition................................................................32
4.06. Insurance........................................................................................38
4.07. Merger of Owner..................................................................................39
V EVENTS OF DEFAULT; REMEDIES...................................................................................40
5.01. Event of Default.................................................................................40
5.02. Remedies.........................................................................................42
5.03. Return of Aircraft, etc..........................................................................44
5.04. Remedies Cumulative..............................................................................45
5.05. Discontinuance of Proceedings....................................................................45
</TABLE>
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<TABLE>
<S> <C>
5.06. Waiver of Past Defaults..........................................................................45
5.07. Appointment of Receiver..........................................................................46
5.08. Mortgagee Authorized to Execute Bills of Sale, etc...............................................46
5.09. Rights of Note Holders to Receive Payment........................................................46
VI MORTGAGEE'S DUTIES...........................................................................................46
6.01. Notice of Default................................................................................47
6.02. Action Upon Instructions; Certain Rights and Limitations.........................................47
6.03. Indemnification..................................................................................48
6.04. No Duties Except as Specified in Mortgage or Instructions........................................48
6.05. No Action Except Under Mortgage or Instructions..................................................48
6.06. Investment of Amounts Held by Mortgagee..........................................................49
VII THE MORTGAGEE ..............................................................................................49
7.01. Acceptance of Trusts and Duties..................................................................49
7.02. Absence of Duties................................................................................49
7.03. No Representations or Warranties as to Aircraft or Documents.....................................50
7.04. No Segregation of Funds; No Interest.............................................................50
7.05. Reliance; Agreements; Advice of Counsel..........................................................51
7.06. Compensation.....................................................................................51
7.07. Instructions from Note Holders...................................................................51
VIII INDEMNIFICATION............................................................................................52
8.01. Scope of Indemnification.........................................................................52
IX SUCCESSOR AND SEPARATE TRUSTEES..............................................................................52
9.01. Resignation of Mortgagee; Appointment of Successor...............................................52
9.02. Appointment of Additional and Separate Trustees..................................................53
X SUPPLEMENTS AND AMENDMENTS....................................................................................55
10.01. Instructions of Majority; Limitations...........................................................55
10.02. Mortgagee Protected.............................................................................56
10.03. Documents Mailed to Note Holders................................................................56
10.04. No Request Necessary for Mortgage Supplement....................................................56
XI MISCELLANEOUS ...............................................................................................57
11.01. Termination of Mortgage.........................................................................57
11.02. No Legal Title to Collateral in Note Holders....................................................57
11.03. Sale of Aircraft by Mortgagee Is Binding........................................................57
11.04. Mortgage for Benefit of Owner, Mortgagee, Note Holders, and the other Mortgage Indemnitees......58
11.05. Notices.........................................................................................58
11.06. Severability....................................................................................58
11.07. No Oral Modification or Continuing Waiver.......................................................58
11.08. Successors and Assigns..........................................................................58
11.09. Headings........................................................................................58
11.10. Normal Commercial Relations.....................................................................59
11.11. Governing Law; Counterpart Form.................................................................59
</TABLE>
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<TABLE>
<S> <C>
11.12. Voting By Note Holders..........................................................................59
11.13. Bankruptcy......................................................................................59
</TABLE>
ANNEX A Definitions
ANNEX B Insurance
EXHIBIT A Aircraft Description
EXHIBIT B Form of Equipment Note
SCHEDULE I Equipment Notes Amortization and Interest Rates
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TRUST INDENTURE AND MORTGAGE N9__AT
This Trust Indenture and Mortgage N9__AT ("Mortgage") is entered into
as of ____________, ____, between AirTran Airways, Inc. ("Owner"), a Delaware
corporation, and State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity,
except as expressly stated herein, but solely as Mortgagee hereunder (in such
capacity, "Mortgagee").
Certain terms used in this Mortgage are defined pursuant to Article I
hereof.
RECITALS:
A. Owner and Mortgagee want by this Mortgage to provide for (1) Owner's
issuance of the Equipment Notes, and (2) Owner's assignment to Mortgagee, as
part of the Collateral, of all of Owner's right, title, and interest in and to
the Aircraft and all payments and other amounts received hereunder in accordance
with the terms hereof, as security for Owner's obligations to the Note Holders
and the Mortgage Indemnitees.
B. All acts have occurred that are necessary to make the Equipment
Notes, when executed by Owner and authenticated and delivered by Mortgagee
hereunder, valid, binding, and enforceable obligations of Owner; and all acts
have occurred that are necessary to make this Mortgage the valid, binding, and
legal obligation of Owner for the uses and purposes herein set forth, in
accordance with its terms.
GRANTING CLAUSE
NOW, THEREFORE, THIS MORTGAGE WITNESSETH, that, to secure the prompt
payment of the Original Amount of, interest on, Make-Whole Amount (if any) on,
and all other amounts due with respect to all Equipment Notes and all Related
Equipment Notes from time to outstanding according to their tenor and effect,
and to secure Owner's performance and observance of all the agreements,
covenants, and provisions herein and in all Related Mortgages, in the
Participation Agreement and in all Related Participation Agreements, in the
Equipment Notes and all Related Equipment Notes, and in the KfW Agreement and
the Boeing Agreement, for the benefit of the Note Holders, the holders of the
Related Equipment Notes, the Certificate Holders, each of the Mortgage
Indemnitees, and each of the "Mortgage Indemnitees" as defined in the Related
Mortgages, and in consideration of the premises and of the covenants herein,
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and of the acceptance of the Equipment Notes by the holders thereof, and for
other good and valuable consideration the receipt and adequacy whereof are
hereby acknowledged, Owner hereby grants to Mortgagee (and its successors in
trust and assigns), for the security and benefit of the Note Holders, the
holders of the Related Equipment Notes, each of the Mortgage Indemnitees, and
each of the "Mortgage Indemnitees" as defined in the Related Mortgages, a
first-priority security interest in and mortgage lien on all Owner's right,
title, and interest in, to, and under the following described property, rights,
and privileges, whether existing or hereafter acquired (which, collectively,
together with all property hereafter specifically subject to the Lien of this
Mortgage by the terms hereof or any supplement hereto, are included within, and
are referred to as, the "Collateral"):
(1) the Airframe and Engines described in the Aircraft Description
Exhibit, whether or not any such Engine is installed on or attached to the
Airframe or any other airframe, including all Parts included within the
definitions of "Airframe" or "Engine", including all substitutions, renewals,
and replacements of and additions, improvements, accessions, and accumulations
to the Airframe and Engines (other than additions, improvements, accessions, and
accumulations excluded from the definition of Parts), and (b) all Aircraft
Documents;
(2) each Permitted Lease assignment and each assigned Permitted Lease
(to the extent assigned under such Permitted Lease assignment), and all rents or
other payments of any kind made under such assigned Permitted Lease (to the
extent assigned under such Permitted Lease assignment) and all rights, powers,
privileges, options, collateral, and other benefits of Owner under such assigned
Permitted Lease;
(3) the Purchase Agreement, the GTA, and the Bills of Sale to the
extent that they relate to Owner's continuing rights to any warranty, indemnity,
or agreement, express or implied, as to title, materials, workmanship, design,
or patent infringement or related matters with respect to the Airframe or the
Engines (reserving to Owner, however, all of Owner's other rights and interest
in and to the Purchase Agreement), and all rights, powers, privileges, options,
and other benefits of Owner thereunder (subject to such reservation) with
respect to the Airframe or the Engines, including the right to make all waivers
and agreements, to give and receive all notices and other instruments or
communications, to take such action upon the occurrence of a default thereunder
(including the commencement, conduct, and consummation of legal, administrative,
or other proceedings) as shall be permitted thereby or by Law, and to do any and
all other things that Owner is or may be entitled to do thereunder (subject to
such reservation), subject, with respect to the Purchase Agreement, to the terms
and conditions of the Consent and Agreement and the Engine Consent and
Agreement;
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(4) all proceeds from the requisition of title to or use of the
Aircraft or any Engine by any Government Entity, or from any other disposition
of the Aircraft by Owner, or from Mortgagee's sale or other disposition of the
Aircraft, the Airframe, any Engine, or other property described in any of these
Granting Clauses pursuant to the terms of this Mortgage, and all insurance
proceeds with respect to the Aircraft, the Airframe, any Engine, or any part
thereof, but excluding any insurance maintained by Owner and not required under
(S) 4.06;
(5) all rents, revenues, and other proceeds collected by Mortgagee
pursuant to (S) 5.03(b), and all money and securities from time to time
deposited or required to be deposited with Mortgagee by or for the account of
Owner pursuant to any terms of this Mortgage held or required to be held by
Mortgagee hereunder; and
(6) all proceeds of the foregoing.
provided, that notwithstanding any of the foregoing provisions, if no
Event of Default exists, (a) Mortgagee shall not take or cause to be taken any
action contrary to Owner's right hereunder to quiet enjoyment of the Airframe
and Engines, and to possess, use, retain, and control the Airframe and Engines
and all revenues, income, and profits derived therefrom, and (b) Owner shall
have the right, to the exclusion of Mortgagee, with respect to the Purchase
Agreement, to exercise in Owner's name all rights and powers of the buyer under
the Purchase Agreement (other than to amend, modify, or waive any of the
warranties or indemnities therein, except in the exercise of Owner's reasonable
business judgment) and to retain any recovery or benefit resulting from the
enforcement of any warranty or indemnity under the Purchase Agreement; provided,
FURTHER, that, notwithstanding the existence of an Event of Default, Mortgagee
shall not enter into any amendment of the Purchase Agreement which would
increase Owner's obligations thereunder.
TO HAVE AND TO HOLD all and singular the aforesaid property unto
Mortgagee, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the Note Holders, the holders of the
Related Equipment Notes, the Mortgage Indemnitees, and the "Mortgage
Indemnitees" as defined in the Related Mortgages, except as provided in (S) 2.13
and Article III hereof, without any preference, distinction, or priority of any
one Equipment Note over any other by reason of priority of time of issue, sale,
negotiation, or date of maturity thereof, or otherwise for any reason
whatsoever, and for the uses and purposes and (in all cases and as to all
property specified in clauses (1) through (6)) subject to the terms and
provisions in this Mortgage.
Anything herein to the contrary notwithstanding, Owner shall remain
liable under the Mortgagee Agreements to perform all of the obligations that it
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assumes thereunder, except to the extent prohibited or excluded from doing so
pursuant to the terms and provisions thereof, and Mortgagee, the Note Holders,
and the Mortgage Indemnitees shall have no obligation or liability under the
Mortgagee Agreements by reason of or arising out of the assignment hereunder,
nor shall Mortgagee, the Note Holders, or the Mortgage Indemnitees be required
or obligated in any manner to perform or fulfill any of Owner's obligations
under or pursuant to the Mortgagee Agreements, or, except as herein expressly
provided, to make any payment, or to make any inquiry as to the nature or
sufficiency of any payment received by it, or present or file any claim, or take
any action to collect or enforce the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
Owner hereby constitutes Mortgagee the true and lawful attorney of
Owner, irrevocably, granted for good and valuable consideration and coupled with
an interest and with full power of substitution, and with full power (in the
name of Owner or otherwise) to ask for, require, demand, receive, compound, and
give acquittance for any and all money and claims for money (in each case
including insurance and requisition proceeds) due and to become due under or
arising out of the Mortgagee Agreements, and all other property which now or
hereafter constitutes part of the Collateral, to endorse any checks or other
instruments or orders in connection therewith, and to file any claims or to take
any action or to institute any proceedings that Mortgagee deems necessary or
advisable in connection with this Mortgage; provided, that Mortgagee shall not
exercise any such rights except during the existence of an Event of Default.
Upon Mortgagee's written request, Owner will promptly and duly execute
and deliver (or cause to be duly executed and delivered) any and all such
further instruments and documents (including UCC continuation statements) as
Mortgagee reasonably deems necessary to perfect, preserve, or protect the
mortgage, security interests, and assignments created or intended to be created
hereby, or to obtain for Mortgagee the full benefits of the assignment hereunder
and of the rights and powers herein granted.
Any and all property described or referred to in the granting clauses
hereof which Owner acquires in the future shall ipso facto, and without any
other conveyance, assignment, or act on the part of Owner or Mortgagee, become
and be subject to the Lien herein granted as fully and completely as though
specifically described herein, but nothing in this paragraph shall modify or
change Owner's obligations in the foregoing paragraphs.
Owner and Mortgagee further agree as follows:
ARTICLE I DEFINITIONS
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The terms defined in Annex A, when capitalized as in Annex A, have the
same meanings when used in this Mortgage. Annex A also contains rules of usage
that control construction in this Mortgage.
ARTICLE II THE EQUIPMENT NOTES
2.01. FORM OF EQUIPMENT NOTES
The Equipment Notes shall be substantially in the form of Exhibit B.
2.02. ISSUANCE AND TERMS OF EQUIPMENT NOTES
The Equipment Notes shall be dated the date of issuance thereof, shall
be issued in three separate series consisting of Series A, Series B, and Series
C, and shall have the maturities and principal amounts and shall bear interest
as specified in Schedule I hereto. On the Closing Date, each Series specified in
Schedule I shall be issued to the Subordination Agent on behalf of the
Pass-Through Trustees under the Pass-Through Trust Agreements. The Equipment
Notes shall be issued in registered form only. The Equipment Notes shall be
issued in original principal amounts of at least $100,000 and integral multiples
of $1,000, except that one Equipment Note of each Series may be in an amount
that is not an integral multiple of $1,000.
Owner agrees to pay to Mortgagee, for distribution in accordance with
(S) 3.04 hereof: (1) to the extent not payable (whether or not in fact paid)
under (S) 6(a) of the Note Purchase Agreement, an amount equal to the fees
payable to Liquidity Provider under (S) 2.03 of each Liquidity Facility and the
related Fee Letter (as defined in the Intercreditor Agreement) multiplied by a
fraction the numerator of which shall be the then-outstanding aggregate
principal amount of the Equipment Notes and the denominator of which shall be
the then outstanding aggregate principal amount of all "Equipment Notes" (as
defined in the Note Purchase Agreement); (2) (aa) the amount equal to interest
on any Downgrade Advance (other than any Applied Downgrade Advance) payable
under (S) 3.07 of each Liquidity Facility, multiplied by (bb) the fraction
specified in the foregoing clause (1); (3) (aa) the amount equal to interest on
any Non-Extension Advance (other than any Applied Non-Extension Advance) payable
under (S) 3.07 of each Liquidity Facility, multiplied by (bb) the fraction
specified in the foregoing clause (1); (4) if any payment default exists with
respect to interest on Equipment Notes, (aa) an amount equal to interest on any
Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension Advance
payable under (S) 3.07 of each Liquidity Facility, plus any amount of interest
at the Past-Due Rate actually payable (whether or not in fact paid) by Owner on
the overdue scheduled interest on the Equipment Notes in respect of which such
Unpaid Advance, Applied Downgrade Advance, or Applied Non-Extension Advance was
made, multiplied by (bb) a fraction the numerator of which shall
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be the total then-overdue amounts of interest on the Equipment Notes (other than
interest becoming due and payable solely as a result of acceleration of any such
Equipment Notes) and the denominator of which shall be the total then-overdue
amounts of interest on all "Equipment Notes" (as defined in the Note Purchase
Agreement) (other than interest becoming due and payable solely as a result of
acceleration of any such "Equipment Notes"); (5) Owner's pro rata share of any
other amounts owed to Liquidity Provider by the Subordination Agent as borrower
under each Liquidity Facility other than amounts due as repayment of advances
thereunder or as interest on such advances, except to the extent payable
pursuant to clause (2), (3), or (4) above; (6) Owner's pro rata share of all
compensation and reimbursement of expenses, disbursements, and advances payable
by Owner under the Pass-Through Trust Agreements; (7) Owner's pro rata share of
all compensation and reimbursement of expenses and disbursements payable to the
Subordination Agent under the Intercreditor Agreement, except with respect to
any income or franchise taxes incurred by the Subordination Agent in connection
with the transactions contemplated by the Intercreditor Agreement; and (8) if
Owner requests any amendment to any Operative Agreement or Pass-Through
Agreement, Owner's pro rata share of all reasonable fees and expenses (including
fees and disbursements of counsel) of Escrow Agents and Paying Agents in
connection therewith payable by the Pass-Through Trustees under the Escrow
Agreements. As used herein, "OWNER'S PRO RATA SHARE" means as of any time a
fraction, the numerator of which is the then-outstanding principal balance of
Equipment Notes and the denominator of which is the then-outstanding principal
balance of all "Equipment Notes" (as defined in each of the Operative
Indentures). For purposes of this paragraph, the terms "Applied Downgrade
Advance", "Applied Non-Extension Advance", "Cash Collateral Account", "Downgrade
Advance", "Final Advance", "Investment Earnings", "Non-Extension Advance", and
"Unpaid Advance" shall have the meanings specified in each Liquidity Facility.
The Equipment Notes shall be executed on behalf of Owner by one of its
authorized officers. Equipment Notes bearing the signatures of individuals who
were at any time the proper officers of Owner shall bind Owner, notwithstanding
that such individuals or any of them have ceased to hold such offices before the
authentication and delivery of such Equipment Notes or did not hold such offices
at the respective dates of such Equipment Notes. Owner may from time to time
execute and deliver Equipment Notes with respect to the Aircraft to Mortgagee
for authentication upon original issue, and Mortgagee thereupon shall
authenticate and deliver such Equipment Notes upon Owner's written request
signed by an authorized officer of Owner. No Equipment Note shall be secured by
or entitled to any benefit under this Mortgage, or be valid or obligatory for
any purposes, unless there appears on such Equipment Note a certificate of
authentication in the form provided for herein, executed by Mortgagee by the
manual signature of one of its authorized officers, and such certificate upon
any Equipment Notes be conclusive evidence, and the only
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evidence, that such Equipment Note has been duly authenticated and delivered
hereunder.
The aggregate Original Amount of the Equipment Notes issued hereunder
shall not exceed the amount set forth as the maximum therefor on Schedule I
hereto. The aggregate Original Amount of any Series of Equipment Notes issued
hereunder shall not exceed the amount set forth on Schedule I for such Series.
2.03. METHOD OF PAYMENT
(a) The Original Amount of, interest on, and any Make-Whole
Amount or other amount due under each Equipment Note or hereunder will be
payable in Dollars by wire transfer of immediately available funds not later
than 11:00 a.m., New York time, on the due date of payment to Mortgagee at the
Corporate Trust Office for distribution among the Note Holders in the manner
provided herein. Notwithstanding the foregoing or any provision in any Equipment
Note to the contrary, Mortgagee will pay or cause to be paid, if so directed in
writing by any Note Holder (with a copy to Owner), all amounts paid by Owner
hereunder and under such holder's Equipment Note or Equipment Notes to such
holder or a nominee therefor (including all amounts distributed pursuant to
Article III of this Mortgage) by transferring, or causing to be transferred, by
wire transfer of immediately available funds in Dollars, before 2:00 p.m., New
York City time, on the due date of payment, to an account maintained by such
holder with a bank located in the continental United States the amount to be
distributed to such holder, for credit to the account of such holder maintained
at such bank. If Mortgagee fails to initiate the transfer by federal wire
transfer of any such payment as provided in the foregoing sentence after its
receipt of funds at the place and before the time specified above by reason of
its failure to use ordinary care, SSB shall compensate such holders for loss of
use of funds at the Debt Rate until such payment is made, and Mortgagee shall be
entitled to any interest earned on such funds until such payment is made. Any
payment made hereunder shall be made without any presentment or surrender of any
Equipment Note, except that, in the case of the final payment in respect of any
Equipment Note, such Equipment Note shall be surrendered to Mortgagee for
cancellation promptly after such payment. Notwithstanding any other provision of
this Mortgage to the contrary, Mortgagee shall not be required to make, or cause
to be made, wire transfers as aforesaid before the first Business Day on which
it is practicable for Mortgagee to do so in view of the time of day when the
funds to be so transferred were received by it if such funds were received after
11:00 a.m., New York time, at the place of payment. Before the due presentment
for registration of transfer of any Equipment Note, Owner and Mortgagee shall
deem and treat the Person in whose name any Equipment Note is registered on the
Equipment Note Register as the absolute owner and holder of such
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Equipment Note for the purpose of receiving payment of all amounts payable with
respect to such Equipment Note and for all other purposes, and neither Owner nor
Mortgagee shall be affected by any notice to the contrary. So long as any
signatory to the Participation Agreement or nominee thereof shall be a
registered Note Holder, all payments to it shall be made to the account of such
Note Holder specified in Schedule I thereto, and otherwise in the manner
provided in or pursuant to the Participation Agreement, unless and until it
specifies some other account or manner of payment by notice to Mortgagee
consistent with this (S) 2.03.
(b) Mortgagee (as agent for Owner) shall exclude and withhold
at the appropriate rate from each payment of Original Amount of, interest on,
and any Make-Whole Amount and other amounts due hereunder or under each
Equipment Note (and such exclusion and withholding shall constitute payment in
respect of such Equipment Note) any and all United States withholding taxes
applicable thereto as required by Law. Mortgagee agrees (1) to act as such
withholding agent and, in connection therewith, (2) whenever any present or
future United States taxes or similar charges are required to be withheld with
respect to any amounts payable hereunder or in respect of the Equipment Notes,
to withhold such amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Note Holders, (3) to file any necessary United
States withholding tax returns or statements when due, and (4) as promptly as
possible after the payment thereof, to deliver to each Note Holder (with a copy
to Owner) appropriate receipts showing the payment thereof, together with such
additional documentary evidence as any such Note Holder reasonably requests from
time to time.
In the case of a Note Holder that is a Non-U.S. Person, Mortgagee
agrees on the written request of any Note Holder to furnish such Note Holder
with such forms and other documentation as may be necessary or desirable to
enable such Note Holder to claim an exemption from, or reduced rate of, such
taxes. Provided that such Note Holder has furnished Mortgagee with the requested
forms and other documentation duly executed by such Note Holder and has not
notified the Mortgagee of the withdrawal or inaccuracy of such form prior to the
date of each interest payment, only the reduced amount (if any) required by
applicable law or treaty shall be withheld from payments under the Equipment
Notes held by such Note Holder in respect of United States federal income tax.
In the case of a Note Holder that is a U.S. Person and not an Exempt Recipient
that has furnished to the Mortgagee a properly completed and currently effective
U.S. Treasury Form W-9, no amount shall be withheld from payments under the
Equipment Notes held by such Note Holder in respect of United States federal
income tax. If any Note Holder has notified Mortgagee that any of the foregoing
forms or certificates is withdrawn or inaccurate, or if the Internal Revenue
Code or the regulations thereunder or the administrative interpretation thereof
are at any time after the date hereof
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amended to require such withholding of United States federal income taxes from
payments under the Equipment Notes held by such Note Holder, or if such
withholding is otherwise required, Mortgagee agrees to withhold from each
payment due to the relevant Note Holder withholding taxes at the appropriate
rate under applicable law, and will, as more fully provided above, on a timely
basis, deposit such amounts with an authorized depository and make such returns,
filings, and other reports in connection therewith, and in the manner required
under applicable Law. For purposes of this paragraph, an "Exempt Recipient" is a
Person described in Code (S)6049(b)(4).
Owner shall not have any liability for Mortgagee's failure to withhold
taxes in the manner provided for herein or for any false, inaccurate, or untrue
evidence provided by any Note Holder hereunder.
2.04. APPLICATION OF PAYMENTS
Each payment of Original Amount, Make-Whole Amount (if any), and
interest due on each Equipment Note shall be applied:
First: to pay accrued interest on such Equipment Note (and any
interest on any overdue Original Amount, any overdue Make-Whole Amount,
and (to the extent permitted by Law) any overdue interest and any other
overdue amounts thereunder) to the date of such payment;
Second: to pay the Original Amount of such Equipment Note (or
a portion thereof) then due thereunder;
Third: to pay any Make-Whole Amount and any other amount due
hereunder or under such Equipment Note; and
Fourth: to pay the Original Amount of such Equipment Note
remaining unpaid (provided, that such Equipment Note shall not be
subject to redemption except as provided in (S) 2.10, (S) 2.11, and (S)
2.12).
The amounts paid pursuant to clause "Fourth" above shall be applied to the
installments of Original Amount of such Equipment Note in the inverse order of
their normal maturity.
2.05. TERMINATION OF INTEREST IN COLLATERAL
No Note Holder, Certificate Holder, or other Mortgage Indemnitee (as
such) shall have any further interest in, or other right with respect to, the
Collateral when and if the Original Amount of, Make-Whole Amount, if any, and
interest on and other amounts due under all Equipment Notes held by such Note
Holder and all other sums then due and payable to such Note Holder, such
Mortgage Indemnitee, any Certificate Holder (to the extent
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secured hereby), or Mortgagee hereunder (including under the third paragraph of
(S) 2.02) and under the other Operative Agreements by Owner (collectively, the
"Secured Obligations") have been paid in full.
2.06. REGISTRATION, TRANSFER, AND EXCHANGE OF EQUIPMENT NOTES
Mortgagee shall keep a register (the "Equipment Note Register") in
which Mortgagee shall provide for the registration of Equipment Notes and the
registration of transfers of Equipment Notes. No such transfer shall be given
effect unless and until registered hereunder. Mortgagee shall keep the Equipment
Note Register at its Corporate Trust Office. Mortgagee is hereby appointed
"Equipment Note Registrar" for the purpose of registering Equipment Notes and
transfers of Equipment Notes as herein provided. A holder of any Equipment Note
intending to exchange such Equipment Note shall surrender such Equipment Note to
Mortgagee at the Corporate Trust Office, together with a written request from
the registered holder thereof for the issuance of a new Equipment Note,
specifying (in the case of a surrender for transfer) the name(s) and address(es)
of the new holder(s). Upon surrender for registration of transfer of any
Equipment Note, Owner shall execute, and Mortgagee shall authenticate and
deliver, in the name(s) of the designated transferee(s), one or more new
Equipment Notes of a like aggregate Original Amount and of the same series. At
the Note Holder's option, Equipment Notes may be exchanged for other Equipment
Notes of any authorized denominations of a like aggregate Original Amount, upon
surrender of the Equipment Notes to be exchanged to Mortgagee at the Corporate
Trust Office. Whenever any Equipment Notes are so surrendered for exchange,
Owner shall execute, and Mortgagee shall authenticate and deliver, the Equipment
Notes which the Note Holder making the exchange is entitled to receive. All
Equipment Notes issued upon any registration of transfer or exchange of
Equipment Notes (whether under this (S) 2.06 or under (S) 2.07 or otherwise
under this Mortgage) shall be the valid obligations of Owner evidencing the same
respective obligations, and entitled to the same security and benefits under
this Mortgage, as the Equipment Notes surrendered upon such registration of
transfer or exchange. Every Equipment Note presented or surrendered for
registration of transfer, shall (if so required by Mortgagee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
Mortgagee duly executed by the Note Holder or such holder's attorney duly
authorized in writing, and Mortgagee shall require evidence satisfactory to it
as to the compliance of any such transfer with the Securities Act, and the
securities Laws of any applicable state. Mortgagee shall make a notation on each
new Equipment Note of the amount of all payments of Original Amount previously
made on the old Equipment Note or Equipment Notes with respect to which such new
Equipment Note is issued and the date to which interest on such old Equipment
Note or Equipment Notes has been paid. Interest shall be deemed to have been
paid on such new Equipment Note to the date on which interest shall have been
paid on such old Equipment
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Note, and all payments of the Original Amount marked on such new Equipment Note,
as provided above, shall be deemed to have been made thereon. Owner shall not be
required to exchange any surrendered Equipment Notes as provided above during
the 10-day period preceding the due date of any payment on such Equipment Note.
Owner shall in all cases deem the Person in whose name any Equipment Note shall
have been issued and registered as the absolute owner and holder of such
Equipment Note for the purpose of receiving payment of all amounts payable by
Owner with respect to such Equipment Note, and for all other purposes, until
Owner receives from Mortgagee a notice stating otherwise and such change is
reflected on the Equipment Note Register. Mortgagee will promptly notify Owner
of each registration of a transfer of an Equipment Note. Any such transferee of
an Equipment Note, by its acceptance of an Equipment Note, agrees to the
provisions of this Mortgage and the Participation Agreement applicable to Note
Holders, including (S) 5.3, (S) 5.4, and (S) 8.1 of the Participation Agreement,
and shall be deemed to have covenanted to the parties to the Participation
Agreement as to the matters covenanted by the original Note Holder in the
Participation Agreement. Subject to compliance by the Note Holder and its
transferee (if any) of the requirements in this (S) 2.06, Mortgagee and Owner
shall use all reasonable efforts to issue new Equipment Notes upon transfer or
exchange within 10 Business Days of the date an Equipment Note is surrendered
for transfer or exchange.
2.07. MUTILATED, DESTROYED, LOST, OR STOLEN EQUIPMENT NOTES
If any Equipment Note shall become mutilated, destroyed, lost, or
stolen, upon the written request of the holder of such Equipment Note, Owner
shall execute, and Mortgagee shall authenticate and deliver, in replacement
thereof, a new Equipment Note of the same Series, payable in the same Original
Amount, dated the same date, and captioned as issued in connection with the
Aircraft. If the Equipment Note being replaced has become mutilated, such
Equipment Note shall be surrendered to Mortgagee and a photocopy thereof shall
be furnished to Owner. If the Equipment Note being replaced has been destroyed,
lost, or stolen, the holder of such Equipment Note shall furnish to Owner and
Mortgagee (a) such security or indemnity as they require to save Owner and
Mortgagee harmless, and (b) evidence satisfactory to Owner and Mortgagee of the
destruction, loss, or theft of such Equipment Note and of the ownership thereof.
If a "qualified institutional buyer" of the type referred to in paragraph
(a)(1)(i)(A), (B), (D), or (E) of Rule 144A under the Securities Act (a "QIB")
is the holder of any such destroyed, lost, or stolen Equipment Note, then the
written indemnity of such QIB, signed by an authorized officer thereof, in favor
of, delivered to, and in form reasonably satisfactory Owner shall be accepted as
satisfactory indemnity and security, and no further indemnity or security shall
be required as a condition to the execution and delivery of such new Equipment
Note. Subject to the Note Holder's compliance with the
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requirements in this (S) 2.07, Mortgagee and Owner shall use all reasonable
efforts to issue new Equipment Notes within 10 Business Days after receiving the
Note Holder's written request therefor.
2.08. PAYMENT OF EXPENSES ON TRANSFER; CANCELLATION
(a) No service charge shall be made to a Note Holder for any
registration of transfer or exchange of Equipment Notes, but Mortgagee, as
Equipment Note Registrar, may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Equipment Notes.
(b) Mortgagee shall cancel all Equipment Notes surrendered for
replacement, redemption, transfer, exchange, payment, or cancellation, and shall
destroy the cancelled Equipment Notes.
2.10. MANDATORY REDEMPTIONS OF EQUIPMENT NOTES
On the date on which Owner is required pursuant to (S) 4.05 to pay for
an Event of Loss to the Airframe, all Equipment Notes shall be redeemed in whole
at a redemption price equal to 100% of the unpaid Original Amount thereof,
together with all accrued interest thereon to the date of redemption and all
other Secured Obligations owed or then due and payable to the Note Holders and
the Certificate Holders, but without Make-Whole Amount.
2.11. VOLUNTARY REDEMPTIONS OF EQUIPMENT NOTES
Owner may redeem all (but not less than all) of the Equipment Notes
(or, in the case of a sale-leaseback of the Aircraft pursuant to (S) 8.3 of the
Participation Agreement, any portion of the Series C Equipment Notes) upon at
least 30 days' revocable prior written notice to Mortgagee and the Note Holders,
and such Equipment Notes shall be redeemed in whole at a redemption price equal
to 100% of the unpaid Original Amount thereof, together with accrued interest
thereon to the date of redemption and all other Secured Obligations owed or then
due and payable to the Note Holders and the Certificate Holders, plus any
Make-Whole Amount.
2.12. REDEMPTIONS; NOTICE OF REDEMPTION
(a) No redemption of any Equipment Note may be made except to
the extent and in the manner expressly permitted by this Mortgage. No purchase
of any Equipment Note may be made by Mortgagee.
(b) Notice of redemption with respect to the Equipment Notes
shall be given by Mortgagee by first-class mail, postage prepaid, mailed not
less than 20 nor more than 60 days before the applicable redemption date, to
each
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Note Holder of such Equipment Notes to be redeemed, at such Note Holder's
address appearing in the Equipment Note Register; provided, that such notice
shall be revocable by written notice from Owner to Mortgagee given not later
than three days before the redemption date. All notices of redemption shall
state: (1) the redemption date, (2) the applicable basis for determining the
redemption price, (3) that on the redemption date, the redemption price will
become due and payable upon each such Equipment Note, and that, if any such
Equipment Notes are then outstanding, interest on such Equipment Notes shall
cease to accrue on and after such redemption date, and (4) the place or places
where such Equipment Notes are to be surrendered for payment of the redemption
price.
(c) On or before the redemption date, Owner (or any Person on
behalf of Owner) shall, to the extent an amount equal to the redemption price
for the Equipment Notes to be redeemed on the redemption date shall not then be
held by Mortgagee, deposit or cause to be deposited with Mortgagee by 12:30 p.m.
New York time on the redemption date in immediately available funds the
redemption price of the Equipment Notes to be redeemed.
(d) If notice of redemption is given as aforesaid (and not
revoked as contemplated in the proviso to (S) 2.12(b)), then, on the redemption
date, the Equipment Notes to be redeemed shall become due and payable at
Mortgagee's Corporate Trust Office or at any office or agency maintained for
such purposes pursuant to (S) 2.06, and from and after such redemption date
(unless there shall be a default in the timely payment of the redemption price)
any such Equipment Notes then outstanding shall cease to bear interest. Upon
surrender of any such Equipment Note for redemption in accordance with such
notice, such Equipment Note shall be redeemed at the redemption price. If any
Equipment Note called for redemption is not so paid upon surrender thereof for
redemption, the principal amount thereof shall, until paid, continue to bear
interest from the applicable redemption date at the interest rate in effect for
such Equipment Note as of such redemption date.
2.13. SUBORDINATION
(a) Owner and (by accepting its Equipment Notes) each Note
Holder agree that, after the commencement of a proceeding of the type referred
to in (S) 5.01(e), (f), or (g), no payment or distribution shall be made on or
in respect of the Secured Obligations owed to such Note Holder, including any
payment or distribution of cash, property, or securities, except as expressly
provided in Article III.
(b) By accepting its Equipment Notes of any Series (other than
Series A), each Note Holder of such Series agrees that if it receives any
payment or distribution on any Secured Obligations in respect of such Series
which it is
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not entitled to receive under this (S) 2.13 or Article III, it will hold any
amount so received in trust for the Senior Holder, and will forthwith turn over
such payment to Mortgagee in the form received to be applied as provided in
Article III.
(c) The "Senior Holder" is (1) the Note Holders of Series A
until the Secured Obligations in respect of Series A Equipment Notes (other than
any Make-Whole Amount thereon) have been paid in full, (2) after such Secured
Obligations have been paid in full, the Note Holders of Series B until the
Secured Obligations in respect of Series B Equipment Notes (other than any
Make-Whole Amount thereon) have been paid in full, (3) after such Secured
Obligations have been paid in full, the Note Holders of Series C until the
Secured Obligations in respect of Series C Equipment Notes (other than any
Make-Whole Amount thereon) have been paid in full, (4) after such Secured
Obligations have been paid in full, the Note Holders of Series A until any
Make-Whole Amount in respect of Series A Equipment Notes has been paid in full,
(5) after such Secured Obligations have been paid in full, the Note Holders of
Series B until any Make-Whole Amount in respect of Series B Equipment Notes has
been paid in full, and (6) after such Secured Obligations have been paid in
full, the Note Holders of Series C until any Make-Whole Amount in respect of
Series C Equipment Notes has been paid in full.
ARTICLE III RECEIPT, DISTRIBUTION, AND APPLICATION OF PAYMENTS
3.01. BASIC DISTRIBUTIONS
Except as otherwise provided in (S) 3.02 and (S) 3.03, each periodic
payment of principal or interest on the Equipment Notes received by Mortgagee
shall be promptly distributed in the following order of priority:
(a) so much of such payment as is required to pay in full the
payment(s) of Original Amount and interest (and any interest
on any overdue Original Amount and, to the extent permitted by
Law, on any overdue interest) then due under all Series A
Equipment Notes shall be distributed to the Note Holders of
Series A ratably, without priority of one over the other, in
the proportion that the amount of such payment(s) then due
under each Series A Equipment Note bears to the total amount
of the payments then due under all Series A Equipment Notes;
(b) after giving effect to clause (a) of this (S) 3.01, so much of
such payment remaining as shall be required to pay in full the
payment(s) of Original Amount and interest (and any interest
on any overdue Original Amount and, to the extent permitted by
Law, on any overdue interest) then due under all Series B
Equipment
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Notes shall be distributed to the Note Holders of Series B
ratably, without priority of one over the other, in the
proportion that the amount of such payment(s) then due under
each Series B Equipment Note bears to the total amount of the
payments then due under all Series B Equipment Notes; and
(c) after giving effect to clause (b) of this (S) 3.01, so much of
such payment remaining as shall be required to pay in full the
payment(s) of Original Amount and interest (and any interest
on any overdue Original Amount and, to the extent permitted by
Law, on any overdue interest) then due under all Series C
Equipment Notes shall be distributed to the Note Holders of
Series C ratably, without priority of one over the other, in
the proportion that the amount of such payment(s) then due
under each Series C Equipment Note bears to the total amount
of the payments then due under all Series C Equipment Notes.
3.02. EVENT OF LOSS; REPLACEMENT; OPTIONAL REDEMPTION
Except as otherwise provided in (S) 3.03, any payments received by
Mortgagee (1) with respect to the Airframe or the Airframe and one or more
Engines as the result of an Event of Loss or (2) pursuant to an optional
redemption of the Equipment Notes pursuant to (S) 2.11 shall be applied to
redeem the Equipment Notes and to all other Secured Obligations by applying such
funds in the following order of priority:
First, (a) to reimburse Mortgagee and the Note Holders for any
reasonable costs or expenses incurred in connection with such
redemption for which they are entitled to reimbursement, or
indemnity by Owner, under the Operative Agreements, and then
(b) to pay any other Secured Obligations then due (except as
provided in clause "Second" below) to Mortgagee, the Note
Holders, and the other Mortgage Indemnitees under this
Mortgage, the Participation Agreement, or the Equipment Notes
(other than amounts specified in clause Second of this (S)
3.02);
Second, (a) to pay the amounts specified in subclause (a) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable on the Series A Equipment Notes;
(b) after giving effect to subclause (a) of this clause "Second",
to pay the amounts specified in subclause (b) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable in respect of the Series B Equipment Notes; and
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(c) after giving effect to subclause (b) of this clause "Second",
to pay the amounts specified in subclause (c) of clause
"Third" of (S) 3.03, plus any Make-Whole Amount then due and
payable in respect of the Series C Equipment Notes; and
Third, as provided in clause "Seventh" of (S) 3.03;
provided, that if a Replacement Airframe or Replacement Engine is substituted
for the Airframe or Engine subject to such Event of Loss as provided in (S)
4.05, any insurance, condemnation or similar proceeds which result from such
Event of Loss and are paid over to Mortgagee shall be held by Mortgagee as
permitted by (S) 7.04 (provided, that such moneys shall be invested as provided
in (S) 6.06) as additional security for the obligations of Owner under the
Operative Agreements, and such proceeds (and such investment earnings), to the
extent not theretofore applied as provided herein, shall be released to Owner at
Owner's written request upon the release of such Airframe or Engine and the
replacement thereof as provided herein.
3.03. PAYMENTS AFTER EVENT OF DEFAULT
Except as otherwise provided in (S) 3.04, all payments received and
amounts held or realized by Mortgagee (including any amounts realized by
Mortgagee from the exercise of any remedies pursuant to Article V) if an Event
of Default exists or after the declaration specified in (S) 5.02(b), as well as
all payments or amounts then held by Mortgagee as part of the Collateral, shall
be promptly distributed by Mortgagee in the following order of priority:
First, so much of such payments or amounts as shall be required (a)
to reimburse Mortgagee or SSB for any tax (except to the
extent resulting from a failure of Mortgagee to withhold taxes
pursuant to (S) 2.03(b)), expense, or other loss (including
all amounts to be expended at the expense of, or charged upon
the rents, revenues, issues, products, and profits of, the
property included in the Collateral (all such property being
herein the "MORTGAGED PROPERTY") pursuant to (S) 5.03(b))
incurred by Mortgagee or SSB (to the extent not previously
reimbursed), the expenses of any sale, or other proceeding,
reasonable attorneys' fees and expenses, court costs, and any
other expenditures incurred or expenditures or advances made
by Mortgagee, SSB, or the Note Holders in the protection,
exercise, or enforcement of any right, power, or remedy or any
damages sustained by Mortgagee, SSB, or any Note Holder,
liquidated or otherwise, upon such Event of Default shall be
applied by Mortgagee as between itself, SSB, and the Note
Holders to reimburse such expenses and any other expenses for
which Mortgagee, SSB, or the Note Holders are entitled to
reimbursement
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under any Operative Agreement, and (b) to pay all Secured
Obligations payable to the other Mortgage Indemnitees
hereunder and under the Participation Agreement (other than
amounts specified in clauses "Second", "Third", and "Fifth" of
this (S) 3.03); and if the aggregate amount to be so
distributed is insufficient to pay all amounts described in
subclauses (a) and (b), then ratably, without priority of one
over the other, in proportion to the amounts owed each
hereunder;
Second, so much of such payments or amounts remaining as is required
to reimburse the then-existing or prior Note Holders for
payments made pursuant to (S) 6.03 (to the extent not
previouslY reimbursed) shall be distributed to such
then-existing or prior Note Holders ratably, without priority
of one over the other, in accordance with the amount of the
payment(s) made by each such then-existing or prior Note
Holder pursuant to (S) 6.03;
Third, (a) so much of such payments or amounts remaining as shall be
required to pay in full (1) the unpaid Original Amount of all
Series A Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon (other than Make-Whole Amount)
and all other Secured Obligations in respect of the Series A
Equipment Notes (other than Make-Whole Amount) to the date of
distribution, shall be distributed to the Note Holders of
Series A, and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the unpaid
Original Amount of all Series A Equipment Notes held by each
holder plus the accrued but unpaid interest and other amounts
due hereunder or thereunder (other than any Make-Whole Amount)
to the distribution date, bears to (y) the aggregate unpaid
Original Amount of all Series A Equipment Notes held by all
such holders plus the accrued but unpaid interest and other
amounts due thereon (other than Make-Whole Amount) to the
distribution date; and (2) thereafter, any Secured Obligations
payable to the Class A Certificate Holders;
(b) after giving effect to subclause (a) of this clause "Third",
so much of such payments or amounts remaining as shall be
required to pay in full (1) any Secured Obligations payable to
the Class B Certificate Holders; and (2) thereafter, the
unpaid Original Amount of all Series B Equipment Notes, and
the accrued but unpaid interest and other amounts due thereon
(other than Make-Whole Amount) and all other Secured
Obligations in respect of the Series B Equipment Notes (other
than Make-Whole Amount) to the date of distribution, shall be
distributed to the Note Holders of Series B,
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and if the amount so to be distributed is insufficient to pay
in full, then ratably, without priority of one over the other,
in the proportion that (x) the unpaid Original Amount of all
Series B Equipment Notes held by each holder plus the accrued
but unpaid interest and other amounts due hereunder or
thereunder (other than any Make-Whole Amount) to the
distribution date, bears to (y) the aggregate unpaid Original
Amount of all Series B Equipment Notes held by all such
holders plus the accrued but unpaid interest and other amounts
due thereon (other than Make-Whole Amount) to the distribution
date; and
(c) after giving effect to subclause (b) of this clause "Third",
so much of such payments or amounts remaining as shall be
required to pay in full (1) the unpaid Original Amount of all
Series C Equipment Notes, and the accrued but unpaid interest
and other amounts due thereon (other than Make-Whole Amount,
which shall not be due and payable) and all other Secured
Obligations in respect of the Series C Equipment Notes (other
than Make-Whole Amount) to the date of distribution, shall be
distributed to the Note Holders of Series C, and if the amount
so to be distributed is insufficient to pay in full, then
ratably, without priority of one over the other, in the
proportion that (x) the unpaid Original Amount of all Series C
Equipment Notes held by each holder plus the accrued but
unpaid interest and other amounts due hereunder or thereunder
(other than any Make-Whole Amount) to the distribution date,
bears to (y) the aggregate unpaid Original Amount of all
Series C Equipment Notes held by all such holders plus the
accrued but unpaid interest and other amounts due thereon
(other than Make-Whole Amount) to the distribution date; and
(2) thereafter, any Secured Obligations payable to the Class C
Certificate Holders;
Fourth, so much of such payments or amounts remaining as is required
to pay in full the amounts specified in clauses First, Second,
and Third of (S) 3.03 of each Related Mortgage, pro rata as to
amounts outstanding, but with priority of such clause First
amounts over such clause Second and Third amounts, priority of
such clause Second amounts over such clause Third amounts,
priority of such subclause Third (a) amounts over such
subclause Third (b) and (c) amounts, and priority of such
subclause Third (b) amounts over such subclause Third (c)
amounts;
Fifth, (a) so much of such payments or amounts remaining as is
required to pay in full the unpaid Make-Whole Amount due on
all Series A Equipment Notes shall be distributed to the Note
Holders of Series A; and if the amount so to be distributed is
insufficient to
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pay in full, then ratably, without priority of one over the
other, in the proportion that (x) the total unpaid amount
thereof owed to each Series A Note Holder bears to (y) the
total amount thereof owed to all Series A Note Holders;
(b) after giving effect to subclause (a) of this clause "Fifth",
so much of such payments or amounts remaining as is required
to pay in full the unpaid Make-Whole Amount due on all Series
B Equipment Notes shall be distributed to the Note Holders of
Series B; and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the total
unpaid amount thereof owed to each Series B Note Holder bears
to (y) the total amount thereof owed to all Series B Note
Holders; and
(c) after giving effect to subclause (b) of this clause "Fifth",
so much of such payments or amounts remaining as is required
to pay in full the unpaid Make-Whole Amount due on all Series
C Equipment Notes shall be distributed to the Note Holders of
Series C; and if the amount so to be distributed is
insufficient to pay in full, then ratably, without priority of
one over the other, in the proportion that (x) the total
unpaid amount thereof owed to each Series C Note Holder bears
to (y) the total amount thereof owed to all Series C Note
Holders;
Sixth, so much of such payments or amounts remaining as is required
to pay in full the amounts specified in clause Fifth of (S)
3.03 of each Related Mortgage, pro rata as to amountS
outstanding, but with priority of such subclause Fifth (a)
amounts over such subclause Fifth (b) amounts; and
Seventh, the balance, if any, of such payments or amounts remaining
thereafter shall be distributed to Owner.
3.04. CERTAIN PAYMENTS
(a) Any payments that Mortgagee receives, and that this
Mortgage (other than this (S) 3.04) does not provide how to apply but any other
Operative Agreement does provide how to apply, shall be applied forthwith to the
purpose for which such payment was made in accordance with such other Operative
Agreement.
(b) Notwithstanding anything to the contrary in this Article
III, Mortgagee will distribute promptly upon receipt any indemnity payment that
it receives from Owner in respect of SSB, any Note Holder, any Certificate
Holder, or any other Mortgage Indemnitee, in each case whether or not pursuant
to (S) 7
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of the Participation Agreement, directly to the Person entitled thereto. Any
payment received by Mortgagee under the second paragraph of (S) 2.02 or, if an
Event of Default exists under (S) 1(B) OR (C) of the KfW Agreement or (S) 1(b)
of the Boeing Agreement, shall be distributed to the Subordination Agent in its
capacity as Note Holder tO be distributed in accordance with the Intercreditor
Agreement.
3.05. OTHER PAYMENTS
Mortgagee shall distribute any payments that it receives, and that the
Operative Agreements (other than this (S) 3.05) do not provide how to apply, in
the order of priority specified in (S) 3.01; and after payment in full of all
amounts then due in accordance with (S) 3.01, then in the manner provided in
clause "Seventh" of (S) 3.03.
3.06. APPLICATION OF PAYMENTS UNDER GUARANTEE
Mortgagee shall distribute all payments that it receives pursuant to
the Guarantee in the same order of priority, and in the same manner, as it would
have distributed the payment for which such payment under the Guarantee was
made.
ARTICLE IV OWNER'S COVENANTS
4.01. LIENS
Owner will not directly or indirectly create, incur, assume, or suffer
to exist any Lien or with respect to the Airframe or any Engine or any other
Collateral, title to any of the foregoing, or any interest of Owner therein,
except Permitted Liens. Owner shall promptly, at its own expense, take such
action as may be necessary duly to discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time.
4.02. POSSESSION; OPERATION AND USE; MAINTENANCE; REGISTRATION;
MARKINGS
(a) General. Except as otherwise expressly provided herein,
Owner shall be entitled to operate, use, locate, employ, or otherwise utilize or
not utilize the Airframe, any Engine or any Parts in any lawful manner or place
in accordance with Owner's business judgment.
(b) Possession. Owner shall not, without Mortgagee's prior
written consent, lease or otherwise in any manner deliver, transfer, or
relinquish possession of the Aircraft, the Airframe, or any Engine, or install
any Engine, or permit any Engine to be installed, on any airframe other than the
Airframe; except that Owner may, without such prior written consent:
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(1) subject or permit any Permitted Lessee to subject
(aa) the Airframe to normal interchange agreements, or (bb) any Engine to normal
interchange agreements or pooling agreements or arrangements, in each case
customary in the commercial airline industry and entered into by Owner or such
Permitted Lessee in the ordinary course of business; provided, that if Owner's
title to any such Engine is divested under any such agreement or arrangement,
then such Engine shall be deemed to have suffered an Event of Loss as of the
date of such divestiture, and Owner shall comply with (S) 4.04(e) in respect
thereof;
(2) deliver or permit any Permitted Lessee to deliver
possession of the Aircraft, the Airframe, any Engine, or any Part (aa) to the
manufacturer thereof or to any third-party maintenance provider for testing,
service, repair, maintenance, or overhaul work on the Aircraft, the Airframe,
any Engine, or any Part, or, to the extent required or permitted by (S) 4.04,
for alterations or modifications in or additions to the Aircraft, the Airframe,
or any Engine, or (bb) to any Person for the purpose of transport to a Person
referred to in the preceding clause (aa);
(3) install or permit any Permitted Lessee to install
an Engine on an airframe owned by Owner or such Permitted Lessee free and clear
of all Liens, except (aa) Permitted Liens and those that do not apply to the
Engines, and (bb) the rights of third parties under normal interchange or
pooling agreements and arrangements of the type permitted under (S) 4.02(b)(1);
(4) install or permit any Permitted Lessee to install
an Engine on an airframe leased to Owner or such Permitted Lessee, or purchased
or owned by Owner or such Permitted Lessee subject to a security agreement,
conditional sale, or other secured financing arrangement, but only if (aa) such
airframe is free and clear of all Liens, except (i) the rights of the parties to
such lease, or any such secured financing arrangement, covering such airframe,
and (ii) Liens of the type permitted by clause (3) of this (S) 4.02(b), and (bb)
Owner or Permitted Lessee has received from the lessor, secured party, or
conditional seller, in respect of such airframe, a written agreement (which may
be a copy of the lease, security agreement, conditional sale agreement, or other
agreement covering such airframe), whereby such Person agrees that it will not
acquire or claim any right, title, or interest in, or Lien on, such Engine by
reason of the installation of such Engine on such airframe at any time while
such Engine is subject to the Lien of this Mortgage;
(5) install or permit any Permitted Lessee to install
an Engine on an airframe owned by or leased to Owner or such Permitted Lessee
subject to a conditional sale or other security agreement under circumstances
where neither clause (3) nor clause (4) of this (S) 4.02(b) applies; provided,
that
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any such installation shall be deemed an Event of Loss with respect to such
Engine, and Owner shall comply with (S) 4.04(e) in respect thereof;
(6) transfer or permit any Permitted Lessee to
transfer possession of the Aircraft, the Airframe, or any Engine to the U.S.
Government, in which event Owner shall promptly notify Mortgagee in writing of
any such transfer of possession (and, in the case of any transfer pursuant to
CRAF, in such notification shall identify by name, address, and telephone
numbers the Contracting Office Representative or Representatives for the
Military Airlift Command of the United States Air Force to whom notices must be
given and to whom requests or claims must be made to the extent applicable under
CRAF);
(7) enter into a Wet Lease with respect to the
Aircraft or any other aircraft on which any Engine may be installed (which shall
not be considered a transfer of possession hereunder); provided, that Owner's
obligations hereunder shall continue in full force and effect notwithstanding
any Wet Lease;
(8) if no Special Default exists, and subject to the
following paragraph, enter into a lease with respect to the Aircraft, the
Airframe, or any Engine to any Permitted Air Carrier or Permitted Manufacturer
who is not then subject to any bankruptcy, insolvency, liquidation,
reorganization, dissolution, or similar proceeding and shall not have
substantially all of its property in the possession of any liquidator, trustee,
receiver, or similar Person; but only if, in the case only of a lease to a
Permitted Foreign Air Carrier or non-U.S. Permitted Manufacturer, Owner
furnishes Mortgagee a favorable opinion, in form and substance reasonably
satisfactory to Mortgagee, of counsel, selected by Owner and reasonably
satisfactory to Mortgagee, located in the country of domicile of such Permitted
Foreign Air Carrier or non-U.S. Permitted Manufacturer, that (aa) the terms of
such lease are the legal, valid, and binding obligations of the parties thereto,
enforceable under the laws of such jurisdiction, (bb) it is not necessary for
Mortgagee to register or qualify to do business in such jurisdiction, if not
already so registered or qualified, as a result of the proposed lease, (cc) the
validity, priority, and perfection of Mortgagee's Lien in respect of, the
Aircraft, Airframe, and Engines will be recognized and enforceable in such
jurisdiction, (dd) the Laws of such jurisdiction of domicile require fair
compensation by the government of such jurisdiction, payable in a currency
freely convertible into Dollars, for the loss of title to the Aircraft,
Airframe, or Engines in the event of the requisition by such government of such
title (unless Owner provides insurance in the amounts required with respect to
hull insurance under this Mortgage covering the requisition of title to the
Aircraft, Airframe, or Engines by the government of such jurisdiction so long as
the Aircraft, Airframe, or Engines are subject to such lease), (ee) such
Permitted Air Carrier's or Permitted Manufacturer's agreement that its rights
under the lease are subject
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and subordinate to all the terms of this Mortgage is enforceable against such
Permitted Air Carrier or Permitted Manufacturer under applicable law, (ff) the
courts of such jurisdiction would provide substantially equivalent protection to
Mortgagee as provided under U.S. Law in respect of the exercise of remedies,
including that there are no possessory rights in favor of Owner, any Permitted
Lessee, or any third party (including any Government Entity) which would, upon
bankruptcy or other default by Owner or any Permitted Lessee, prevent the return
of the Aircraft to Owner in accordance with and when permitted by the terms of
this Mortgage upon Mortgagee's exercise of its remedies hereunder, or, if such
possessory rights exist, they are not materially greater than those available to
borrowers and lessees under United States Law and there are no procedural
impediments to the return of the Aircraft to Mortgagee greater than under United
States Law, and upon termination of any Permitted Lease, registration shall be
terminable without material burden or delay and there is no material impediment
under the laws of such country of registration to the enforceability (other than
immaterial differences in procedures of enforcement) of the rights and remedies
of Mortgagee provided for under the Operative Agreements (it being understood
that, in the absence of restrictions similar to those imposed under (S)(S) 362
and 363 of the BankrupTcy Code, rights and remedies similar to those available
under Section 1110 of the Bankruptcy Code are not required), (gg) there is no
strict tort liability imposed on passive lenders or lessors, except such tort
liability not of materially greater scope or magnitude than might be imposed on
such passive lender or lessor under the prevailing rule among the states of the
United States, and except liabilities that Owner or a Permitted Lessee has
agreed to insure against at its expense to the reasonable satisfaction of
Mortgagee, and (hh) Mortgagee, the Note Holders, and the Certificate Holders
shall not be subjected to any adverse tax consequences as a result of such lease
for which Owner is not required to indemnify such Person, unless Owner agrees to
indemnify such Person therefor by means of an indemnity agreement reasonably
satisfactory to such Person (and Holdings guarantees such indemnity pursuant to
the Guarantee);
provided, that (1) the rights of any transferee who receives possession by
reason of a transfer permitted by this (S) 4.02(b) (other than by a transfer of
an Engine which is deemed an Event of Loss) shall be subject anD subordinate to
this Mortgage and to Mortgagee's rights, powers and remedies hereunder,
including (x) Mortgagee's right to repossess the Aircraft pursuant to (S) 5.02,
(y) Mortgagee's right to terminate and avoid such lease, delivery, transfer or
relinquishment of possession if an Event of Default exists, and (z) the right to
require such Person to deliver the Aircraft, the Airframe, and Engines subject
to such transfer forthwith if an Event of Default exists, (2) Owner shall remain
primarily liable for the performance this Mortgage and all the terms and
conditions of this Mortgage and the other Operative Agreements shall remain in
effect, and (3) no lease or transfer of possession otherwise in compliance with
this (S) 4.02(b) shall (aa) result in any registration or re-registration of an
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Aircraft (except to the extent permitted by (S) 4.02(e)) or the maintenance,
operation, or use thereof except in compliance with (S) 4.02(c) and (S) 4.02(d),
or (bb) permit any action not permitted to Owner hereunder.
In the case of any lease permitted under this (S) 4.02(b), Owner will
include in such lease appropriate provisions which (x) make such lease expressly
subject and subordinate to this Mortgage, including Mortgagee's right to avoid
such lease in the exercise of its rights to repossession of the Airframe and
Engines hereunder; (y) require the Permitted Lessee to comply with (S) 4.06, to
the extent that Owner does not obligate itself therein to do so; and (z) require
that the Airframe or any Engine subject thereto be used in accordance with the
limitations applicable to Owner's possession and use provided in this Mortgage
and provide for the maintenance and inspection of the Aircraft in the same
manner in all material respects as the applicable provisions of this Mortgage.
No lease permitted under this (S) 4.02(b) shall be entered into unless (i) Owner
provides written notice to Mortgagee (such notice in the event of a lease to a
U.S. Air Carrier to be given promptly after entering into any such lease, and,
in the case of a lease to any other Permitted Air Carrier or a Permitted
Manufacturer, 10 days in advance of entering into such lease); (ii) Owner
furnishes to Mortgagee evidence reasonably satisfactory to Mortgagee that the
insurance required by (S) 4.06 remains in effect; (iii) all necessary documents
are dulY filed, registered, or recorded in such public offices as may be
required fully to preserve the first-priority security interest (subject to
Permitted Liens) of Mortgagee in the Aircraft; (iv) no Permitted Lessee may
sublease the Airframe or any Engine, except that a Permitted Manufacturer may
sublease to any Permitted Lessee to whom a lease would be permitted under this
(S) 4.02; PROVIDED that (A) such sublease shall not permit any sub-subleasing of
the Aircraft, the Airframe, or any Engine (and Owner shall ensure that the same
does not occur), (B) such sublease shall be assigned to Owner to secure such
Permitted Manufacturer's obligations under its lease, and (C) Owner shall
comply, and shall cause such sublease to comply, with all requirements of this
(S) 4.02 as if such sublease were a direct lease from Lessee to the sublessee;
(v) the Permitted Lessee shall not be eligible to assert, or shall have
effectively waived, any right to sovereign immunity; and (vi) Mortgagee receives
evidence that: all necessary approvals from any Government Entity required for
the Airframe or any Engine or engine (as applicable) to be imported and, to the
extent reasonably obtainable and reasonably requested, exported from the
applicable country of domicile upon repossession of such equipment by Mortgagee
shall have been obtained prior to the importation of the imported item(s) under
any such Permitted Lease;. Owner shall reimburse Mortgagee for all of its
reasonable out-of-pocket fees and expenses (including reasonable fees and
disbursements of counsel) incurred in connection with any such lease. Except as
otherwise provided herein and without in any way relieving Owner from its
primary obligation for the performance of its obligations under this Mortgage,
Owner may in its sole discretion permit a lessee to exercise any or all
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rights which Owner would be entitled to exercise under (S) 4.02 and (S) 4.04,
and may cause a lessee to perform any or all of Owner's obligations under
Article IV, and Mortgagee agrees to accept actual and full performance thereof
by a lessee in lieu of performance by Owner.
In addition to the foregoing requirements, before the commencement of
any Permitted Lease, Owner shall deliver to Mortgagee: (i) a notice stating the
identity of the lessee and a copy of the lease agreement, (ii) an officer's
certificate stating that no Special Default exists and that such lease complies
with this (S) 4.02, (iii) the consent of the Permitted Lessee to the assignment
of its Permitted Lease pursuant to the final paragraph of this (S) 4.02(b), in a
form reasonably satisfactory to Mortgagee, and (iv) if required by the final
paragraph of this (S) 4.02(b), the Lease Assignment referred to therein, and a
supplement to the Mortgage and financing statements or similar documents under
the applicable Laws of the country of the Permitted Lessee confirming the
perfected first-priority security interest of Mortgagee in such Permitted Lease,
duly executed and delivered and duly filed or recorded in all appropriate
places. No relinquishment of possession of any Airframe, Engine, or Part shall
in any way discharge or diminish any of Owner's obligations.
Mortgagee hereby agrees, and each Note Holder by acceptance of an
Equipment Note agrees, for the benefit of each lessor, conditional seller, or
secured party of any engine leased, purchased, or owned by Owner or any
Permitted Lessee subject to a lease, conditional sale, or other security
agreement that Mortgagee, each Note Holder, and their respective successors and
assigns will not acquire or claim, as against such lessor, conditional seller,
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, conditional sale, or other security agreement and owned
by such lessor or conditional seller or subject to a security interest in favor
of such secured party.
As security for Owner's due and punctual payment and performance of all
of its covenants and obligations in the Operative Agreements, Owner hereby
grants to Mortgagee a first-priority security interest in all of Owner's right,
title, and interest in and to each Permitted Lease of any Aircraft, Airframe, or
Engine, and all payments, including payments of rent, insurance proceeds (other
than public liability insurance proceeds), and other amounts due or to become
due thereunder. Owner shall enter into a "Lease Assignment" in form and
substance satisfactory to Mortgagee with respect to each Permitted Lease of the
Airframe having a term of one or more years. In furtherance of the provisions of
this paragraph, Owner agrees that each Permitted Lease for more than one year of
the Airframe (x) shall contain a provision to the effect that the Permitted
Lessee agrees to pay all amounts due under the Permitted Lease to Mortgagee
after the Permitted Lessee receives written notice from Mortgagee to
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such effect (until the Permitted Lessee receives written notice from Mortgagee
to contrary effect) and stating that a Special Default exists under this
Mortgage, and (y) shall be accompanied by such Uniform Commercial Code financing
statements as shall, in Mortgagee's reasonable opinion, be required to perfect
and protect the security interests of Mortgagee in such Permitted Lease.
(c) Operation and Use. Owner shall not operate, use, or locate
the Aircraft, the Airframe, or any Engine, or allow the Aircraft, the Airframe,
or any Engine to be operated, used, or located, (1) in any area excluded from
coverage by any insurance required by (S) 4.06, except in the case of a
requisition bY the U.S. Government where Owner obtains indemnity in lieu of such
insurance from the U.S. Government, or insurance from the U.S. Government,
against substantially the same risks and for at least the amounts of the
insurance required by (S) 4.06 covering such area, or (2) in any recognized area
of hostilities unless covered iN accordance with (S) 4.06 by war risk insurance,
or in either case unless the Aircraft, the Airframe, or any Engine is only
temporarily operated, used, or located in such area as a result of an emergency,
equipment malfunction, navigational error, hijacking, weather condition, or
other similar unforeseen circumstance, so long as Owner diligently and in good
faith proceeds to remove the Aircraft from such area. Owner shall not permit the
Aircraft, the Airframe, or any Engine to be used, operated, maintained,
serviced, repaired or overhauled (x) in violation of any Law binding on or
applicable to such Aircraft, Airframe, or Engine or (y) in violation of any
airworthiness certificate, license, or registration of any Government Entity
relating to the Aircraft, the Airframe, or any Engine, except (i) immaterial or
non-recurring violations with respect to which corrective measures are taken
promptly by Owner or Permitted Lessee upon discovery thereof, or (ii) to the
extent the validity or application of any such Law or requirement relating to
any such certificate, license, or registration is being contested in good faith
by Owner or Permitted Lessee in any reasonable manner which does not involve any
material risk of the sale, forfeiture, or loss of the Aircraft, the Airframe, or
any Engine, any material risk of criminal liability or material civil penalty
against Mortgagee or any Note Holder or impair Mortgagee's or any Note Holder's
interest in the Aircraft, the Airframe, or any Engine.
(d) Maintenance and Repair. At its own cost and expense, Owner
shall cause the Aircraft, the Airframe, and each Engine to be maintained,
serviced, repaired, and overhauled in accordance with (1) maintenance standards
required by, or substantially as stringent as those required by, the FAA or the
central aviation authority of Canada, France, Germany, Japan, or the United
Kingdom for the Aircraft, the Airframe, and the Engines (the "Maintenance
Program"), so as (aa) to keep the Aircraft, the Airframe, and each Engine in as
good operating condition as on the Closing
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Date, ordinary wear and tear excepted, and (bb) to keep the Aircraft in such
operating condition as may be necessary to enable the applicable airworthiness
certification of such Aircraft to be maintained under the regulations of the FAA
or other Aviation Authority then having jurisdiction over the operation of the
Aircraft (but in any event in accordance with the Maintenance Program), except
during (x) temporary periods of storage in accordance with applicable
regulations, (y) maintenance and modification permitted hereunder, or (z)
periods when the FAA or such other Aviation Authority has revoked or suspended
the airworthiness certificates for Similar Aircraft; and (2) except during
periods when a Permitted Lease is in effect, the same standards as Owner uses
with respect to similar aircraft of similar size in its fleet operated by Owner
in similar circumstances and, during any period in which a Permitted Lease is in
effect, the same standards used by the Permitted Lessee with respect to similar
aircraft of similar size in its fleet and operated by the Permitted Lessee in
similar circumstances. Owner further agrees that the Aircraft, the Airframe, and
Engines will be maintained, used, serviced, repaired, overhauled, or inspected
in compliance with applicable Laws with respect to the maintenance of the
Aircraft and in compliance with each applicable airworthiness certificate,
license, and registration relating to the Aircraft, the Airframe, or any Engine
issued by the Aviation Authority, other than minor or nonrecurring violations
with respect to which corrective measures are taken upon discovery thereof and
except to the extent Owner or Permitted Lessee is contesting in good faith the
validity or application of any such Law or requirement relating to any such
certificate, license, or registration in any reasonable manner which does not
create a material risk of sale, loss, or forfeiture of the Aircraft, the
Airframe, or any Engine or the interest of Mortgagee or any Note Holder therein,
or any risk of criminal liability or material civil penalty against Mortgagee or
any Note Holder; provided, that no contest shall excuse the failure to maintain
the airworthiness certification for the aircraft in good standing without
Mortgagee's written consent, nor shall the pendency of any contest prevent a
prohibition of use from becoming an Event of Lo(S) Owner shall maintain or cause
to be maintained the Aircraft Documents. All Aircraft Records shall be
maintained in English (except that, during the term of any Permitted Lease to a
Permitted Lessee who is not a U.S. Air Carrier, such Permitted Lessee may
maintain Aircraft Records in the primary language of the country in which such
Permitted Lessee is located, and such Aircraft Records shall be translated into
English on an ongoing basis and no less frequently than once each year).
(e) Registration. On or as promptly as possible after the
Closing Date, Owner shall cause the Aircraft to be duly registered in its name
under the Transportation Code, and except as otherwise permitted by this (S)
4.02(e) at all times thereafter shall cause the Aircraft to remain so
registered. If no Special Default exists, Owner may, by written notice to
Mortgagee, request to change the country of registration of the Aircraft. Any
such change in
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registration shall be effected only in compliance with, and subject to all of
the conditions in, (S) 5.4.5 of the Participation Agreement. Owner shall also
cause this Mortgage to be duly recordeD and at all times maintained of record as
a first-priority perfected mortgage (subject to Permitted Liens) on the
Aircraft, the Airframe, and each of the Engines (except to the extent such
perfection or priority cannot be maintained solely as a result of the failure by
Mortgagee to execute and deliver any necessary documents).
(f) Markings. If permitted by applicable Law, on or reasonably
promptly after the Closing Date, Owner will cause to be affixed to, and
maintained in, the cockpit of the Airframe and on each Engine, in each case, in
a clearly visible location, a placard of a reasonable size and shape bearing the
legend: "Subject to a security interest in favor of State Street Bank and Trust
Company of Connecticut, National Association, as Mortgagee." Such placards may
be removed temporarily, if necessary, in the course of maintenance of the
Airframe or Engines. If any such placard is damaged or becomes illegible, Owner
shall promptly replace it with a placard complying with the requirements of this
(S) 4.02(f).
4.03. INSPECTION
(a) At all reasonable times, Mortgagee, a single
representative for each class of Certificate Holders or any initial Class A
Certificate Holder holding at least 5% of the principal amount of the Class A
Certificates issued under the related Pass-Through Trust Agreement, and their
authorized representatives (the "Inspecting Parties") may (not more than once
every 12 months, unless an Event of Default exists, then such inspection right
shall not be so limited) inspect the Aircraft and the Aircraft Documents, and
any such Inspecting Party may make copies of such Aircraft Documents not
reasonably deemed confidential by Owner or a Permitted Lessee.
(b) Any inspection of the Aircraft hereunder shall be limited
to a visual, walk-around inspection, and shall not include the opening of any
panels, bays, or other components of the Aircraft, and no such inspection shall
interfere with Owner's or any Permitted Lessee's maintenance or operation of the
Aircraft, the Airframe, or any Engine.
(c) With respect to such rights of inspection, neither
Mortgagee nor any Certificate Holder shall have any duty or liability to make,
or any duty or liability by reason of not making, any such visit, inspection or
survey.
(d) Each Inspecting Party shall bear its own expenses in
connection with any such inspection (including the cost of any copies made in
accordance with (S) 4.03(a)), unless an Event of Default exists, then any such
inspection (including the cost of such copies) shall be at Owner's expense.
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4.04. REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS, AND
ADDITIONS; SUBSTITUTION OF ENGINES
(a) Replacement of Parts. Except as otherwise provided herein,
Owner, at its own cost and expense, will promptly replace (or cause to be
replaced) all Parts that are from time to time be incorporated or installed in
or attached to the Aircraft, and that become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair, or permanently rendered unfit for
use for any reason whatsoever. In addition, Owner, at its own cost and expense,
may remove (or cause to be removed) in the ordinary course of maintenance,
service, repair, overhaul, or testing any Parts, whether or not worn out, lost,
stolen, destroyed, seized, confiscated, damaged beyond repair, or permanently
rendered unfit for use; provided, that, except as otherwise provided herein,
Owner will replace or cause the replacement of such Parts as promptly as
practicable. All replacement Parts shall be free and clear of all Liens, except
for Permitted Liens and pooling arrangements to the extent permitted by (S)
4.04(c), and shall be in good operating condition and (except in the case of
replacement propertY installed on the basis of operational exigencies) have a
value, remaining useful life, and utility not less than the value, remaining
useful life, and utility of the Parts replaced (assuming such replaced Parts
were in the condition required hereunder).
(b) Parts. Except as otherwise provided herein, any Part at
any time removed from the Airframe or any Engine shall remain subject to the
Lien of this Mortgage, no matter where located, until it is replaced by a Part
that has been incorporated or installed in or attached to such Airframe or any
Engine and that meets the requirements for replacement Parts specified above. As
soon as a replacement Part is incorporated or installed in or attached to the
Airframe or any Engine as provided in (S) 4.04(a), without further act, (1) the
replaced Part shall thereupon be free and clear of all rights of Mortgagee and
shall no longer be a Part hereunder, and (2) such replacement Part shall become
subject to this Mortgage and be part of such Airframe or Engine for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to such Airframe or Engine.
(c) Pooling of Parts. Any Part removed from the Aircraft may
be subjected by Owner or a Permitted Lessee to a normal pooling arrangement
customary in the airline industry and entered into in the ordinary course of
business of Owner or Permitted Lessee, provided, that the part replacing such
removed Part shall be incorporated or installed in or attached to such Airframe
or any Engine in accordance with (S) 4.04(a) and (S) 4.04(b) as promptly as
practicable after the removal of such removed Part. In addition, any replacement
parT when incorporated or installed in or attached to the Airframe or any Engine
may be owned by any third party, subject to a normal pooling arrangement, so
long as Owner or a Permitted Lessee, as promptly thereafter
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as reasonably possible, either (1) causes such replacement part to become
subject to the Lien of this Mortgage, free and clear of all Liens except
Permitted Liens, at which time such replacement part shall become a Part, or (2)
replaces (or causes to be replaced) such replacement part by incorporating or
installing in or attaching to the Aircraft a further replacement Part owned by
Owner free and clear of all Liens except Permitted Liens and which shall become
subject to the Lien of this Mortgage in accordance with (S) 4.04(b).
(d) Alterations, Modifications, and Additions. Owner shall
make (or cause to be made) alterations and modifications in and additions to the
Aircraft as may be required to be made from time to time to meet the applicable
standards of the FAA or other Aviation Authority having jurisdiction over the
operation of the Aircraft, to the extent made mandatory in respect of the
Aircraft (a "Mandatory Modification"); provided, that Owner or a Permitted
Lessee may, in good faith and by appropriate procedure, contest the validity or
application of any law, rule, regulation, or order in any reasonable manner
which does not materially adversely affect Mortgagee's interest in the Aircraft
and does not involve any material risk of sale, forfeiture, or loss of the
Aircraft or the interest of Mortgagee or any Note Holder therein, or any
material risk of material civil penalty or any material risk of criminal
liability being imposed on Mortgagee or the holder of any Equipment Note. In
addition, Owner may make or permit to be made such alterations and modifications
in and additions to the Airframe or any Engine (each an "Optional Modification")
as Owner or a Permitted Lessee deems desirable in the proper conduct of its
business, including removal of Parts which Owner deems are obsolete or no longer
suitable or appropriate for use in the Aircraft; provided, that no such Optional
Modification shall (1) diminish the fair market value, utility, or useful life
of the Aircraft or any Engine below its fair market value, utility, or useful
life immediately before such Optional Modification (assuming the Aircraft or
such Engine was in the condition required by this Mortgage immediately before
such Optional Modification), or (2) cause the Aircraft to cease to have the
applicable standard certificate of airworthiness. Except as otherwise provided
herein, all Parts (other than Removable Parts) incorporated or installed in or
attached to the Aircraft as a result of such Optional Modification shall,
without further act, become subject to this Mortgage. Owner or any Permitted
Lessee may, at any time so long as the Airframe or any Engine is subject to the
Lien of this Mortgage, remove any such Part (such Part being referred to herein
as a "Removable Part") from such Airframe or an Engine if (i) such Part is in
addition to, and not in replacement of or in substitution for, any Part
originally incorporated or installed in or attached to such Airframe or any
Engine at the time of delivery thereof hereunder or any Part in replacement of,
or in substitution for, any such original Part, (ii) such Part is not required
to be incorporated or installed in or attached or added to such Airframe or any
Engine pursuant to (S) 4.02(d) or the first sentence of this (S) 4.04(d), and
(iii) such Part can be removed from such Airframe or any Engine without
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diminishing the fair market value, utility, or remaining useful life which such
Airframe or any Engine would have had at the time of removal had such removal
not been effected, assuming the Aircraft was otherwise maintained in the
condition required by this Mortgage and such Removable Part had not been
incorporated or installed in or attached to the Aircraft. No Removable Part
shall be subject to the Lien of this Mortgage; except that any Part not removed
before the repossession by Mortgagee hereunder of the Airframe or Engine on
which it is incorporated, installed, or attached shall at that time, without
further act, become a part of such Airframe or Engine and be subject to the Lien
of this Mortgage. Removable Parts may be leased from or financed by third
parties other than Mortgagee.
(e) Substitution of Engines. If an Event of Loss to an Engine
occurs under circumstances in which no Event of Loss to the Airframe occurs,
Owner shall promptly (and in any event within 15 days after such occurrence)
notify Mortgagee of such Event of Loss Owner shall have the right at its option
at any time, on at least five Business Days' prior notice to Mortgagee, to
substitute, and if an Event of Loss to an Engine occurs under circumstances in
which an Event of Loss to the Airframe has not occurred, shall within 60 days of
the occurrence of such Event of Loss substitute, a Replacement Engine for any
Engine, free and clear of Liens (other than Permitted Liens not of record). In
such event, immediately upon the effectiveness of such substitution and without
further act, (1) the replaced Engine shall thereupon be free and clear of all
rights of Mortgagee and the Lien of this Mortgage and shall no longer be an
Engine hereunder, and (2) such Replacement Engine shall become subject to this
Mortgage and be part of the Aircraft for all purposes hereof to the same extent
as the replaced Engine. Such Replacement Engine shall be an engine manufactured
by Engine Manufacturer that is the same model as the Engine to be replaced
thereby, or an improved model (but in any event the same model as the other
Engine then subject to this Mortgage), and that is suitable for installation and
use on the Airframe, and that has a value, utility, and remaining useful life
(without regard to hours and cycles remaining until overhaul) at least equal to
the Engine to be replaced thereby (assuming that such Engine had been maintained
in accordance with this Mortgage). Owner's right to make a replacement hereunder
shall be subject to the fulfillment (which may be simultaneous with such
replacement) of the following conditions precedent at Owner's sole cost and
expense, and Mortgagee agrees to cooperate with Owner to the extent necessary to
enable it timely to satisfy such conditions:
(1) an executed counterpart of each of the following
documents shall be delivered to Mortgagee:
(aa) a supplement to this Mortgage, covering the
Replacement Engine, which shall be duly filed for recordation pursuant
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to the Transportation Code or such other applicable law of the
jurisdiction other than the United States in which the aircraft of
which such Engine is a part is registered in accordance with (S)
4.02(e);
(bb) a full warranty (as to title) bill of sale,
covering the Replacement Engine, executed by the former owner thereof
in favor of Owner (or, at Owner's option, other evidence of Owner's
ownership of such Replacement Engine, reasonably satisfactory to
Mortgagee); and
(cc) UCC financing statements covering the security
interests created by this Mortgage (or any similar statements or other
documents required to be filed or delivered pursuant to the laws of the
jurisdiction in which such Aircraft may be registered) as are deemed
necessary or desirable by counsel for Mortgagee to protect the security
interests of Mortgagee in the Replacement Engine;
(2) Owner shall cause to be delivered to Mortgagee an
opinion of counsel to the effect that the Lien of this Mortgage continues to be
in full force and effect with respect to the Replacement Engine, and such
evidence of compliance with the insurance provisions of (S) 4.06 with respect to
such ReplacemenT Engine as Mortgagee reasonably requests; and
(3) Owner shall have furnished to Mortgagee an
opinion of Owner's aviation law counsel reasonably satisfactory to Mortgagee and
addressed to Mortgagee as to the due filing for recordation of the supplement to
this Mortgage with respect to such Replacement Engine under the Transportation
Code or such other applicable law of the jurisdiction other than the United
States in which the Aircraft is registered in accordance with (S) 4.02(e) and
the due filing of any Financing Statements or other filings reasonably requested
by Mortgagee with respect to such Replacement Engine under applicable Law.
Upon satisfaction of all conditions to such substitution, (x) Mortgagee
shall execute and deliver to Owner such documents and instruments, prepared at
Owner's expense, as Owner reasonably requests to evidence the release of such
replaced Engine from the Lien of this Mortgage, (y) Mortgagee shall assign to
Owner all claims that Mortgagee may have against any other Person relating to
any Event of Loss giving rise to such substitution, and (z) Owner shall receive
all insurance proceeds (other than those reserved to others under (S) 4.06(b))
and proceeds in respect of any Event of Loss giving rise to such replacement to
the extent not previously applied to the purchase price of the Replacement
Engine as provided in (S) 4.05(d).
4.05. LOSS, DESTRUCTION, OR REQUISITION
(a) Event of Loss to the Aircraft.
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If an Event of Loss to the Airframe (and any Engine(s) installed
thereon) occurs, Owner shall promptly (and in any event within 10 days after
such occurrence, or, if later, within 10 days after the determination that an
Event of Loss has occurred) notify Mortgagee of such Event of Lo(S) Within 45
days after such occurrence, Owner shall notify Mortgagee of Owner's election
either to replace the Airframe and any such Engine(s) as provided under (S)
4.05(a)(1) or to make payment in respect of such Event of Loss as provided under
(S) 4.05(a)(2) (and if Owner does not notify Mortgagee of such election within
the 45-day time period, Owner shall be deemed to have elected to make payment in
respect of such Event of Loss as provided under (S) 4.05(a)(2)):
(1) If Owner elects to replace the Airframe and any
such Engine(s) (and Owner shall not be entitled to elect to replace the Airframe
if, at the time that Mortgagee receives the notice referred to above, a Special
Default exists), Owner shall, subject to the satisfaction of the conditions in
(S) 4.05(c), as promptly as possible and in any event within 180 days after the
occurrence of such Event of Loss, cause to be subjected to the Lien of this
Mortgage, in replacement of the Airframe with respect to which the Event of Loss
occurred, a Replacement Airframe and, if any Engine was installed on the
Airframe when it suffered the Event of Loss, a Replacement Engine therefor, such
Replacement Airframe and any Replacement Engine(s) to be free and clear of all
Liens except Permitted Liens not of record, and to have a value, utility, and
remaining useful life (without regard to hours or cycles remaining until the
next regular maintenance check) at least equal to the Airframe or Engine, as the
case may be, to be replaced thereby (assuming that such Airframe or Engine had
been maintained in accordance with this Mortgage); provided, THAT if Owner does
not perform its obligation to effect such replacement under this clause (1)
during the 180-day period provided herein, it shall pay the amounts required to
be paid pursuant to and within the time frame specified in clause (2) below.
(2) If Owner elects to make a payment for such Event
of Loss to the Airframe, Owner shall make a payment to Mortgagee for purposes of
redeeming Equipment Notes in accordance with (S) 2.10 on a date on or before the
Business Day following the earlier of (aa) the 180th day after the occurrence of
such Event of Loss, and (bb) the fourth Business Day after the receipt of
insurance proceeds with respect to such Event of Loss (but in any event not
earlier than the date of Owner's election under (S) 4.05(a) to make payment
under this (S) 4.05(a)(2)); and upon such payment and payment of all other
Secured Obligations then due and payable, Mortgagee shall, at Owner's cost and
expense, release from the Lien of this Mortgage the Airframe and the Engines, by
executing and delivering to Owner all documents that Owner reasonably requests
to evidence such release.
(c) If Owner elects the replacement option in clause (1) above and has
not effected such replacement within 60 days after the Event of Loss occurred,
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then Owner shall immediately pay to Mortgagee the amounts required pursuant to
clause (2), to be held as security for Owner's obligations under clause (1). If
Owner elects the replacement option in clause (1) above, and pays the deposit
required by the preceding sentence, and has not effected such replacement within
180 days after the Event of Loss occurred, then such deposit shall be applied to
Owner's obligations under clause (2), and Owner shall pay any remaining amounts
due under clause (2).
(b) Effect of Replacement. If Owner provides a Replacement
Airframe and any Replacement Engine(s) as provided for in (S) 4.05(a)(1), then
(1) the Lien of this Mortgage shall continue with respect to such Replacement
Airframe and any Replacement Engine(s) as though no Event of Loss had occurred;
(2) Mortgagee shall (at Owner's cost and expense) release from the Lien of this
Mortgage the replaced Airframe and Engines (if any) by executing and delivering
to Owner such documents and instruments as Owner reasonably requests to evidence
such release; and (3) in the case of a replacement upon an Event of Loss,
Mortgagee shall assign to Owner all claims Mortgagee may have against any other
Person arising from the Event of Loss, and Owner shall receive all insurance
proceeds (other than those reserved to others under (S) 4.06(b)) and proceeds
from any award in respect of condemnation, confiscation, seizure, or
requisition, including any investment interest thereon, to the extent not
previously applied to the purchase price of the Replacement Airframe and any
Replacement Engine(s) as provided in (S) 4.05(d).
(c) Conditions to Airframe and Engine Replacement. Owner's
right to substitute a Replacement Airframe and any Replacement Engine(s) as
provided in (S) 4.05(a)(1) is subject to the fulfillment, at Owner's sole cost
and expense, in addition to the conditions in (S) 4.05(a)(1), of the following
conditions precedent::
(1) on the date when the Replacement Airframe and any
Replacement Engine(s) are subjected to the Lien of this Mortgage (the
"Replacement Closing Date"), Mortgagee receives an executed counterpart of each
of the following documents (or, in the case of the FAA Bill of Sale and full
warranty bill of sale referred to below, a photocopy thereof):
(aa) a supplement to this Mortgage, in form and
substance reasonably satisfactory to Mortgagee, covering the
Replacement Airframe and any Replacement Engine(s), which is being duly
filed for recordation pursuant to the Transportation Code or such other
applicable law of such jurisdiction other than the United States in
which the Replacement Airframe and any Replacement Engine(s) are to be
registered in accordance with (S) 4.02(e);
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(bb) an FAA Bill of Sale (or a comparable document,
if any, of another Aviation Authority, if applicable) covering the
Replacement Airframe and any Replacement Engine(s), executed by the
former owner thereof in favor of Owner;
(cc) a full warranty (as to title) bill of sale,
covering the Replacement Airframe and any Replacement Engine(s),
executed by the former owner thereof in favor of Owner (or, at Owner's
option, other evidence of Owner's ownership of such Replacement
Airframe and any Replacement Engine(s), reasonably satisfactory to
Mortgagee); and
(dd) UCC financing statements (or any similar
statements or other documents required to be filed or delivered
pursuant to the laws of the jurisdiction in which the Replacement
Airframe and any Replacement Engine(s) may be registered in accordance
with (S) 4.02(e)) as counsel for Mortgagee deems necessary or desirable
by to protect the security interests of Mortgagee in the Replacement
Airframe and any Replacement Engine(s);
(2) the Replacement Airframe and any Replacement
Engine(s) are of the same model as the Airframe or Engines, or an improved model
of such aircraft or engines of the manufacturer thereof (and, in the case of a
Replacement Engine, the same model as the other Engine then subject to this
Mortgage), shall have a value and utility (without regard to hours or cycles
remaining until the next regular maintenance check) at least equal to, and are
in as good operating condition and repair as, the Airframe and any Engine(s)
replaced (assuming such Airframe and Engine(s) had been maintained in accordance
with this Mortgage);
(3) Mortgagee (acting directly or by authorization to
its special counsel) receives reasonably satisfactory evidence as to the
compliance with (S) 4.06 with respect to the Replacement Airframe and any
Replacement Engine(s);
(4) on the Replacement Closing Date, (aa) Owner
causes the Replacement Airframe and any Replacement Engine(s) to be subjected to
the Lien of this Mortgage free and clear of Liens (other than Permitted Liens),
(bb) the Replacement Airframe has been duly certified by the FAA as to type and
(upon registration) is eligible to receive an airworthiness certificate in
accordance with this Mortgage, and (cc) application for registration of the
Replacement Airframe in accordance with (S) 4.02(e) is being duly made with the
FAA or other applicable Aviation Authority and Owner has authority to operate
the Replacement Airframe;
(5) Mortgagee (at Owner's expense) receives (directly
or through its special counsel) (aa) an opinion of counsel, addressed to
Mortgagee,
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to the effect that the Replacement Airframe and any Replacement Engine(s) has
been or are being duly made subject to the Lien of this Mortgage and that
(assuming the matters covered by the opinion in the following clause (bb)) all
necessary action has been taken to perfect such Lien, the Guarantee and
Guarantor Confirmation are in full force and effect, and Mortgagee will be
entitled to the benefits of Section 1110 with respect to the Replacement
Airframe, provided, that such opinion with respect to Section 1110 need not be
delivered to the extent that, immediately before such replacement, solely by
reason of a change in law or court interpretation thereof, the benefits of
Section 1110 were not available to Mortgagee, and (bb) an opinion of Owner's
aviation law counsel reasonably satisfactory to and addressed to Mortgagee as to
the due registration of any such Replacement Airframe, the absence of Liens of
record at the FAA as to any such Replacement Airframe and Replacement Engine(s),
and the due filing for recordation of each supplement to this Mortgage with
respect to such Replacement Airframe and any Replacement Engine(s) under the
Transportation Code or such other applicable law of the jurisdiction other than
the United States in which the Replacement Airframe is to be registered in
accordance with (S) 4.02(e), and the due filing of any Financing Statements or
other filingS reasonably requested by Mortgagee with respect to such Replacement
Airframe or Replacement Engine(s) under applicable Law;
(6) if requested by Mortgagee, furnish Mortgagee with
evidence reasonably satisfactory to it of the value, utility, remaining useful
life, and estimated residual value of, and good title to, such Replacement
Airframe and any such Replacement Engine(s) (including an appraisal by a
qualified independent appraiser selected by Mortgagee of such value, utility,
remaining useful life and estimated residual value);
(7) assign to Mortgagee the benefit of all assignable
manufacturers, and vendors, warranties with respect to such Replacement Airframe
and such Replacement Engine(s);
(8) furnish Mortgagee with a Guarantor Confirmation,
duly executed and delivered by Holdings;
(9) furnish Mortgagee with a certificate of Owner
certifying compliance with this (S) 4.05(c) and to the effect that, upon
consummation of such replacement, no Special Default will exist; and
(10) take such other action as Mortgagee reasonably
requests in order that such Replacement Airframe and any such Replacement
Engine(s) be subjected to the Lien of this Mortgage to the same extent as the
Airframe and any Engine(s) replaced thereby.
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Owner shall cause an airworthiness certificate, with
respect to such Replacement Airframe, to be duly issued under the Transportation
Code promptly after such substitution.
(d) Non-Insurance Payments Received on Account of an
Event of Lo(S) Any amounts, other than insurance proceeds in respect of damage
or loss not constituting an Event of Loss (the application of which is provided
for in Annex B), received at any time by Mortgagee or Owner from any Government
Entity or any other Person in respect of any Event of Loss will be held by
Mortgagee and applied as follows:
(1) If such amounts are received with respect to the
Airframe, and any Engine installed thereon at the time of such Event of
Loss, upon Owner's compliance with the applicable terms of (S)
4.05(a)(1) and (S) 4.05(c) with respect to the Event of Loss for which
such amounts are received, such amounts shall be paid over to, or (if
received after such compliance) retained by, Owner;
(2) If such amounts are received with respect to an
Engine (other than an Engine installed on the Airframe at the time such
Airframe suffers an Event of Loss), upon Owner's compliance with the
applicable terms of (S) 4.04(e) with respect to the Event of Loss for
which such amounts are received, such amounts shall be paid over to, or
(if received after such compliance) retained by, Owner;
(3) If such amounts are received, in whole or in
part, with respect to the Airframe, and Owner makes, has made or is
deemed to have made the election in (S) 4.05(a)(2), such amounts shall
be applied as follows:
first, if the sum described in (S) 4.05(a)(2) has not
then been paid in full by Owner, such amounts shall be paid to
Mortgagee to the extent necessary to pay in full such sum; and
second, the remainder, if any, shall be paid to
Owner.
(e) Requisition for Use. If any Government Entity requisitions
the use of the Airframe and any Engine(s) or engine(s) installed on such
Airframe while such Airframe is subject to the Lien of this Mortgage and such
requisition does not constitute an Event of Loss, Owner shall promptly notify
Mortgagee of such requisition, and all of Owner's obligations under this
Mortgage shall continue to the same extent as if such requisition had not
occurred. Any payments received by Mortgagee or Owner or a Permitted Lessee from
such Government Entity with respect to such requisition of use shall be paid
over to, or retained by, Owner. If an Event of Loss to an Engine results from
the requisition for use by a Government Entity of such Engine (but not
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the Airframe), Owner will replace such Engine hereunder by complying with (S)
4.04(e), and any payments received by Mortgagee or Owner from such Government
Entity with respect to such requisition following such compliance shall be paid
over to, or retained by, Owner.
(f) Certain Payments to be Held As Security. Any amount
referred to in this (S) 4.05 or (S) 4.06 which is payable or creditable to, or
retainable by, Owner shall not be paid or credited to or retained by Owner if at
the time of such payment, credit, or retention a Special Default or an Event of
Default exists, but shall be paid to and held by Mortgagee as security for
Owner's obligations under this Mortgage and the other Operative Agreements, and
at such time as no Special Default or Event of Default exists, such amount and
any gain realized as a result of investments required to be made pursuant to (S)
6.06 shall (to the extent not theretofore applied as provided herein) be paid
over to Owner.
4.06. INSURANCE
(a) Owner's Obligation to Insure. Owner shall comply with, or
cause to be complied with, each of the provisions of Annex B, which provisions
are hereby incorporated by this reference as if set forth in full herein.
(b) Insurance for Own Account. Nothing in (S) 4.06 shall limit
or prohibit (a) Owner from maintaining the policies of insurance required under
Annex B with higher limits than those specified in Annex B, or (b) Mortgagee
from obtaining insurance for its own account (and any proceeds payable under
such separate insurance shall be payable as provided in the policy relating
thereto); provided, that no insurance may be obtained or maintained that would
limit or otherwise adversely affect the coverage of or increase the cost of any
insurance required to be obtained or maintained by Owner pursuant to this (S)
4.06 and Annex B.
(c) Indemnification by Government in Lieu of Insurance. During
any period of requisition or transfer of the Aircraft or any part thereof by or
to the U.S. Government or any other Government Entity, Mortgagee and each
Certificate Holder shall accept, in lieu of insurance against any risk with
respect to the Aircraft described in Annex B, indemnification from, or insurance
provided by, the U.S. Government, or upon Mortgagee's written consent, other
Government Entity, against such risk in an amount that, when added to the amount
of insurance (including permitted self-insurance), if any, against such risk
that Owner (or any Permitted Lessee) may continue to maintain, in accordance
with this (S) 4.06, during the period of such requisition or transfer, shall be
at least equal to the amount of insurance against such risk otherwise required
by this (S) 4.06.
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(d) Application of Insurance Proceeds. As between Owner and
Mortgagee, all insurance proceeds received as a result of the occurrence of an
Event of Loss to the Aircraft or any Engine under policies required to be
maintained by Owner pursuant to this (S) 4.06 will be applied in accordance with
(S) 4.05(d). All proceeds of insurance required to be maintained by Owner, in
accordance with (S) 4.06 and (S) B of Annex B, in respect of any property damage
or loss not constituting an Event of Loss with respect to the Aircraft, the
Airframe, or any Engine will be held by Mortgagee and applied to pay (or to
reimburse Owner) for repairs or for replacement property, and any balance
remaining after such repairs or replacement with respect to such damage or loss
shall be paid over to, or retained by, Owner.
4.07. MERGER OF OWNER
(a) In General.
Owner shall not consolidate with or merge into any other
Person under circumstances in which Owner is not the surviving corporation, or
convey, transfer, or lease in one or more transactions all or substantially all
of its assets to any other Person, unless:
(1) such Person is organized, existing, and in good
standing under the Laws of the United States, any state of the United States, or
the District of Columbia, and, upon consummation of such transaction, such
Person will be a U.S. Air Carrier;
(2) such Person executes and delivers to Mortgagee a
duly authorized, legal, valid, binding, and enforceable agreement, reasonably
satisfactory in form and substance to Mortgagee, containing an effective
assumption by such Person of the due and punctual performance and observance of
each covenant, agreement, and condition in the Operative Agreements to be
performed or observed by Owner;
(3) such Person makes such filings and recordings
with the FAA pursuant to the Transportation Code as shall be necessary to
evidence such consolidation or merger;
(4) immediately after giving effect to such
consolidation or merger, no Event of Default exists;
(5) Holdings issues a Guarantor Confirmation with
respect to such Person; and
(6) such Person delivers to Mortgagee an opinion of
counsel as to the authorization and enforceability of the agreement referred to
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in clause (2) above, the filings described in clause (3) above, and such other
matters as may be reasonably requested, reasonably satisfactory to Mortgagee.
(b) Effect of Merger.
Upon any such consolidation or merger of Owner with or into, or the
conveyance, transfer, or lease by Owner of all or substantially all of its
assets to, any Person in accordance with this (S) 4.07, such Person will succeed
to, and be substituted for, and may exercise every right and power of, Owner
under the Operative Agreements with the same effect as if such Person had been
named as "Owner" therein. No such consolidation, merger, conveyance, transfer,
or lease shall have the effect of releasing Owner or such Person from any of the
obligations, liabilities, covenants, or undertakings of Owner under the
Mortgage.
ARTICLE V EVENTS OF DEFAULT; REMEDIES
5.01. EVENT OF DEFAULT
"Event of Default" means any of the following events (whatever the
reason for such Event of Default and whether such event is voluntary or
involuntary or comes about or is 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 Government Entity):
(a) Owner fails to pay (1) principal of, interest on,
or any Make-Whole Amount under any Equipment Note when due, and such failure
shall continue unremedied for a period of 10 days, or (2) any other amount
payable by it to Mortgagee or the Note Holders under this Mortgage or the
Participation Agreement when due, and such failure continues for a period in
excess of 10 Business Days after Owner has received written notice from
Mortgagee of the failure to make such payment when due;
(b) Owner fails to carry and maintain, or cause to be
carried and maintained, insurance on and in respect of the Aircraft, the
Airframe, and the Engines in accordance with the provisions of (S) 4.06;
(c) Owner or Holdings fails to observe or perform (or
caused to be observed and performed) in any material respect any other covenant,
agreement, or obligation of Owner or Holdings in any Operative Agreement, and
such failure continues unremedied for a period of 30 days from and after the
date of written notice thereof to Owner or Holdings from Mortgagee or any
Certificate Holder (or, if earlier, 30 days after a Responsible Officer of Owner
or Holdings is aware of such default), unless such failure is capable of being
corrected and creates no material risk of loss, forfeiture, or damage to the
Aircraft, and Owner or Holdings is diligently proceeding to
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correct such failure, in which case there shall be no Event of Default unless
and until such failure continues unremedied for a period of 180 days after
receipt of such notice or such awareness;
(d) any representation or warranty made by Owner or
Holdings in any Operative Agreement (a) proves to have been untrue or inaccurate
in any material respect as of the date made, (b) is material at the time in
question, and (c) if the effect of such incorrectness is curable (incorrectness
of a representation as to financial condition being incurable), remains uncured
(to the extent of the adverse impact of such incorrectness on the interest of
Mortgagee or any Note Holder) for a period in excess of 30 days from and after
the date of written notice thereof from Mortgagee or any Certificate Holder to
Owner or Holdings or (if earlier) the date that a responsible Officer of Owner
or Holdings is aware of the incorrectness;
(e) Owner or Holdings consents to the appointment of
or taking possession by a receiver, trustee, or liquidator of itself or of a
substantial part of its property, or Owner or Holdings admits in writing its
inability to pay its debts generally as they come due or makes a general
assignment for the benefit of its creditors, or Owner or Holdings files a
voluntary petition in bankruptcy or a voluntary petition or an answer seeking
reorganization, liquidation, or other relief under any bankruptcy Laws or
insolvency Laws (as in effect at such time), or an answer admitting the material
allegations of a petition filed against it in any such case, or Owner or
Holdings seeks relief by voluntary petition, answer, or consent under the
provisions of any other bankruptcy or similar Law providing for the
reorganization or winding-up of corporations (as in effect at such time), or
Owner or Holdings seeks an agreement, composition, extension, or adjustment with
its creditors under such laws;
(f) an order, judgment, or decree is entered by any
court of competent jurisdiction appointing, without Owner's or Holdings's
consent, a receiver, trustee, or liquidator of Owner or Holdings or of
substantially all of its property, or substantially all of the property of Owner
or Holdings is sequestered, or any other relief in respect of Owner or Holdings
as a debtor is granted under any bankruptcy Laws or other insolvency Laws (as in
effect at such time), and any such order, judgment, decree, or decree of
appointment or sequestration remains in force undismissed, unstayed, and
unvacated for a period of 60 days after the date of entry thereof;
(g) a petition against Owner or Holdings in a
proceeding under any bankruptcy laws or other insolvency laws (as in effect at
such time) is filed and not withdrawn or dismissed within 60 days thereafter, or
if, under the provisions of any Law providing for reorganization or winding-up
of corporations that applies to Owner or Holdings, any court of competent
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jurisdiction assumes jurisdiction, custody, or control of Owner or Holdings or
of substantially all of the property of Owner or Holdings, and such
jurisdiction, custody, or control remains in force unrelinquished, unstayed, and
unterminated for a period of 60 days;
(h) an "Event of Default" (as defined in any Related
Mortgage) exists;
(i) the Guarantee is repudiated, is determined to be
invalid, or becomes unenforceable for any reason;
(j) Mortgagee fails to have a perfected
first-priority security interest in the Aircraft so long as any Equipment Note
is outstanding, subject only to Permitted Liens;
(k) an Event of Default would exist as a result of a
default under the November 3, 1999 Supplemental Agreement (the "KFW AGREEMENT")
among Owner, Holdings and Kreditanstalt fur Wiederaufbau ("KfW"), but only if
(1) KfW is then a Certificate Holder holding one or more Class B Pass-Through
Trust Certificate(s), and (2) KfW gives written notice to Mortgagee that such
default constitutes an Event of Default; or
(l) an Event of Default would exist as a result of a
default under the November 3, 1999 Supplemental Agreement (the "BOEING
AGREEMENT") among Owner, Holdings and The Boeing Company ("BOEING"), but only if
(1) Boeing is then a Certificate Holder holding one or more Class C Pass-Through
Trust Certificate(s), and (2) Boeing gives written notice to Mortgagee that such
default constitutes an Event of Default.
5.02. REMEDIES
(a) If an Event of Default exists, then and in every such case
Mortgagee may exercise any or all of the rights and powers and pursue any and
all of the remedies pursuant to this Article V, and shall have and may exercise
all of the rights and remedies of a secured party under the Uniform Commercial
Code, and may take possession of all or any part of the properties covered or
intended to be covered by the Lien created hereby or pursuant hereto, and may
exclude Owner and all Persons claiming under it wholly or partly therefrom;
provided, that Mortgagee shall give Owner 20 days' prior written notice of its
intention to sell the Aircraft. Without limiting any of the foregoing, Mortgagee
may exercise any right of sale of the Aircraft available to it, even if it does
not have taken possession of the Aircraft and will not have possession thereof
at the time of such sale.
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(b) If an Event of Default exists, then and in every such case
Mortgagee may (and shall, upon receipt of a written demand therefor from a
Majority in Interest of Note Holders), at any time, by delivery of written
notice or notices to Owner, declare all the Equipment Notes to be due and
payable, whereupon the unpaid Original Amount of all Equipment Notes then
outstanding, together with accrued but unpaid interest thereon and any
Make-Whole Amount and other amounts due thereunder or otherwise payable
hereunder, shall immediately become due and payable without presentment, demand,
protest, or notice, all of which are hereby waived; provided, that if an Event
of Default referred to in clause (e), (f), or (g) of (S) 5.01 exists, then and
in every such case the unpaid Original Amount then outstanding, together with
accrued but unpaid interest, any Make-Whole Amount, and all other amounts due
hereunder and under the Equipment Notes, shall immediately and without further
act become due and payable without presentment, demand, protest, or notice, all
of which are hereby waived.
If at any time after the Original Amount of the Equipment
Notes becomes so due and payable, and before any judgment or decree for the
payment of the money so due, or any thereof, is entered, all overdue payments of
interest upon the Equipment Notes and all other amounts payable hereunder or
under the Equipment Notes (except the Original Amount of the Equipment Notes
which by such declaration shall have become payable) has been duly paid, and
every other Default and Event of Default with respect to any covenant or
provision of this Mortgage has been cured, then and in every such case a
Majority in Interest of Note Holders may (but shall not be obligated to), by
written instrument filed with Mortgagee, rescind and annul Mortgagee's
declaration (or such automatic acceleration) and its consequences; but no such
rescission or annulment shall extend to or affect any subsequent Default or
impair any right consequent thereon.
(c) The Note Holders shall be entitled, at any sale pursuant
to this (S) 5.02, to credit against any purchase price bid at such sale by such
holder all or any part of the unpaid obligations owing to such Note Holder and
secured by the Lien of this Mortgage (only to the extent that such purchase
price would have been paid to such Note Holder pursuant to Article III if such
purchase price were paid in cash and the foregoing provisions of this (S)
5.02(c) were not given effect).
(d) If the Collateral (or any part thereof) is sold pursuant
to any judgment or decree of any court or otherwise in connection with the
enforcement of this Mortgage, the unpaid Original Amount of all Equipment Notes
then outstanding, together with accrued interest thereon and any Make-Whole
Amount, and other amounts due thereunder, shall immediately become due and
payable without presentment, demand, protest, or notice, all of which are hereby
waived.
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(e) Notwithstanding anything herein, so long as the
Pass-Through Trustee under any Pass-Through Trust Agreement (or its designee) is
a Note Holder, Mortgagee will not be authorized or empowered to acquire title to
any Collateral or take any action with respect to any Collateral so acquired by
it if such acquisition or action would cause any Trust to fail to qualify as a
"grantor trust" for federal income tax purposes.
5.03. RETURN OF AIRCRAFT, ETC.
(a) If an Event of Default exists and the Equipment Notes have
been accelerated, at Mortgagee's request, Owner shall promptly execute and
deliver to Mortgagee such instruments of title and other documents as Mortgagee
deems necessary or advisable to enable Mortgagee or an agent or representative
designated by Mortgagee, at such time or times and place or places as Mortgagee
shall specify, to obtain possession of all or any part of the Collateral to
which Mortgagee shall at the time be entitled hereunder. If Owner for any reason
fails to execute and deliver such instruments and documents after such request
by Mortgagee, Mortgagee may (1) obtain a judgment conferring on Mortgagee the
right to immediate possession and requiring Owner to execute and deliver such
instruments and documents to Mortgagee, to the entry of which judgment Owner
hereby specifically consents to the fullest extent permitted by Law, and (2)
pursue all or part of such Collateral wherever it may be found, and enter any of
the premises of Owner wherever such Collateral may be or be supposed to be, and
search for such Collateral and take possession of and remove such Collateral.
All expenses of obtaining such judgment or of pursuing, searching for, and
taking such property shall, until paid, be secured by the Lien of this Mortgage.
(b) Upon every such taking of possession, Mortgagee may, from
time to time, at the expense of the Collateral, make all such expenditures for
maintenance, use, operation, storage, insurance, leasing, control, management,
disposition, modification, or alteration to and of the Collateral, as it deems
proper. In each such case, Mortgagee shall have the right to maintain, use,
operate, store, insure, lease, control, manage, dispose of, modify, or alter the
Collateral, and to exercise all rights and powers of Owner relating to the
Collateral, as Mortgagee deems best, including the right to enter into any and
all such agreements with respect to the maintenance, use, operation, storage,
insurance, leasing, control, management, disposition, modification, or
alteration of the Collateral or any part thereof as Mortgagee shall determine,
and Mortgagee shall be entitled to collect and receive directly all rents,
revenues, and other proceeds of the Collateral and every part thereof, without
prejudice, however, to Mortgagee's right under any provision of this Mortgage to
collect and receive all cash held by, or required to be deposited with,
Mortgagee hereunder. Such rents, revenues, and other proceeds shall be applied
to pay the expenses of the maintenance, use, operation, storage,
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insurance, leasing, control, management, disposition, improvement, modification,
or alteration of the Collateral and of conducting the business thereof, and to
make all payments which Mortgagee is required or elects to make (if any) for
taxes, assessments, insurance, or other proper charges upon the Collateral or
any part thereof (including the employment of engineers and accountants to
examine, inspect, and make reports upon Owner's properties and books and
records), and all other payments which Mortgagee is required or authorized to
make under any provision of this Mortgage, as well as just and reasonable
compensation for the services of Mortgagee, and of all Persons properly engaged
and employed by Mortgagee with respect hereto.
5.04. REMEDIES CUMULATIVE
Each and every right, power, and remedy given to Mortgagee specifically
or otherwise in this Mortgage shall be cumulative and shall be in addition to
every other right, power, and remedy herein specifically given or now or
hereafter existing at Law, in equity, or by statute, and each and every right,
power, and remedy whether specifically herein given or otherwise existing may be
exercised from time to time and as often and in such order as Mortgagee deems
expedient, and the exercise or the beginning of the exercise of any right,
power, or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other right, power, or remedy. No delay or
omission by Mortgagee in the exercise of any right, remedy, or power or in the
pursuance of any remedy shall impair any such right, power, or remedy or be
construed to be a waiver of any default on the part of Owner or to be an
acquiescence therein.
5.05. DISCONTINUANCE OF PROCEEDINGS
If Mortgagee institutes any proceeding to enforce any right, power, or
remedy under this Mortgage by foreclosure, entry, or otherwise, and such
proceedings is discontinued or abandoned for any reason or is determined
adversely to Mortgagee, then and in every such case Owner and Mortgagee shall,
subject to any determination in such proceedings, be restored to their former
positions and rights hereunder with respect to the Collateral, and all rights,
remedies, and powers of Owner or Mortgagee shall continue as if no such
proceedings had been instituted.
5.06. WAIVER OF PAST DEFAULTS
Upon written instruction from a Majority in Interest of Note Holders,
Mortgagee shall waive any past Default hereunder and its consequences, and upon
any such waiver such Default shall cease to exist and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Mortgage, but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon; provided, that in the absence
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of written instructions from all the Note Holders, Mortgagee shall not waive any
Default (a) in the payment of the Original Amount, Make-Whole Amount, and
interest and other amounts due under any Equipment Note then outstanding, or (b)
in respect of a covenant or provision hereof which, under Article X, cannot be
modified or amended without the consent of each Note Holder.
5.07. APPOINTMENT OF RECEIVER
If an Event of Default exists and the Equipment Notes have been
accelerated, Mortgagee shall, as a matter of right, be entitled to the
appointment of a receiver (who may be Mortgagee or any successor or nominee
thereof) for all or any part of the Collateral, whether such receivership be
incidental to a proposed sale of the Collateral or the taking of possession
thereof or otherwise, and Owner hereby consents to the appointment of such a
receiver and will not oppose any such appointment. Any receiver appointed for
all or any part of the Collateral shall be entitled to exercise all the rights
and powers of Mortgagee with respect to the Collateral.
5.08. MORTGAGEE AUTHORIZED TO EXECUTE BILLS OF SALE, ETC.
Owner irrevocably appoints, while an Event of Default exists, Mortgagee
as Owner's true and lawful attorney-in-fact (which appointment is coupled with
an interest), in Owner's name and stead and on its behalf, for the purpose of
effectuating any sale, assignment, transfer, or delivery for the enforcement of
the Lien of this Mortgage, whether pursuant to foreclosure or power of sale,
assignments, and other instruments as may be necessary or appropriate, with full
power of substitution, Owner hereby ratifying and confirming all that such
attorney or any substitute shall do by virtue hereof in accordance with
applicable Law. Nevertheless, if so requested by Mortgagee or any purchaser,
Owner shall ratify and confirm any such sale, assignment, transfer, or delivery,
by executing and delivering to Mortgagee or such purchaser all bills of sale,
assignments, releases, and other proper instruments to effect such ratification
and confirmation as designated in any such request.
5.09. RIGHTS OF NOTE HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Mortgage, the right of any
Note Holder to receive payment of principal of, any premium, and interest on an
Equipment Note on or after the due dates expressed in such Equipment Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates in accordance with the terms hereof, shall not be impaired or affected
without such Note Holder's consent.
ARTICLE VI MORTGAGEE'S DUTIES
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6.01. NOTICE OF DEFAULT
If Mortgagee obtains Actual Knowledge of a Default, Mortgagee shall
promptly notify each Note Holder. Subject to (S) 5.06, (S) 6.02, and (S) 6.03,
Mortgagee shall take such action, or refrain from taking such action, with
respect to such Event of Default or Default (including with respect to the
exercise of any rights or remedies hereunder) as Mortgagee shall be instructed
in writing by a Majority in Interest of Note Holders. Subject to the provisions
of (S) 6.03, if Mortgagee does not receive instructions as above provided within
20 days after mailing notice of such Event of Default to the Note Holders,
Mortgagee may (subject to instructions thereafter received pursuant to the
preceding provisions of this (S) 6.01) take such action, or refrain from taking
such action (but shall be under no duty to take or refrain from taking any
action) with respect to such Event of Default or Default as it determines to be
advisable in the best interests of the Note Holders; provided, that Mortgagee
may not sell the Aircraft or any Engine without the consent of a Majority in
Interest of Note Holders. For all purposes of this Mortgage, unless it has
Actual Knowledge, Mortgagee shall not be deemed to have knowledge of a Default
or an Event of Default (except that Owner's failure to pay any installment of
principal or interest within one Business Day after it becomes due shall
constitute knowledge of a Default) unless notified in writing by Owner or one or
more Note Holders.
6.02. ACTION UPON INSTRUCTIONS; CERTAIN RIGHTS AND LIMITATIONS
Subject to (S) 5.02(a), (S) 5.06, (S) 6.01, and (S) 6.03, upon the
written instructions at any time and from time to time of a Majority in Interest
of Note Holders, Mortgagee shall, subject to this (S) 6.02, take such of the
following actions as shall be specified in such instructions: (a) give such
notice or direction or exercise such right, remedy, or power hereunder as shall
be specified in such instructions, (b) give such notice or direction or exercise
such right, remedy, or power hereunder with respect to any part of the
Collateral as shall be specified in such instructions, and (c) approve as
satisfactory to Mortgagee all matters required hereby to be satisfactory to
Mortgagee (and, without the written instructions of a Majority in Interest of
Note Holders, Mortgagee shall not, except as provided in (S) 6.01, approve any
such matter as satisfactory to Mortgagee).
Mortgagee will execute and Owner will file such continuation statements
with respect to financing statements relating to the security interest created
hereunder in the Collateral as shall be specified from time to time in written
instructions of a Majority in Interest of Note Holders (which instructions shall
be accompanied by the form of such continuation statement so to be filed).
Mortgagee will furnish to each Note Holder and Certificate Holder, promptly upon
receipt thereof, duplicates or copies of all reports, notices, requests,
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demands, certificates, and other instruments furnished to Mortgagee hereunder.
6.03. INDEMNIFICATION
Mortgagee shall not be required to take any action or refrain from
taking any action under (S) 6.01 (other than the first sentence thereof), (S)
6.02, or Article V unless Mortgagee is indemnified to its reasonable
satisfaction against any liability, cost, or expense (including counsel fees)
which may be incurred in connection therewith pursuant to a written agreement
with one or more Note Holders. Mortgagee agrees that it shall look solely to the
Note Holders for the satisfaction of any indemnity (except expenses for
foreclosure of the type referred to in clause "First" of (S) 3.03) owed to it
pursuant to this (S) 6.03. Mortgagee shall not be under any obligation to take
any action under this Mortgage or any other Operative Agreement, and nothing
herein or therein shall require Mortgagee to expend or risk its own funds or
otherwise incur the risk of any financial liability in the performance of any of
its rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it (the written indemnity of any Note Holder who is a
QIB, signed by an authorized officer thereof, in favor of, delivered to, and in
form reasonably satisfactory to Mortgagee shall be accepted as reasonable
assurance of adequate indemnity). Mortgagee shall not be required to take any
action under (S) 6.01 (other than the first sentencE thereof), (S) 6.02, or
Article V, nor shall any other provision of this Mortgage or any other Operative
Agreement impose a duty on Mortgagee to take any action, if Mortgagee is advised
by counsel that such action is contrary to the terms hereof or is otherwise
contrary to Law.
6.04. NO DUTIES EXCEPT AS SPECIFIED IN MORTGAGE OR INSTRUCTIONS
Mortgagee shall not have any duty or obligation to use, operate, store,
lease, control, manage, sell, dispose of, or otherwise deal with the Aircraft or
any other part of the Collateral, or to otherwise take or refrain from taking
any action under, or in connection with, this Mortgage or any part of the
Collateral, except as expressly provided by this Mortgage or as expressly
provided in written instructions from Note Holders as provided in this Mortgage;
and no implied duties or obligations shall be read into this Mortgage against
Mortgagee. SSB agrees that it will at its own cost and expense (but without any
right of indemnity in respect of any such cost or expense under (S) 8.01)
promptly take such action as may be necessary duly to discharge all Liens on any
part of the Collateral which result from claims against SSB not related to the
administration of the Collateral or any other transaction pursuant to this
Mortgage or any document included in the Collateral.
6.05. NO ACTION EXCEPT UNDER MORTGAGE OR INSTRUCTIONS
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Mortgagee will not use, operate, store, lease, control, manage, sell,
dispose of, or otherwise deal with the Aircraft or any other part of the
Collateral except in accordance with the powers granted to, or the authority
conferred upon, Mortgagee pursuant to this Mortgage and in accordance with the
express terms hereof.
6.06. INVESTMENT OF AMOUNTS HELD BY MORTGAGEE
Any amounts held by Mortgagee pursuant to the proviso to the first
sentence of (S) 3.01, pursuant to (S) 3.02, or pursuant to any provision of any
other Operative Agreement providing for amounts to be held by Mortgagee which
are not distributed pursuant to the other provisions of Article III shall be
invested by Mortgagee from time to time in Cash Equivalents as directed by Owner
so long as Mortgagee may acquire them using its best efforts. All Cash
Equivalents held by Mortgagee pursuant to this (S) 6.06 shall either be (a)
registered in the name of, payable to the order of, or specially endorsed to,
Mortgagee, or (b) held in an Eligible Account. Unless otherwise expressly
provided in this Mortgage, any income realized as a result of any such
investment, net of Mortgagee's reasonable fees and expenses in making such
investment, shall be held and applied by Mortgagee in the same manner as the
principal amount of such investment is to be applied, and any losses, net of
earnings and such reasonable fees and expenses, shall be charged against the
principal amount invested. Mortgagee shall not be liable for any loss resulting
from any investment required to be made by it under this Mortgage other than by
reason of its willful misconduct or gross negligence, and any such investment
may be sold (without regard to its maturity) by Mortgagee without instructions
whenever such sale is necessary to make a distribution required by this
Mortgage.
ARTICLE VII THE MORTGAGEE
7.01. ACCEPTANCE OF TRUSTS AND DUTIES
Mortgagee accepts the duties hereby created and applicable to it,
agrees to perform them (but only upon the terms of this Mortgage), and agrees to
receive and disburse all money constituting part of the Collateral in accordance
with the terms hereof. SSB shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or gross negligence
(other than for the handling of funds, for which the standard of accountability
shall be willful misconduct or negligence), (b) as provided in the fourth
sentence of (S) 2.03(a) and the last sentence of (S) 6.04, and (c) from the
inaccuracy of any representation or warranty of SSB in the Participation
Agreement or expressly made hereunder.
7.02. ABSENCE OF DUTIES
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Except in accordance with written instructions furnished pursuant to
(S) 6.01 or (S) 6.02, and except as provided in (and without limiting the
generality of) (S) 6.03, (S) 6.04, and (S) 7.07, Mortgagee shall have no duty
(a) to see to any registration of the Aircraft or any recording or filing of
this Mortgage or any other document, or to see to the maintenance of any such
registration, recording, or filing, (b) to see to any insurance on the Aircraft
or to effect or maintain any such insurance, whether or not Owner is in default
with respect thereto, (c) to see to the payment or discharge of any lien or
encumbrance of any kind against any part of the Collateral, (d) to confirm,
verify, or inquire into the failure to receive any financial statements from
Owner, or (e) to inspect the Aircraft at any time or ascertain or inquire as to
the performance or observance of any of Owner's covenants herein or any
Permitted Lessee's covenants under any assigned Permitted Lease with respect to
the Aircraft.
7.03. NO REPRESENTATIONS OR WARRANTIES AS TO AIRCRAFT OR DOCUMENTS
NEITHER MORTGAGEE NOR SSB MAKES, NOR SHALL EITHER BE DEEMED TO HAVE
MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY
(EXPRESS OR IMPLIED) AS TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION,
MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR
ANY ENGINE, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT
DISCOVERABLE), AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK,
OR COPYRIGHT, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER. Neither Mortgagee nor
SSB makes, nor shall either be deemed to have made, any representation or
warranty as to the validity, legality, or enforceability of this Mortgage, the
Participation Agreement, the Equipment Notes, or the Purchase Agreement, or as
to the correctness of any statement in any thereof, except for SSB's
representations and warranties expressly made in this Mortgage or in the
Participation Agreement. The Note Holders make no representation or warranty
hereunder whatsoever.
7.04. NO SEGREGATION OF FUNDS; NO INTEREST
Any money paid to or retained by Mortgagee pursuant to this Mortgage,
and not then required to be distributed to the Note Holders or Owner as provided
in Article III, need not be segregated in any manner except to the extent
required by Law or (S) 6.06, and may be deposited under such general conditions
as prescribed by Law, and Mortgagee shall not be liable for any interest thereon
(except that Mortgagee shall invest all money held as directed by Owner so long
as no Event of Default exists (or in the absence of such direction, by the
Majority In Interest of Note Holders) in Cash Equivalents; provided, that
Mortgagee shall account for any payments that it receives, or applies hereunder,
so that it is identifiable as to its source.
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7.05. RELIANCE; AGREEMENTS; ADVICE OF COUNSEL
Mortgagee shall not incur any liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper that it believed to be genuine
and to be signed by the proper party or parties. Mortgagee may accept a copy of
a resolution of the Board of Directors (or Executive Committee thereof) of
Owner, certified by the Secretary or an Assistant Secretary thereof as duly
adopted and in full force and effect, as conclusive evidence that such
resolution was duly adopted and is in full force and effect. As to the aggregate
unpaid Original Amount of Equipment Notes outstanding as of any date, Owner may
for all purposes hereof rely on a certificate signed by any Vice President or
other authorized corporate trust officer of Mortgagee. As to any fact or matter
relating to Owner that this Mortgage does not specifically describe how to
ascertain, Mortgagee may for all purposes hereof rely on a certificate, signed
by a duly-authorized officer of Owner, as to such fact or matter, and such
certificate shall constitute full protection to Mortgagee for any action taken
or omitted to be taken by it in good faith in reliance thereon. In the
administration of the trusts hereunder, Mortgagee (x) may execute any of the
trusts or powers hereof and perform its powers and duties hereunder directly or
through agents or attorneys, (y) may, at the expense of the Collateral, consult
with counsel, accountants, and other skilled Persons to be selected and retained
by it, and (z) shall not be liable for anything done, suffered, or omitted in
good faith by it in accordance with the written advice or written opinion of any
such counsel, accountants, or other skilled Persons.
7.06. COMPENSATION
SSB shall be entitled to reasonable compensation, including expenses
and disbursements (including the reasonable fees and expenses of counsel), for
all services rendered hereunder, and shall, on and after an Event of Default,
have a right to payment of such compensation as provided in (S) 3.03, to the
extent that Owner does not pay such compensation, and shall have the right, on
and after an Event of Default, to use or apply any money held by it hereunder in
the Collateral toward such payments. SSB agrees that it shall have no right
against the Note Holders for any fee as compensation for its services as trustee
under this Mortgage.
7.07. INSTRUCTIONS FROM NOTE HOLDERS
In the administration of the trusts created hereunder, Mortgagee shall
have the right to seek instructions from a Majority in Interest of Note Holders
if any provision of this Mortgage appears to conflict with any other provision
herein or if Mortgagee's duties or obligations hereunder are unclear, and
Mortgagee shall incur no liability in refraining from acting until it receives
such
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instructions. Mortgagee shall be fully protected for acting in accordance with
any instructions received under this (S) 7.07.
ARTICLE VIII INDEMNIFICATION
8.01. SCOPE OF INDEMNIFICATION
Mortgagee shall be indemnified by Owner to the extent and in the manner
provided in (S) 7 of the Participation Agreement.
ARTICLE IX SUCCESSOR AND SEPARATE TRUSTEES
9.01. RESIGNATION OF MORTGAGEE; APPOINTMENT OF SUCCESSOR
(a) The institution acting as Mortgagee or any successor
thereto may resign at any time without cause by giving at least 30 days' prior
written notice to Owner and each Note Holder, such resignation to be effective
upon the acceptance of the trusteeship by a successor institution. In addition,
a Majority in Interest of Note Holders may at any time (but only with the
consent of Owner, which consent shall not be unreasonably withheld, except that
such consent shall not be necessary if an Event of Default exists) remove the
institution acting as Mortgagee without cause by an instrument in writing
delivered to Owner and Mortgagee, and Mortgagee shall promptly notify each Note
Holder thereof in writing, such removal to be effective upon the acceptance of
the trusteeship by a successor institution. In the case of the resignation or
removal of the institution acting as Mortgagee, a Majority in Interest of Note
Holders may appoint a successor by an instrument signed by such holders, which
successor (if no Event of Default exists) shall be subject to Owner's reasonable
approval. If a successor is not appointed within 30 days after such notice of
resignation or removal, Mortgagee, Owner, or any Note Holder may apply to any
court of competent jurisdiction to appoint a successor to act until such time,
if any, as a successor is appointed as provided above. The court-appointed
successor shall immediately and without further act be superseded by any
successor appointed by a Majority in Interest of Note Holders as above provided.
(b) Any successor institution acting as Mortgagee, however
appointed, shall execute and deliver to Owner and the predecessor institution
acting as Mortgagee an instrument accepting such appointment and assuming the
obligations of Mortgagee arising from and after the time of such appointment,
and thereupon, without further act, such successor shall become vested with all
the estates, properties, rights, powers, and duties of the predecessor hereunder
in the trust hereunder applicable to it with like effect as if originally named
Mortgagee herein; but nevertheless upon the written
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request of such successor Mortgagee, such predecessor shall execute and deliver
an instrument transferring to such successor, upon the trusts herein expressed
applicable to it, all the estates, properties, rights, and powers of such
predecessor, and such predecessor shall duly assign, transfer, deliver, and pay
over to such successor all money or other property then held by such predecessor
hereunder.
(c) Any successor institution acting as Mortgagee, however
appointed, shall be a bank or trust company that has its principal place of
business in the Borough of Manhattan, New York, NY; Chicago, IL; Hartford, CT;
Wilmington, DE; or Boston, MA, and that has (or whose obligations under the
Operative Agreements are guaranteed by an affiliated entity that has) a combined
capital and surplus of at least $250,000,000, if such an institution is then
willing, able, and legally qualified to perform the duties of Mortgagee
hereunder upon reasonable or customary terms.
(d) Any corporation into which the institution acting as
Mortgagee is merged or converted or with which it is consolidated, or any
corporation resulting from any merger, conversion, or consolidation to which the
institution acting as Mortgagee is a party, or any corporation to which
substantially all the corporate trust business of the institution acting as
Mortgagee is transferred, shall, subject to (S) 9.01(c), be a successor
Mortgagee and Mortgagee under this Mortgage without further act.
9.02. APPOINTMENT OF ADDITIONAL AND SEPARATE TRUSTEES
(a) Whenever (1) Mortgagee deems it necessary or desirable in
order to conform to any Law of any jurisdiction in which all or any part of the
Collateral is situated or to make any claim or bring any suit with respect to or
in connection with the Collateral, this Mortgage, any other Mortgagee Agreement,
the Equipment Notes, or any of the transactions contemplated by the
Participation Agreement, (2) Mortgagee is advised by counsel satisfactory to it
that it is so necessary or prudent in the interests of the Note Holders (and
Mortgagee so advises Owner), or (3) Mortgagee is requested to do so by a
Majority in Interest of Note Holders, then in any such case, Mortgagee and (upon
Mortgagee's written request) Owner, shall execute and deliver an indenture
supplemental hereto and such other instruments as may from time to time be
necessary or advisable either (x) to constitute one or more bank or trust
companies or one or more Persons approved by Mortgagee, either to act jointly
with Mortgagee as additional trustee(s) of all or any part of the Collateral, or
to act as separate trustee(s) of all or any part of the Collateral, in each case
with such rights, powers, duties, and obligations consistent with this Mortgage
as are provided in such supplemental indenture or other instruments as Mortgagee
or a Majority in Interest of Note Holders deem necessary or advisable, or (y) to
clarify, add to, or subtract from the rights, powers, duties,
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and obligations theretofore granted any such additional or separate trustee,
subject in each case to the remaining provisions of this (S) 9.02. If Owner has
not taken any action requested of it under this (S) 9.02(a) that is permitted or
required by its terms within 15 days after receiving a written request from
Mortgagee to do so, or if an Event of Default exists, Mortgagee may act under
the foregoing provisions of this (S) 9.02(a) without Owner's concurrence, and
Owner hereby irrevocably appoints (which appointment is coupled with an
interest) Mortgagee as Owner's agent and attorney-in-fact to act for Owner under
the foregoing provisions of this (S) 9.02(a) in either of such contingencies. In
such capacity, Mortgagee may execute, deliver, and perform any such supplemental
indenture, or any such instrument, as may be required for the appointment of any
such additional or separate trustee or for the clarification of, addition to, or
subtraction from the rights, powers, duties, or obligations theretofore granted
to any such additional or separate trustee. If any additional or separate
trustee appointed under this (S) 9.02(a) dies, becomes incapable of acting,
resigns, or is moved, all the assets, property, rights, powers, trusts, duties,
and obligations of such additional or separate trustee shall revert to Mortgagee
until a successor additional or separate trustee is appointed as provided in
this (S) 9.02(a).
(b) No additional or separate trustee shall be entitled to
exercise any of the rights, powers, duties, and obligations conferred upon
Mortgagee in respect of the custody, investment, and payment of money, and any
such additional or separate trustee shall promptly pay over to Mortgagee all
money that such additional or separate trustee receives from or constituting
part of the Collateral or otherwise payable to Mortgagee under any Operative
Agreement. All other rights, powers, duties, and obligations conferred or
imposed upon any additional or separate trustee shall be exercised or performed
by Mortgagee and such additional or separate trustee jointly, except to the
extent that applicable Law of any jurisdiction in which any particular act is to
be performed renders Mortgagee incompetent or unqualified to perform such act,
in which event such rights, powers, duties, and obligations (including the
holding of title to all or part of the Collateral in any such jurisdiction)
shall be exercised and performed by such additional or separate trustee. No
additional or separate trustee shall take any discretionary action except on the
instructions of Mortgagee or a Majority in Interest of Note Holders. No trustee
hereunder shall be personally liable by reason of any act or omission of any
other trustee hereunder, except that Mortgagee shall be liable for the
consequences of its lack of reasonable care in selecting, and Mortgagee's own
actions in acting with, any additional or separate trustee. Each additional or
separate trustee appointed pursuant to this (S) 9.02 shall be subject to, and
shall have the benefiT of, Articles V through IX and Article XI insofar as they
apply to Mortgagee. The powers of any additional or separate trustee appointed
pursuant to this (S) 9.02 shall not in any case exceed those of Mortgagee
hereunder.
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(c) If at any time Mortgagee deems it no longer necessary or
in order to conform to any such Law or take any such action or shall be advised
by such counsel that it is no longer so necessary or desirable in the interest
of the Note Holders, or if Mortgagee is requested to do so in writing by a
Majority in Interest of Note Holders, Mortgagee and (upon Mortgagee's written
request) Owner shall execute and deliver an indenture supplemental hereto and
all other instruments and agreements necessary or proper to remove any
additional or separate trustee. Mortgagee may act on behalf of Owner under this
(S) 9.02(c) when and to the extent it could so act under (S) 9.02(a).
ARTICLE X SUPPLEMENTS AND AMENDMENTS
10.01. INSTRUCTIONS OF MAJORITY; LIMITATIONS
(a) Mortgagee agrees with the Note Holders that it shall not
enter into any amendment, waiver, or modification of, or supplement or consent
to, any Operative Agreement without the written consent of a Majority in
Interest of Note Holders, but upon the written request of a Majority in Interest
of Note Holders, Mortgagee shall from time to time enter into any such
supplement or amendment, or execute and deliver any such waiver, modification,
or consent, as is specified in such request (and, to the extent required, agreed
to by Owner, Airframe Manufacturer, or Engine Manufacturer); provided, that,
without the consent of each holder of an affected Equipment Note then
outstanding and of Liquidity Provider, no such amendment, waiver, or
modification shall (1) modify this (S) 10.01, or Article II or III, or (S) 5.01,
5.02(c), 5.02(d), or 6.02, the definitions of "Event of Default", "Default",
"Majority in Interest of Note Holders", "Make-Whole Amount", or "Note Holder",
or the percentage of Note Holders required to take or approve any action
hereunder, (2) reduce the amount, or change the time of payment or method of
calculation of any amount, of Original Amount, Make-Whole Amount, or interest
with respect to any Equipment Note, (3) reduce, modify, or amend any indemnities
in favor of Mortgagee or the Note Holders (except that Mortgagee may consent to
any waiver or reduction of an indemnity payable to it), or the other Mortgage
Indemnitees, or (4) permit the creation of any Lien on the Mortgage Estate or
any part thereof (other than Permitted Liens), or deprive any Note Holder of the
benefit of the Lien of this Mortgage on the Collateral, except as provided in
connection with the exercise of remedies under Article V; FURTHER provided,
that, without the consent of the majority in interest of the holders of each
Series of Equipment Notes, no such amendment, modification, consent or waiver
shall modify (S)(S) 4.02(b), 4.02(e), 4.06, or Annex B of this MortgaGe,
Schedule 4 to the Participation Agreement, or any definition in Annex A of the
Participation Agreement relating to leasing, subleasing, re-registration, or
insurance of the Aircraft. Notwithstanding the foregoing, without the consent of
Liquidity Provider, neither Owner nor Mortgagee shall
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enter into any amendment, waiver, or modification of, or supplement or consent
to, the Operative Agreements which shall reduce, modify, or amend any
indemnities in favor of Liquidity Provider.
(b) Owner and Mortgagee may enter into one or more agreements
supplemental hereto without the consent of any Note Holder for any of the
following purposes: (1) (aa) to cure any defect or inconsistency herein or in
the Equipment Notes, or to make any change not inconsistent with the provisions
hereof (provided that such change does not adversely affect the interests of any
Note Holder in its capacity solely as Note Holder), or (bb) to cure any
ambiguity or correct any mistake; (2) to evidence the succession of another
party as Owner in accordance with the terms hereof, or to evidence the
succession of a new trustee hereunder pursuant hereto, the removal of the
trustee hereunder, or the appointment of any co-trustee or co-trustees or any
separate or additional trustee or trustees; (3) to convey, transfer, assign,
mortgage, or pledge any property to or with Mortgagee, or to make any other
provisions with respect to matters or questions arising hereunder, so long as
such action shall not adversely affect the interests of the Note Holders in
their capacity solely as Note Holder; (4) to correct or amplify the description
of any property at any time subject to the Lien of this Mortgage or better to
assure, convey, and confirm to Mortgagee any property subject or required to be
subject to the Lien of this Mortgage, including the Airframe or Engines or any
Replacement Airframe or Replacement Engine; (5) to add to the covenants of Owner
for the benefit of the Note Holders, or to surrender any rights or power herein
conferred upon Owner; (6) to add to the rights of the Note Holders; and (7) to
include on the Equipment Notes any legend as may be required by Law.
10.02. MORTGAGEE PROTECTED
If, in the opinion of the institution acting as Mortgagee hereunder,
any document required to be executed by it pursuant to (S) 10.01 affects any
right, duty, immunity, or indemnity with respect to such institution under this
Mortgage, such institution may in its discretion decline to execute such
document.
10.03. DOCUMENTS MAILED TO NOTE HOLDERS
Promptly after Owner or Mortgagee executes any document entered into
pursuant to (S) 10.01, Mortgagee shall mail, by first class mail, postage
prepaid, a copy thereof to Owner (if not a party thereto) and to each Note
Holder at its address last set forth in the Equipment Note Register, but
Mortgagee's failure to mail such copies shall not impair or affect the validity
of such document.
10.04. NO REQUEST NECESSARY FOR MORTGAGE SUPPLEMENT
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No written request or consent of the Note Holders pursuant to (S) 10.01
shall be required to enable Mortgagee to execute and deliver a supplement to
this Mortgage specifically required by the terms hereof.
ARTICLE XI MISCELLANEOUS
11.01. TERMINATION OF MORTGAGE
Upon (or at any time after) payment in full of the Original Amount of,
Make-Whole Amount (if any) on, interest on, and all other amounts due under all
Equipment Notes, and provided that no other Secured Obligations are then due to
the Mortgage Indemnitees, the Note Holders, and Mortgagee hereunder or under the
Participation Agreement or other Operative Agreement, Owner shall direct
Mortgagee to execute and deliver to or as directed in writing by Owner an
appropriate instrument releasing the Aircraft and the Engines and all other
Collateral from the Lien of the Mortgage, and Mortgagee shall execute and
deliver such instrument; provided, that this Mortgage and the trusts created
hereby shall earlier terminate, and this Mortgage shall be of no further force
or effect, upon any sale or other final disposition by Mortgagee of all property
constituting part of the Collateral, and Mortgagee's final distribution of all
money or other property or proceeds constituting part of the Collateral in
accordance with the terms hereof. Except as otherwise provided in this (S)
11.01, this Mortgage and the trusts created hereby shall continue in full force
and effect in accordance with the terms hereof.
11.02. NO LEGAL TITLE TO COLLATERAL IN NOTE HOLDERS
No holder of an Equipment Note shall have legal title to any part of
the Collateral. No transfer, by operation of law or otherwise, of any Equipment
Note or other right, title, and interest of any Note Holder in and to the
Collateral or hereunder shall terminate this Mortgage or entitle such holder or
any successor or transferee of such holder to an accounting or to the transfer
to it of any legal title to any part of the Collateral.
11.03. SALE OF AIRCRAFT BY MORTGAGEE IS BINDING
Any sale or other conveyance of the Collateral, or any part thereof
(including any part thereof or interest therein), by Mortgagee made pursuant to
this Mortgage shall bind the Note Holders and shall be effective to transfer or
convey all right, title, and interest of Mortgagee, Owner, and such holders in
and to such Collateral or part thereof. No purchaser or other grantee shall be
required to inquire as to the authorization, necessity, expediency, or
regularity of such sale or conveyance or as to the application of any sale or
other proceeds with respect thereto by Mortgagee.
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11.04. MORTGAGE FOR BENEFIT OF OWNER, MORTGAGEE, NOTE HOLDERS, AND THE
OTHER MORTGAGE INDEMNITEES
Nothing in this Mortgage, whether express or implied, shall give any
Person other than Owner, Mortgagee, the Note Holders, and the other Mortgage
Indemnitees any legal or equitable right, remedy, or claim under or in respect
of this Mortgage, except that the Persons referred to in the last paragraph of
(S) 4.02(b) shall be third-party beneficiaries of such paragraph.
11.05. NOTICES
Unless otherwise expressly specified or permitted by the terms hereof,
all notices, requests, demands, authorizations, directions, consents, waivers,
or other communications provided or permitted by this Mortgage to be made,
given, furnished, or filed shall be made, given, furnished, or filed, and shall
become effective, in the manner prescribed in the Participation Agreement.
11.06. SEVERABILITY
Any provision of this Mortgage which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
11.07. NO ORAL MODIFICATION OR CONTINUING WAIVER
No term or provision of this Mortgage or the Equipment Notes may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by Owner and Mortgagee, in compliance with (S) 10.01. Any waiver
of the terms hereof or of any Equipment Note shall be effective only in the
specific instance and for the specific purpose given.
11.08. SUCCESSORS AND ASSIGNS
All covenants and agreements herein shall bind and benefit each of the
parties hereto and the permitted successors and assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver, or other instrument
or action by any Note Holder shall bind the successors and assigns of such
holder. Each Note Holder by its acceptance of an Equipment Note agrees to be
bound by this Mortgage and all provisions of the Operative Agreements applicable
to a Note Holder.
11.09. HEADINGS
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The headings of the Articles and sections herein and in the table of
contents hereto are for convenience of reference only, and shall not define or
limit any of the terms or provisions hereof.
11.10. NORMAL COMMERCIAL RELATIONS
Anything in this Mortgage to the contrary notwithstanding, SSB may
conduct any banking or other financial transactions, and have banking or other
commercial relationships, with Owner, fully to the same extent as if this
Mortgage were not in effect, including the making of loans or other extensions
of credit to Owner for any purpose whatsoever, whether related to any of the
transactions contemplated hereby or otherwise.
11.11. GOVERNING LAW; COUNTERPART FORM
THIS MORTGAGE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE. This Mortgage is being
delivered in the state of New York. This Mortgage may be executed in separate
counterparts (or upon separate signature pages bound together into one or more
counterparts), each fully-executed set of which shall be an original.
11.12. VOTING BY NOTE HOLDERS
All votes of the Note Holders shall be governed by a vote of a Majority
in Interest of Note Holders, except as otherwise provided herein.
11.13. BANKRUPTCY
Owner and Mortgagee intend that Mortgagee shall be entitled to the
benefits of Section 1110 with respect to the right to take possession of the
Aircraft, Airframe, Engines, and Parts as provided herein in the event of a case
under Chapter 11 of the Bankruptcy Code in which Owner is a debtor. In any
instance where more than one construction is possible of the terms and
conditions hereof or any other pertinent Operative Agreement, a construction
which would preserve such benefits shall control over any construction which
would not preserve such benefits.
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IN WITNESS WHEREOF, Owner and Mortgagee have executed this Trust
Indenture and Mortgage N9__AT.
AIRTRAN AIRWAYS, INC.
By: __________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, as Mortgagee
By: ____________________________
Name:
Title:
<PAGE>
ANNEX A
DEFINITIONS
GENERAL PROVISIONS
(a) In each Operative Agreement, unless otherwise expressly provided, a
reference to:
(1) each of "Owner", "Mortgagee", "Note Holder", and any other
Person includes any successor in interest to it and any permitted
transferee, permitted purchaser, or permitted assignee of it;
(2) any agreement or other document (including any annex,
schedule, or exhibit thereto, or any other part thereof) includes that
agreement or other document as amended, supplemented, or otherwise
modified from time to time in accordance with its terms and in
accordance with the Operative Agreements, and any agreement or other
document entered into in substitution or replacement therefor;
(3) any provision of any Law includes any such provision as
amended, modified, supplemented, substituted, reissued, or reenacted
before the Delivery Date, and thereafter from time to time;
(4) "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof", "hereunder", and words of similar import, when used
in any Operative Agreement, refer to such Operative Agreement as a
whole and not to any particular provision of such Operative Agreement;
(5) "including", "include", and terms or phrases of similar
import means "including [etc.], without limitation";
(6) "or" is conjunctive and not disjunctive; and
(7) a reference to a "section" or "(S)", an "Exhibit", an
"Annex", or a "Schedule" in any Operative Agreement, or in any annex
thereto, is a reference to a section of, or an exhibit, an annex, or a
schedule to, such Operative Agreement or such annex, respectively.
(b) Each exhibit, annex, and schedule to each Operative Agreement is
incorporated in, and is a part of, such Operative Agreement.
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(c) Unless otherwise defined or specified in any Operative Agreement,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Agreement are for convenience only,
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Agreement.
(e) For purposes of each Operative Agreement, the existence of a
Default referred to in (S) 5.01(e), (f), or (g) shall not prohibit Owner from
taking any action or exercising any right that is conditioned on the
non-existence of any Special Default, Default, or Event of Default if such
Special Default, Default, or Event of Default consists of the institution of
reorganization proceedings with respect to Owner under Chapter 11 of the
Bankruptcy Code, and the trustee or debtor-in-possession in such proceedings has
agreed to perform its obligations under the Mortgage with the approval of the
applicable court and thereafter continues to perform such obligations in
accordance with Section 1110.
DEFINED TERMS
Actual Knowledge: (a) as it applies to Mortgagee, actual knowledge of a
responsible officer in the Corporate Trust Office, and (b) as it applies to
Owner, actual knowledge of a Vice President or more-senior officer of Owner or
any other officer of Owner having responsibility for the transactions
contemplated by the Operative Agreements; provided, that each of Owner and
Mortgagee shall be deemed to have "Actual Knowledge" of any matter as to which
it has received notice from Owner, any Note Holder, or Mortgagee, given pursuant
to (S) 11.05 of the Mortgage.
Affiliate of any Person: any other Person directly or indirectly
controlling, controlled by, or under common control with such Person. For
purposes of this definition, "control" means the power, directly or indirectly,
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract, or otherwise,
and "controlling", "controlled by", and "under common control with" have
correlative meanings.
After-Tax Basis: a basis such that any payment to be received
or receivable by any Person is supplemented by a further payment to that Person
so that the sum of all the two payments, after deducting all Taxes (taking into
account any related current credits or deductions) payable by such Person or any
of its Affiliates under any law or governmental authority, is equal to the
payment due to such Person.
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Aircraft: the Airframe and the two Engines.
Aircraft Bill of Sale: the full warranty bill of sale covering the
Aircraft delivered by Seller to Owner on the Closing Date.
Aircraft Description Exhibit: Exhibit A to the Mortgage.
Aircraft Documents: all technical data, manuals, and log books, and all
inspection, modification, and overhaul records and other service, repair,
maintenance, and technical records that the relevant Aviation Authority requires
to be maintained with respect to the Aircraft, including all required additions,
renewals, revisions, and replacements of any such materials, in each case in
whatever form and by whatever means or medium (including microfiche, microfilm,
paper, or computer disk) such materials are maintained or retained by or on
behalf of Owner.
Airframe: (1) the aircraft (excluding Engines or engines from time to
time installed thereon) manufactured by Airframe Manufacturer and identified by
Airframe Manufacturer's model number, United States registration number, and
Airframe Manufacturer's serial number in the Aircraft Description Exhibit, or
(2) any Replacement Airframe, including in either case any and all Parts
incorporated or installed in or attached or appurtenant to such airframe, and
any and all Parts removed from such airframe, unless the Lien of the Mortgage
does not apply to such Parts in accordance with (S) 4.04 of the Mortgage. Upon
substitution of a Replacement Airframe under and in accordance with the
Mortgage, such Replacement Airframe shall become subject to the Mortgage and
shall be the "Airframe" for all purposes of the Operative Agreements, and the
replaced Airframe shall cease to be subject to the Mortgage and shall cease to
be the "Airframe".
Airframe Manufacturer: McDonnell Douglas Corporation, a Maryland
corporation.
Amortization Amount for any Equipment Note, as of any Payment Date: the
amount determined by multiplying the percentage set forth opposite such Payment
Date on the Amortization Schedule by the Original Amount of such Equipment Note.
Amortization Schedule for an Equipment Note: the amortization schedule
for that Equipment Note delivered pursuant to (S) 2.02 of the Mortgage.
Appraiser: a firm of internationally-recognized, independent aircraft
appraisers.
Average Life Date for any Equipment Note: the date which follows the
time of determination by a period equal to the Remaining Weighted Average Life
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of such Equipment Note. The "Remaining Weighted Average Life" for any Equipment
Note on a given date is the number of days equal to (1) the sum of (a) each
then-remaining scheduled payment of principal of such Equipment Note, Times (b)
the number of days from and including such determination date to but excluding
the date on which such payment of principal is scheduled to be made, divided by
(2) the then-outstanding principal amount of such Equipment Note.
Aviation Authority: the FAA or, if the Aircraft is registered with any
other Government Entity under and in accordance with (S) 4.02(e) of the Mortgage
and (S) 5.4.5 of the Participation Agreement, such other Government Entity.
Bankruptcy Code: the United States Bankruptcy Code, 11 U.S.C. (S) 101
et seq.
Bolls of Sale: the FAA Bill of Sale and the Aircraft Bill of Sale.
Boeing Agreement: defined in (S) 5.01(l) of the Mortgage.
Business Day: any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized or required by law to close in New York,
NY, Orlando, FL, or the city and state in which Mortgagee maintains its
corporate trust office or receives and disburses funds.
Cash Equivalents: the following securities (which shall mature within
90 days of the date of purchase thereof): (1) direct obligations of the U.S.
Government; (2) obligations fully guaranteed by the U.S. Government; (3)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with, Mortgagee or any bank, trust company, or national
banking association incorporated or doing business under the laws of the United
States or any state thereof having a combined capital and surplus and retained
earnings of at least $1 billion and having a rate of "A" or better from the
Thomson BankWatch Service; or (4) commercial paper of any issuer doing business
under the laws of the United States or one of the states thereof and in each
case having a rating assigned to such commercial paper by Standard & Poor's or
Moody's equal to or higher than A1 or P1, respectively.
Certificate Holder: a registered holder of one or more Pass-Through
Certificates or if any Pass-Through Certificate is held by Depository Trust
Company, a beneficiary in fractional interest of such Pass-Through Certificate.
Citizen of the United States: defined in (S) 40102(a)(15) of the
Transportation Code and in the FARs.
Class a Certificate Holders: as defined as "Class A Certificateholder"
in the Intercreditor Agreement.
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Class B Certificate Holders: as defined as "Class B Certificateholder"
in the Intercreditor Agreement.
Class C Certificate Holders: as defined as "Class C Certificateholder"
in the Intercreditor Agreement.
Closing: the closing of the transactions contemplated by the
Participation Agreement.
Closing Date: the date on which the Closing occurs.
Code: the Internal Revenue Code of 1986; provided, that, when used in
relation to a Plan, "Code" shall be interpreted in accordance with the
regulations and rulings issued thereunder.
Collateral: defined in the Granting Clause of the Mortgage.
Consent and Agreement: the Consent and Agreement N9__AT, dated the
Closing Date, of Airframe Manufacturer.
Corporate Trust Office: Mortgagee's principal office, located at
Mortgagee's address for notices under the Participation Agreement, or such other
office at which Mortgagee's corporate trust business shall be administered and
which Mortgagee specifies by notice in writing to Owner and each Note Holder.
CRAF: the Civil Reserve Air Fleet Program established pursuant to 10
U.S.C. (S) 9511 - 13, or any similar substitute program.
Debt Rate: (1) for any Series, the rate per annum specified for such
Series under the heading "Interest Rate" in Schedule I to the Mortgage, and (2)
for any other purpose, with respect to any period, the weighted average interest
rate per annum during such period borne by the outstanding Equipment Notes,
excluding any interest payable at the Past-Due Rate.
Default: (1) any event or condition that, with the giving of notice or
the lapse of time, would become an Event of Default, or (2) any Event of
Default.
Deposit Agreement: each of the three Deposit Agreements between Escrow
Agent and Depository, dated as of the Issuance Date, each of which relates to
one of the Pass-Through Trusts, provided, that, for purposes of any obligation
of Owner, no amendment, modification, or supplement to, or substitution or
replacement of, any such Deposit Agreement shall be effective unless Owner
consents to it.
Depository: ABN AMRO Bank N.V. (acting through its Chicago branch), as
Depository under each Deposit Agreement.
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Dollars, United States Dollars, or $: the lawful currency of the United
States.
Dot: the Department of Transportation of the United States, or any
Government Entity succeeding to the functions of such Department of
Transportation.
Eligible Account: an account established by and with an Eligible
Institution at Mortgagee's request, which institution agrees, for all purposes
of the UCC (including UCC Article 8), that (1) such account shall be a
"securities account" (as defined in UCC (S) 8-501), (2) all property (other than
cash) credited to such account shall be treated as a "financial asset" (as
defined in UCC (S) 8-102(9)), (3) Mortgagee shall be the "entitlement holder"
(as defined in UCC (S) 8-102(7)) of such account, (4) it will comply with all
entitlement orders issued by Mortgagee to the exclusion of Owner, and (5) the
"securities intermediary jurisdiction" (under UCC (S) 8-110(e)) shall be the
state of New York.
Eligible Institution: the corporate trust department of (1) State
Street Bank and Trust Company of Connecticut, National Association, acting
solely in its capacity as a "securities intermediary" (as defined in UCC (S)
8-102(14)), or (2) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured
debt rating from Moody's and Standard & Poor's of at least A-3 or its
equivalent.
Engine: (1) each of the engines manufactured by Engine Manufacturer and
identified by Engine Manufacturer's model number and Engine Manufacturer's
serial number in the Aircraft Description Exhibit and originally installed on
the Airframe on the Closing Date, or (2) any Replacement Engine, in any case
whether or not from time to time installed on such Airframe or installed on any
other airframe or aircraft, including (for both clauses (1) and (2)) any and all
Parts incorporated or installed in or attached or appurtenant to such engine,
and any and all Parts removed from such engine, unless the Lien of the Mortgage
does not apply to such Parts in accordance with (S) 4.04 of the Mortgage. Upon
substitution of a Replacement Engine under and in accordance with the Mortgage,
such Replacement Engine shall become subject to the Mortgage and shall be an
"Engine" for all purposes of the Operative Agreements, and the replaced Engine
shall cease to be subject to the Mortgage and shall cease to be an "Engine".
Engine Consent and Agreement: Engine Consent and Agreement N9__AT,
dated the Closing Date, of Engine Manufacturer.
Engine Manufacturer: BMW Rolls-Royce GmbH.
Equipment Note Register: defined in (S) 2.06 of the Mortgage.
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Equipment Note: any equipment note issued under the Mortgage in the
form specified in (S) 2.01 and Exhibit B thereof (as such form may be varied
pursuant to the terms of the Mortgage), or any Equipment Note issued under the
Mortgage in exchange for or replacement of any Equipment Note.
ERISA: the Employee Retirement Income Security Act of 1974.
Escrow Agent: First Security Bank, National Association, as Escrow
Agent under each of the Escrow Agreements.
Escrow Agreement: each of the three Escrow and Paying Agent Agreements,
among Escrow Agent, Paying Agent, certain initial purchasers of the Pass-Through
Certificates named therein, and one of the Pass-Through Trustees, dated as of
the Issuance Date, each of which relates to one of the Pass-Through Trusts,
provided, that, for purposes of any obligation of Owner, no amendment,
modification, or supplement to, or substitution or replacement of, any such
Escrow Agreement shall be effective unless Owner consents to it.
Event of Default: defined in (S) 5.01 of the Mortgage.
Event of Loss with respect to the Aircraft, the Airframe, or any
Engine: any of the following circumstances, conditions, or events with respect
to such property, for any reason whatsoever:
(1) the destruction of such property, damage to such property
beyond economic repair, or rendition of such property
permanently unfit for normal use by Owner;
(2) the actual or constructive total loss of such property, or any
damage to such property, or requisition of title or use of
such property, which results in an insurance settlement with
respect to such property on the basis of a total loss or
constructive or compromised total loss;
(3) any theft, hijacking, or disappearance of such property for a
period of 90 consecutive days or more;
(4) any seizure, condemnation, confiscation, taking, or
requisition of use of such property by any Government Entity
or purported Government Entity (other than a requisition of
use by a U.S. Government Entity) for a period exceeding 180
consecutive days; or any taking of title of such property by
any Government Entity or purported Government Entity (whether
by seizure, condemnation, confiscation, requisition, or
otherwise);
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(5) as a result of any law, rule, regulation, order, or other
action by the Aviation Authority or by any Government Entity
of the government of registry of the Aircraft or by any
Government Entity otherwise having jurisdiction over the
operation or use of the Aircraft, the use of such property in
the normal course of Owner's business of passenger air
transportation is prohibited for a period of 180 consecutive
days, unless, before the expiration of such 180-day period,
Owner undertakes and is diligently carrying forward such steps
as are necessary or desirable to permit the normal use of such
property by Owner, but in any event if such use is prohibited
for a continuous period of one year.
Expenses: any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses, and
disbursements (including reasonable fees and disbursements of legal counsel,
accountants, appraisers, inspectors, or other professionals, and costs of
investigation).
FAA: the Federal Aviation Administration of the United States or any
Government Entity succeeding to the functions of such Federal Aviation
Administration.
FAA Bill of Sale: a bill of sale for the Aircraft on AC Form 8050-2 (or
such other form as may be approved by the FAA) delivered to Owner on the Closing
Date by Seller.
FAA Counsel: Crowe & Dunlevy.
FAA-Filed Documents: the Mortgage, the FAA Bill of Sale, [INCLUDE ANY
RELEASE OR TERMINATION OR CITIZENSHIP AFFIDAVIT] and an application for
registration of the Aircraft with the FAA in Owner's name.
FARS: the Federal Aviation Regulations issued or promulgated pursuant
to the Transportation Code from time to time.
Financing Statements: UCC-1 (and, where appropriate, UCC-3) financing
statements covering the Collateral, by Owner, as debtor, showing Mortgagee as
secured party, for filing in Florida and each other jurisdiction where (in
Mortgagee's opinion) filing is necessary to perfect its Lien on the Collateral.
GAAP: generally accepted accounting principles as set forth in the
statements of financial accounting standards issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants, as
varied by any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior
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periods except as may be disclosed in the pertinent Person's financial
statements.
Government Entity: (1) any federal, state, provincial, or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative, or regulatory
functions of such government, or (2) any other government entity having
jurisdiction over any matter contemplated by the Operative Agreements or
relating to the observance or performance of the obligations of any of the
parties to the Operative Agreements.
GTA: Fleet Support Agreement [Contract No. V005.02.01], dated December
8, 1995, by and between BMW Rolls-Royce GmbH and Owner (as successor to ValuJet
Airlines, Inc.), insofar as it relates to the Engine Warranties, but excluding
any and all side letter agreements thereto (which do not detract or limit the
Engine Warranties in any material respect), to the extent that such Fleet
Support Agreement relates to the Engines, as such Fleet Support Agreement, may
hereafter be amended, supplemented, and modified (to the extent permitted by the
terms of this Assignment) to the extent relating to the Engines.
Guarantee: Guarantee N9__AT, dated the Delivery Date, issued by
Holdings in favor of Mortgagee, SSB, each Pass-Through Trustee, the Certificate
Holders, and each Note Holder.
Guarantor Confirmation: an agreement, in form and substance reasonably
satisfactory to the Note Holders, under which Holdings confirms its obligations
under the Guarantee after giving effect to the transactions necessitating the
delivery of that agreement.
Holdings: AirTran Holdings, Inc., a Nevada corporation.
Indemnitee: (1) SSB and Mortgagee, (2) each separate or additional
trustee appointed pursuant to the Mortgage, (3) Subordination Agent, Paying
Agent, and Escrow Agent, (4) Liquidity Provider, (5) the Pass-Through Trustees,
(6) each Certificate Holder, (7) each Affiliate of the Persons described in
clauses (1) through (6), (8) the directors, officers, employees, and agents of
each of the Persons described in clauses (1), (2), (6), and (7), (9) the
respective directors, officers, employees, and agents of each of the Persons
described in clauses (3) through (7), (10) the successors and permitted assigns
of the Persons described in clauses (1), (2), and (8), and (11) the successors
and permitted assigns of the Persons described in clauses (3), (4), (5), and
(9); provided, that the Persons described in clauses (3), (4), (5), and (6), the
Affiliates of such Persons, and the Persons described in clauses (9) and (11)
are Indemnitees only for purposes of (S) 7.1 of the Participation Agreement. If
any Indemnitee is Airframe
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Manufacturer or Engine Manufacturer or any subcontractor or supplier of either
thereof, such Person shall be an Indemnitee only in its capacity as Certificate
Holder.
Intercreditor Agreement: the Intercreditor Agreement among the
Pass-Through Trustees, Liquidity Provider, and Subordination Agent, dated as of
the Issuance Date.
IRS: the Internal Revenue Service of the United States, or any
Government Entity succeeding to the functions of such Internal Revenue Service.
Issuance Date: November 3, 1999.
KFW Agreement: defined in (S) 5.01(k) of the Mortgage.
Law: (1) any constitution, treaty, statute, law, decree, regulation,
order, rule, or directive of any Government Entity, and (2) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
Lease Assignment: as defined in (S) 4.02(b) of the Mortgage.
Lien: any mortgage, pledge, lien, charge, claim, encumbrance, lease, or
security interest affecting the title to or any interest in property.
Liquidity Facilities: the three Revolving Credit Agreements (consisting
of a separate Revolving Credit Agreement with Liquidity Provider with respect to
each Pass-Through Trust) between Subordination Agent, as borrower, and Liquidity
Provider, each dated as of the Issuance Date, provided, that, for purposes of
any obligation of Owner, no amendment, modification, or supplement to, or
substitution or replacement of, any such Liquidity Facility shall be effective
unless Owner consents to it.
Liquidity Provider: ABN AMRO Bank N.V. (acting through its Chicago
branch), as "Class A Liquidity Provider", "Class B Liquidity Provider", and
"Class C Liquidity Provider" (as defined in the Intercreditor Agreement).
Majority in Interest of Note Holders as of a particular date of
determination: the holders of a majority in aggregate unpaid Original Amount of
all Equipment Notes outstanding as of such date (excluding any Equipment Notes
held by Owner or any of its Affiliates (unless all Equipment Notes then
outstanding are held by Owner or any Affiliate of Owner)); provided, that for
the purposes of directing any action, casting any vote, or giving any consent,
waiver, or instruction hereunder, any Note Holder may (in its sole discretion)
allocate any fractional portion of the principal amount of its Equipment Note(s)
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in favor of or in opposition to any such action, vote, consent, waiver, or
instruction. A "majority in interest" of holders of any Series of Equipment
Notes shall be the holders described in the preceding sentence if each reference
therein to "Equipment Notes" were replaced with "such Series of Equipment
Notes".
Make-Whole Amount with respect to any Equipment Note: an amount (as
determined by an independent investment bank of national standing) equal to the
excess, if any, of (a) the present value of the remaining scheduled payments of
principal and interest to maturity of such Equipment Note, computed by
discounting such payments on a semiannual basis on each Payment Date (assuming a
360-day year of twelve 30-day months), using a discount rate equal to the
Treasury Yield plus the Margin, over (b) the outstanding principal amount of
such Equipment Note plus accrued interest to the determination date. For
purposes of this definition, "Treasury Yield" means, at the determination date
for any Equipment Note, the interest rate (expressed as a decimal and, in the
case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semi-annual yield to maturity
for United States Treasury securities maturing on the Average Life Date of such
Equipment Note and trading in the public securities markets, either (1) as
determined by interpolation between the most-recent weekly average yield to
maturity for two series of United States Treasury securities, trading in the
public securities markets, (aa) one maturing as close as possible to, but
earlier than, the Average Life Date of such Equipment Note, and (bb) the other
maturing as close as possible to, but later than, the Average Life Date of such
Equipment Note, such yields in each case to be determined by averaging (and
rounding to the nearest whole multiple of 1/100 of 1% per annum, if the average
is not such a multiple) the yields of the relevant United States Treasury
securities (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward) (aa) which appear on the Reuter Monitor
Money Rates Service BNDS Page (or such other page of such service as may replace
such page), (bb) if no such yields are available on any such page of such
service, then which appear on Telerate Page 7677 (or such other page of such
service as may replace such page), or (cc) if no such yields are available on
any such page of such service, then as quoted by Salomon Smith Barney Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, in each case, at
approximately 11:00 a.m. New York City time on the date two Business Days before
the determination date). "Margin" means, (1) for the purpose of computing the
Make-Whole Amount payable under (S) 5.02 of the Mortgage, 1.5% per annum and (2)
in all other cases, 0% per annum. The determination date for a Make-Whole Amount
shall be the third Business Day before the applicable payment or redemption
date. Notwithstanding the foregoing, the Make-Whole Amount shall be zero on any
Series C Equipment Note prepaid on or before the second anniversary of the
Issuance Date other than pursuant to (S) 5.02(b) or (d) of the Mortgage.
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Materially Adverse Change with respect to any Person: any event,
condition, or circumstance that materially adversely affects such Person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities, and agreements under the Operative
Agreements.
Minimum Liability Insurance Amount: defined in Schedule 3 to the
Participation Agreement.
Moody's: Moody's Investors Service, Inc.
Mortgage: Trust Indenture and Mortgage N9__AT, dated the Closing Date,
between Owner and Mortgagee.
Mortgagee Agreements: the Purchase Agreement and the Bills of Sale (to
the extent included in Granting Clause (3) of the Mortgage), any Permitted Lease
assignment or assigned Permitted Lease contemplated by subclause (2) of the
Granting Clause in the Mortgage, and any other contract, agreement, or
instrument from time to time assigned or pledged under the Mortgage.
Mortgaged Property: defined in (S) 3.03 of the Mortgage.
Mortgage Indemnitee: (1) SSB and Mortgagee, (2) each separate or
additional trustee appointed pursuant to the Mortgage, (3) Subordination Agent,
(4) Liquidity Provider, (5) each Pass-Through Trustee, (6) Paying Agent, (7)
Escrow Agent, and (8) each of the directors, officers, employees, and agents of
each of the Persons described in clauses (1) through (7).
Mortgagee: State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its individual capacity but
solely as mortgagee under the Mortgage.
Non-U.S. Person: any Person, other than a United States person as
defined in Code (S) 7701(a)(30).
Note Holder: each registered holder of one or more Equipment Notes.
Note Purchase Agreement: the Note Purchase Agreement, dated as of the
Issuance Date, among AirTran Airways, Inc., Subordination Agent, Escrow Agent,
Paying Agent, and the Pass-Through Trustee under each Pass-Through Trust
Agreement providing for the issuance and sale of certain equipment notes.
Officer's Certificate of any party to the Participation Agreement: a
certificate signed by the Chairman, the President, any Vice President (including
those with varying ranks such as Executive, Senior, Assistant, or Staff Vice
President), the Treasurer, or the Secretary of such party.
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Operative Agreements: the Participation Agreement, the Mortgage, the
Bills of Sale, the Guarantee, the Equipment Notes, the KfW Agreement, and the
Boeing Agreement.
Operative Indenture: an indenture under which notes have been issued
and purchased by the Pass-Through Trustees pursuant to the Note Purchase
Agreement.
Original Amount of an Equipment Note: the stated original principal
amount of such Equipment Note and, with respect to all Equipment Notes, the
aggregate stated original principal amounts of all Equipment Notes.
Owner Person: Owner, any lessee, assignee, successor, or other user or
Person in possession of the Aircraft, the Airframe, or an Engine with or without
color of right, or any Affiliate of any of the foregoing (excluding any Tax
Indemnitee or any related Tax Indemnitee with respect thereto, or any Person
using or claiming any rights with respect to the Aircraft, the Airframe, or an
Engine directly by or through any of the Persons in this parenthetical).
Participation Agreement: Participation Agreement N9__AT, dated the
Closing Date, among Owner, the Pass-Through Trustees, Subordination Agent, and
Mortgagee.
Parts: all appliances, parts, components, instruments, appurtenances,
accessories, furnishings, seats, and other equipment of whatever nature (other
than (1) Engines or engines, and (2) any Removable Part leased by Owner from a
third party or subject to a security interest granted to a third party) from
time to time installed or incorporated in or attached or appurtenant to the
Airframe or any Engine.
Pass-Through Agreements: the Pass-Through Trust Agreements, the Note
Purchase Agreement, the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Liquidity Facilities and the Fee Letters referred
to in (S) 2.03 of each of the Liquidity Facilities, provided, that no amendment,
modification, or supplement to, or substitution or replacement of, any such Fee
Letter shall be effective for purposes of any obligation of Owner, unless Owner
consents to it.
Pass-Through Certificates: the pass-through certificates issued by the
Pass-Through Trusts (and any pass-through certificates for which such
pass-through certificates may be exchanged).
Pass-Through Trust: each of the three separate pass-through trusts
created under the Pass-Through Trust Agreements.
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Pass-Through Trust Agreement: each of the three separate Pass-Through
Trust Agreements, each dated as of the Issuance Date, by and between Owner and a
Pass-Through Trustee.
Pass-Through Trustee: State Street Bank and Trust Company of
Connecticut, National Association, a national banking association, in its
capacity as trustee under each Pass-Through Trust Agreement.
Pass-Through Trustee Agreements: the Participation Agreement, the
Pass-Through Trust Agreements, the Note Purchase Agreement, the Deposit
Agreements, the Escrow Agreements, and the Intercreditor Agreement.
Past-Due Rate: the Debt Rate plus 2% (not to exceed the maximum rate
permitted under applicable Law).
Paying Agent: State Street Bank and Trust Company of Connecticut,
National Association, as paying agent under each of the Escrow Agreements.
Payment Date: each April 1 and October 1, commencing with the first
such date to occur after the Closing Date.
Permitted Air Carrier: any Permitted Foreign Air Carrier or U.S. Air
Carrier.
Permitted Country: any country listed on Schedule 4 to the
Participation Agreement; except any such country that, when the pertinent lease
or other transfer begins, does not maintain normal diplomatic relations with the
United States (or, in the case of Taiwan, diplomatic relations at least as good
as those in effect on the Delivery Date), is involved in internal or external
war or military conflict, or is a country with which it would constitute a
breach of Law for Mortgagee or any Note Holder to engage directly or indirectly
in business.
Permitted Foreign Air Carrier: any air carrier that (1) has its
principal executive offices in any Permitted Country, and (2) is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.
Permitted Government Entity: (1) the U.S. Government, or (2) any
Government Entity if the Aircraft is then registered under the laws of the
country of such Government Entity.
Permitted Lease: a lease or sublease permitted under (S) 4.02(b) of the
Mortgage.
Permitted Lessee: the lessee under a Permitted Lease.
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Permitted Lien: (a) the rights of Mortgagee under the Operative
Agreements, or of any Permitted Lessee under any Permitted Lease; (b) Liens
attributable to SSB or Mortgagee; (c) the rights of others under agreements or
arrangements to the extent expressly permitted by (S) 4.02(b) or (S) 4.04 of the
Mortgage; (d) Liens of Taxes either not yet due or being contested in good faith
by appropriate proceedings if such Liens and such proceedings do not involve any
material risk of the sale, forfeiture, or loss of the Aircraft, the Airframe,
any Engine, or the interest of Mortgagee or any Note Holder therein, or impair
the Lien of the Mortgage; (e) materialmen's, mechanics', workers', repairers',
employees', or other like Liens arising in the ordinary course of business for
amounts the payment of which either is not yet delinquent for more than 60 days
or is being contested in good faith by appropriate proceedings, if such Liens
and such proceedings do not involve any material risk of the sale, forfeiture,
or loss of the Aircraft, the Airframe, any Engine, or the interest of Mortgagee
or any Note Holder therein, or impair the Lien of the Mortgage; (f) Liens
arising out of any judgment or award against Owner (or any Permitted Lessee),
if, within 60 days after the entry thereof, that judgment or award is discharged
or vacated, or has its execution stayed pending appeal, or is discharged,
vacated, or reversed within 60 days after the expiration of such stay, and if
during any such 60-day period there is not, or any such judgment or award does
not involve, any material risk of the sale, forfeiture, or loss of the Aircraft,
the Airframe, any Engine, or the interest of Mortgagee or any Note Holder
therein, or impair the Lien of the Mortgage; (g) any other Lien with respect to
which Owner (or any Permitted Lessee) provides a bond, cash collateral, or other
security adequate in the reasonable opinion of Mortgagee.
Permitted Manufacturer: any manufacturer of commercial jet airframes or
commercial jet aircraft engines, or subsidiary of any such manufacturer, that
has its principal executive offices in the United States or a Permitted Country.
Person or person: an individual, firm, partnership, joint venture,
trust, trustee, Government Entity, organization, association, corporation,
limited liability company, government agency, committee, department, authority,
and other body, corporate or incorporate, whether having distinct legal status
or not, or any member of any of the same.
Plan: any employee benefit plan within the meaning of ERISA (S) 3(3),
or any plan within the meaning of Code (S) 4975(e)(1).
Purchase Agreement: Purchase Agreement DAC 95-40-D, dated December 6,
1995, between Airframe Manufacturer and ValuJet Airlines, Inc. (predecessor to
Owner), including all exhibits thereto, together with all letter agreements
entered into that by their terms constitute part of such Purchase Agreement, all
to the extent included in the Granting Clause (3) of the Mortgage.
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QIB: defined in (S) 2.07 of the Mortgage.
Related Equipment Note: an equipment note issued pursuant to a Related
Mortgage.
Related Mortgage: a trust indenture and mortgage (1) covering a Boeing
model 717-200 aircraft to be delivered pursuant to the Purchase Agreement, (2)
entered into in connection with a Related Participation Agreement, and (3) which
provides for the issuance of equipment notes to three pass-through trustees
named thereunder.
Related Participation Agreement: a participation agreement covering a
Boeing model 717-200 aircraft delivered pursuant to the Purchase Agreement, and
entered into by the Owner and State Street Bank and Trust Company of
Connecticut, National Association, as mortgagee, subordination agent, and
pass-through trustee, in connection with the Owner's offering of Pass-Through
Certificates, series 1999-1.
Removable Part: defined in (S) 4.04(d) of the Mortgage.
Replacement Airframe: an airframe substituted for the Airframe pursuant
to Article IV of the Mortgage.
Replacement Engine: an engine substituted for an Engine pursuant to
Article IV of the Mortgage.
Responsible Officer of a Person: (1) the President or Chief Financial
Officer of such Person, any other officer of such Person customarily bearing
responsibility for matters relating to the transactions contemplated by the
Operative Agreements, or (3) any officer of such Person specifically authorized
to take responsibility for any matter relating to the transactions contemplated
by the Operative Agreements.
SEC: the Securities and Exchange Commission of the United States, or
any Government Entity succeeding to the functions of such Securities and
Exchange Commission.
Section 1110: 11 U.S.C. (S) 1110 of the Bankruptcy Code, or any
successor or analogous section of the federal bankruptcy law in effect from time
to time.
Secured Obligations: defined in (S) 2.05 of the Mortgage.
Securities Act: the Securities Act of 1933.
Security: a "security" as defined in (S) 2(l) of the Securities Act.
Seller: [Airframe Manufacturer] [other].
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Senior Holder: defined in (S) 2.13(c) of the Mortgage.
Series: Series A, Series B, or Series C.
Series A or Series A Equipment Notes: Equipment Notes issued under the
Mortgage and designated as "Series A" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series A".
Series B or Series B Equipment Notes: Equipment Notes issued under the
Mortgage and designated as "Series B" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series B".
Series C or Series C Equipment Notes means Equipment Notes issued under
the Mortgage and designated as "Series C" thereunder, in the Original Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series C".
Similar Aircraft: a Boeing model 717-200 aircraft.
Special Default: (1) Owner's failure to pay any amount of principal of
or interest on any Equipment Note when due, (2) any Default referred to in (S)
5.01(f) or (g) of the Mortgage, or (3) any Event of Default.
SSB: State Street Bank and Trust Company of Connecticut, National
Association, a national banking association, not in its capacity as Mortgagee
under the Mortgage, but in its individual capacity.
Standard & Poor's: Standard & Poor's Ratings Services.
Subordination Agent: State Street Bank and Trust Company of
Connecticut, National Association, as subordination agent under the
Intercreditor Agreement.
Tax Indemnitee: (1) SSB and Mortgagee, (2) each separate or additional
trustee appointed pursuant to the Mortgage, (3) each Note Holder, and (4) the
successors, assigns, and agents of the foregoing.
Taxes: all taxes, levies, imposts, duties, charges, assessments, or
withholdings of any nature whatsoever imposed by any Taxing Authority, and any
penalties, additions to tax, fines, or interest thereon or additions thereto.
Taxing Authority: any federal, state, or local government or other
taxing authority in the United States, any foreign government or any political
subdivision or taxing authority thereof, any international taxing authority, or
any territory or possession of the United States or any taxing authority
thereof.
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Threshold Amount: defined in Schedule 3 to the Participation Agreement.
Transaction Expenses: all costs and expenses incurred by Mortgagee or
the Certificate Holders in connection with (1) the preparation, execution, and
delivery of the Operative Agreements and the recording or filing of any
documents, certificates, or instruments in accordance with any Operative
Agreement, including the FAA-Filed Documents and the Financing Statements, (2)
the initial fee of Mortgagee under the Mortgage, and (3) the reasonable fees and
disbursements of counsel for each Mortgagee, each counsel for the Certificate
Holders, and FAA Counsel, in each case, in connection with the Closing.
Transactions: the transactions contemplated by the Participation
Agreement.
Transfer: the transfer, sale, assignment, or other conveyance of all or
any interest in any property, right, or interest.
Transferee: a Person to whom any Note Holder purports or intends to
Transfer any or all of its right, title, or interest in the Equipment Note, as
described in (S) 8 of the Participation Agreement.
Transportation Code: subtitle VII of title 49, United States Code.
UCC: the Uniform Commercial Code as in effect in any applicable
jurisdiction.
United States or U.S.: the United States of America; provided, that for
geographic purposes, "United States" means the 50 states and the District of
Columbia of the United States of America.
U.S. Air Carrier: any United States air carrier who is a Citizen of the
United States holding an air carrier operating certificate issued by the
Secretary of Transportation pursuant to chapter 447 of the Transportation Code
for aircraft capable of carrying 10 or more individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating certificate
issued pursuant to FAR Part 121, or who may operate as an air carrier by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.
U.S. Government: the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
U.S. Person: any Person described in Code (S) 7701(a)(30).
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Wet Lease: any arrangement whereby Owner or a Permitted Lessee agrees
to furnish the Aircraft, the Airframe, or any Engine to a third party pursuant
to which the Aircraft, Airframe, or Engine is at all times in the operational
control of Owner or a Permitted Lessee, provided, that Owner's obligations under
the Mortgage shall continue in full force and effect notwithstanding any such
arrangement.
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ANNEX B
INSURANCE
The terms defined in Annex A to Trust Agreement and Mortgage N9__AT,
when capitalized as in Annex A, have the same meanings when used in this
"Insurance" Annex. Annex A also contains rules of usage that control
construction in this "Insurance" Annex.
A. LIABILITY INSURANCE
1. Except as provided in (S) A2 below, Owner will carry or cause to be
carried at all times, at no expense to Mortgagee, any Note Holder, or any
Certificate Holder, comprehensive airline legal liability insurance (including
passenger liability, property damage, and contractual liability insurance) with
respect to the Aircraft, the Airframe and the Engines, which is (a) in an amount
not less than the greater of (x) the amount of comprehensive airline legal
liability insurance from time to time applicable to aircraft operated by Owner
of the same type and operating on similar routes as the Aircraft, and (y) the
Minimum Liability Insurance Amount per occurrence; (b) of the type and covering
the same risks as from time to time applicable to aircraft operated by Owner of
the same type as the Aircraft; and (c) maintained in effect with insurers of
nationally or internationally recognized responsibility (such insurers being
referred to herein as "Approved Insurers").
2. During any period that the Aircraft is on the ground and not in
operation, Owner may carry or cause to be carried, in lieu of the insurance
required by (S) A1 above, insurance otherwise conforming with the provisions of
(S) A1 except that (a) the amounts of coverage shall not be required to exceed
the amounts of public liability and property damage insurance from time to time
applicable to aircraft operated by Owner of the same type as the Aircraft which
are on the ground and not in operation, and (b) the scope of the risks covered
and the type of insurance shall be the same as from time to time shall be
applicable to aircraft operated by Owner of the same type which are on the
ground and not in operation.
B. HULL INSURANCE
1. Except as provided in (S) B2 below, Owner will carry or cause to be
carried at all times, at no expense to Mortgagee, any Note Holder, or any
Certificate Holder with Approved Insurers "all-risk" ground and flight aircraft
hull insurance covering the Aircraft (including the Engines when they are
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installed on the Airframe or any other airframe) which is of the type as from
time to time applicable to aircraft operated by Owner of the same type as the
Aircraft for an amount denominated in United States Dollars not less than 120%
of the unpaid Original Amount (the "Insured Value").
Any policies of insurance carried in accordance with this (S) B.1
covering the Aircraft and any policies taken out in substitution or replacement
for any such policies (a) shall name Mortgagee as exclusive loss payee for any
proceeds to be paid under such policies up to an amount equal to the Insured
Value, and (b) shall provide that (aa) in the event of a loss involving proceeds
in excess of the Threshold Amount, the proceeds in respect of such loss up to an
amount equal to the Insured Value shall be payable to Mortgagee, except in the
case of a loss with respect to an Engine installed on an airframe other than the
Airframe, in which case Owner (or any Permitted Lessee) shall endeavor to
arrange for any payment of insurance proceeds in respect of such loss to be held
for the account of Mortgagee whether such payment is made to Owner (or any
Permitted Lessee) or any third party and, if Mortgagee receives such a payment
otherwise than in respect of an Event of Loss, then, upon receipt of evidence
satisfactory to Mortgagee that the damage giving rise to such payment has been
repaired or that such payment is then required to pay for repairs then being
made, Mortgagee shall, unless a Special Default exists, pay the amount of such
payment to Owner or its order, and (bb) the entire amount of any loss involving
proceeds of the Threshold Amount or less or the amount of any proceeds of any
loss in excess of the Insured Value shall be paid to Owner or its order unless a
Special Default exists and the insurers have been notified thereof by Mortgagee.
In the case of a loss with respect to an engine (other than an Engine) installed
on the Airframe, Mortgagee shall hold any payment to it of any insurance
proceeds in respect of such loss for the account of Owner or any other third
party who is entitled to receive such proceeds.
2. During any period that the Aircraft is on the ground and not in
operation, Owner may carry or cause to be carried, in lieu of the insurance
required by (S) B1 above, insurance otherwise conforming with the provisions of
(S) B1, except that the scope of the risks and the type of insurance shall be
the same as from time to time applicable to aircraft operated by Owner of the
same type similarly on the ground and not in operation, provided, that Owner
shall maintain insurance against risk of loss or damage to the Aircraft in an
amount equal to the Insured Value during such period that the Aircraft is on the
ground and not in operation.
C. WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE
If Owner (or any Permitted Lessee) operates or proposes to operate the
Aircraft, the Airframe, or any Engine (1) in any area of recognized hostilities,
or
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(2) on international routes and Owner (or such Permitted Lessee) maintains
war-risk, hijacking, or allied perils insurance for other aircraft that it
operates on such routes, Owner shall maintain or cause to be maintained
war-risk, hijacking, and related perils insurance of substantially the same type
carried by major United States commercial air carriers operating the same or
comparable models of aircraft on similar routes or in such areas, and in no
event in an amount less than the unpaid Original Amount. In any event, Owner
shall maintain or cause a Permitted Lessee to maintain the "Common North
American Airline Buyback" to the War Exclusion Clause (or London or other
equivalent) war risk perils buyback.
D. GENERAL PROVISIONS
Any policies of insurance carried in accordance with (S)(S) A, B, and
C, including any policies taken out in substitution or replacement for such
policies:
(1) shall name Mortgagee, each Note Holder, each Certificate
Holder (identified by description, not by name) and the Liquidity
Provider as an additional insured (collectively, the "Additional
Insureds"), as their interests may appear;
(2) shall apply worldwide and have no territorial
restrictions or limitations (except only in the case of war, hijacking,
and related perils insurance required under (S) C, which shall apply to
the fullest extent available in the international insurance market);
(3) shall provide that, in respect of the interests of the
Additional Insureds in such policies, the insurance shall not be
invalidated or impaired by any act or omission (including
misrepresentation and nondisclosure) by Owner (or any Permitted Lessee)
or any other Person (including use for illegal purposes of the Aircraft
or any Engine), and shall insure the Additional Insureds regardless of
any breach or violation of any representation, warranty, declaration,
term, or condition in such policies by Owner (or any Permitted Lessee);
(4) shall provide that, if the insurers cancel such insurance
for any reason whatsoever, or if it is allowed to lapse for nonpayment
of premium, or if any material change is made in the insurance which
adversely affects the interest of any of the Additional Insureds, such
cancellation, lapse, or change shall not be effective as to the
Additional Insureds for 30 days (seven days in the case of war risk,
hijacking, and allied perils insurance) after receipt by the Additional
Insureds of written
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notice by such insurers of such cancellation, lapse, or change,
provided, that if any notice period specified above is not reasonably
obtainable, such policies shall provide for as long a period of prior
notice as shall then be reasonably obtainable;
(5) shall waive any rights of setoff (including for unpaid
premiums), recoupment, counterclaim, or other deduction, whether by
attachment or otherwise, against each Additional Insured;
(6) shall waive any right of recourse, subrogation, setoff,
recoupment, counterclaim, or other deduction against any Additional
Insured;
(7) shall be primary without right of contribution from any
other insurance that may be available to any Additional Insured;
(8) shall provide that all of the liability insurance
provisions thereof, except the limits of liability, shall operate in
all respects as if a separate policy had been issued covering each
party insured thereunder;
(9) shall provide that none of the Additional Insureds shall
be liable for any insurance premium; and
(10) shall contain a 50/50% Clause per Lloyd's Aviation
Underwriters' Association Standard Policy Form AVS 103;
provided, that any such endorsements may be subject to any limitations on
endorsements generally prevailing in the airline insurance marketplace at the
time (e.g., AVN67B).
E. REPORTS AND CERTIFICATES; OTHER INFORMATION
On or before the Closing Date and on or before each renewal date of the
insurance policies required hereunder, Owner will furnish or cause to be
furnished to Mortgagee insurance certificates describing in reasonable detail
the insurance maintained by Owner hereunder and a report, signed by Owner's
regular independent insurance broker (the "Insurance Broker"), stating the
opinion of such Insurance Broker that (a) all premiums in connection with the
insurance then due have been paid, and (b) such insurance complies with this
Annex B. To the extent such agreement is reasonably obtainable, Owner will also
cause the Insurance Broker to agree to advise Mortgagee in writing of any
default in the payment of any premium and of any other act or omission on the
part of Owner of which the Insurance Broker has knowledge and which might
invalidate or render unenforceable, in whole or in part, any insurance on the
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Aircraft or Engines or cause the cancellation or termination of such insurance,
and to notify Mortgagee in writing at least 30 days (seven days in the case of
war-risk and allied perils coverage, or such shorter period as may be available
in the international insurance market, as applicable) before the cancellation,
lapse, or materially adverse change of any insurance maintained pursuant to this
Annex B.
F. RIGHT TO PAY PREMIUMS
The Additional Insureds shall have the rights but not the obligations
of an additional named insured. None of Mortgagee and the other Additional
Insured shall have any obligation to pay any premium, commission, assessment, or
call due on any such insurance (including reinsurance). Notwithstanding the
foregoing, in the event of cancellation of any insurance due to the nonpayment
of premiums, Mortgagee shall have the option, in its sole discretion, to pay any
such premium in respect of the Aircraft that is due in respect of the coverage
pursuant to this Mortgage and to maintain such coverage, as Mortgagee may
require, until the scheduled expiry date of such insurance and, in such event,
Owner shall, upon demand, reimburse Mortgagee for amounts that it so pays.
G. DEDUCTIBLES; SELF-INSURANCE
Owner may self-insure by way of deductible, premium adjustment,
franchise provisions, or otherwise (including, with respect to insurance
maintained pursuant to (S) B, insuring for a maximum amount which is less than
the Insured Value) in the insurance covering the risks required to be insured
against pursuant to (S) 4.06 of the Mortgage and this Annex B under a program
applicable to all aircraft in Owner's fleet, but in no case shall the aggregate
amount of self-insurance in regard to (S) 11 of the Mortgage and this Annex B
exceed $1 million per occurrence, or, if greater, the lesser per policy year
with respect to all of the aircraft in Owner's fleet (including the Aircraft of
(x) 4% of the consolidated tangible net worth of Holdings at the time (based on
the latest publicly-available financial statements at the time that the
insurance is placed) and (y) the value of the single most valuable aircraft in
Owner's fleet), unless an insurance broker of national standing shall certify
that the standard among all other major U.S. airlines is a higher level of
self-insurance, in which case Owner may self-insure to such higher level. In
addition, Owner (and any Permitted Lessee) may self-insure to the extent of any
applicable deductible per aircraft that does not exceed industry standards for
major U.S. airlines.
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EXHIBIT A
AIRCRAFT DESCRIPTION
The Aircraft is a Boeing model 717-200 aircraft, consisting of (1) an airframe
bearing FAA registration no. N9__AT and manufacturer's serial no. 55___, (2) two
BMW Rolls-Royce model BR715 engines (each of which has 750 or more rated takeoff
horsepower or its equivalent), bearing manufacturer's serial nos. 13___ and
13___, and (3) all appliances, parts, instruments, appurtenances, accessories,
furnishings, and other equipment or property incorporated in such airframe and
engines.
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<PAGE>
EXHIBIT B
THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE.
ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER
THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS
IS AVAILABLE.
AIRTRAN AIRWAYS, INC.
Series 1999-1_ Equipment Note due ___________ 1, 20__, issued in
connection with the Boeing model 717-200 aircraft bearing United
States registration mark N9__AT.
No. ____ _____________, ____
$______________________
Interest Rate Maturity Date
------------- -------------
_______% _______________, 201_
AirTran Airways, Inc. ("Owner"), a Delaware corporation hereby promises
to pay to _________________________________ (or its registered assignee) the
principal sum of $____________ (the "Original Amount"), together with interest
at the Debt Rate on the unpaid balance of the Original Amount (calculated on the
basis of a 360-day year of twelve 30-day months) from the date hereof until paid
in full. The Original Amount of this Equipment Note shall be payable in
installments on the dates in Schedule I hereto equal to the corresponding
percentage of the Original Amount of this Equipment Note in Schedule I hereto.
Accrued but unpaid interest shall be due and payable in semiannual installments,
starting _____________ 1, 2000, and on each April 1 and October 1 thereafter, to
and including ___________ 1, 201_. Notwithstanding the foregoing, the final
payment made on this Equipment Note shall be amount sufficient to discharge in
full the unpaid Original Amount and all accrued and unpaid interest on, and any
other amounts due under, this Equipment Note. If any date on which a payment
under this Equipment Note becomes due and payable is not a Business Day, then
such payment shall not be made on such scheduled date but shall be made on the
following Business Day, and if such payment is made on such following Business
Day, no interest shall accrue on the amount of such payment during such
extension.
B-1
<PAGE>
For purposes hereof, "Mortgage" means Trust Indenture and Mortgage
N9__AT, dated as of ___________________, ____, between Owner and State Street
Bank and Trust Company of Connecticut, National Association ("MORTGAGEE"), as
amended or supplemented from time to time. All terms used in this Equipment
Note, if defined in the Mortgage and not in this Equipment Note, have the same
meanings as in the Mortgage.
This Equipment Note shall bear interest, payable on demand, at the
Past-Due Rate (calculated on the basis of a 360-day year of twelve 30-day
months) on any overdue Original Amount, any overdue Make-Whole Amount, and (to
the extent permitted by applicable Law) any overdue interest and any other
amounts payable hereunder which are overdue, in each case for the period that it
is overdue. Amounts shall be overdue if not paid when due (whether at stated
maturity, by acceleration, or otherwise).
An Equipment Note Register shall be maintained at Mortgagee's Corporate
Trust Office (or at the office of any successor), for the purpose of registering
transfers and exchanges of Equipment Notes, in the manner provided in (S) 2.06
of the Mortgage.
The Original Amount and interest and other amounts due hereunder shall
be payable in Dollars in immediately available funds at Mortgagee's Corporate
Trust Office, or as otherwise provided in the Mortgage. Each such payment shall
be made without any presentment or surrender of this Equipment Note. However,
this Equipment Note shall be surrendered to Mortgagee for cancellation promptly
after any final payment.
The holder hereof, by its acceptance of this Equipment Note, agrees
that (except as otherwise provided in the Mortgage) each payment of the Original
Amount, Make-Whole Amount (if any), and interest received by it hereunder shall
be applied: first, to pay accrued interest on this Equipment Note (as well as
any interest on any overdue Original Amount, any overdue Make-Whole Amount, or
(to the extent permitted by Law) any overdue interest and other amounts
hereunder) to the date of such payment, second, to pay the Original Amount of
this Equipment Note then due, third, to pay any Make-Whole Amount and any other
amount due hereunder or under the Mortgage, and fourth, the balance, if any,
remaining thereafter, to pay installments of the Original Amount of this
Equipment Note remaining unpaid in the inverse order of their maturity.
This Equipment Note is one of the Equipment Notes referred to in the
Mortgage which have been or are to be issued by Owner Trustee pursuant to the
Mortgage. The Collateral is held by Mortgagee as security, in part, for the
Equipment Notes. The provisions of this Equipment Note are subject to the
B-2
<PAGE>
Mortgage. Refer to the Mortgage for a complete statement of (1) the rights and
obligations of the holder of this Equipment Note, and the nature and extent of
the security for this Equipment Note, (2) the rights and obligations of the
holders of any other Equipment Notes executed and delivered under the Mortgage,
and the nature and extent of the security for any other Equipment Notes executed
and delivered under the Mortgage, and (3) a statement of the terms and
conditions of the Trust created by the Mortgage, to all of which terms and
conditions in the Mortgage each holder hereof agrees by its acceptance of this
Equipment Note.
As provided in the Mortgage and subject to certain limitations therein,
this Equipment Note is exchangeable for a like aggregate Original Amount of
Equipment Notes of different authorized denominations, as requested by the
holder surrendering it.
Before this Equipment Note is duly presented for registration of
transfer, Owner and Mortgagee shall treat the person in whose name this
Equipment Note is registered as the owner hereof for all purposes, whether or
not this Equipment Note is overdue, and neither Owner nor Mortgagee shall be
affected by notice to the contrary.
This Equipment Note is subject to redemption as provided in (S) 2.10,
(S) 2.11, and (S) 2.12 of the Mortgage, but not otherwise. In addition, this
Equipment Note may be accelerated as provided in (S) 5.02 of the Mortgage.
[The indebtedness evidenced by this Equipment Note is, to the extent
and in the manner provided in the Mortgage, subordinate and subject in right of
payment to the prior payment of certain Secured Obligations (as defined in the
Mortgage) in respect of [Series A Equipment Notes](1) [Series A and Series B
Equipment Notes](2), and this Equipment Note is issued subject to such
provisions. By accepting this Equipment Note, the Note Holder (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs Mortgagee on such
Note Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Mortgage, and (c) appoints
Mortgagee such Note Holder's attorney-in-fact for such purpose.](3)
Unless the certificate of authentication hereon has been executed by or
on behalf of Mortgagee by manual signature, this Equipment Note shall not be
- ----------------
1. To be inserted in the case of a Series B Equipment Note.
2. To be inserted in the case of a Series C Equipment Note.
3. To be inserted for each Equipment Note other than any Series A
Equipment Note.
B-3
<PAGE>
entitled to any benefit under the Mortgage or be valid or obligatory for any
purpose.
THIS EQUIPMENT NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
B-4
<PAGE>
IN WITNESS WHEREOF, Owner has executed this Equipment Note.
AIRTRAN AIRWAYS, INC.
By: _______________________
Name:
Title:
B-5
<PAGE>
MORTGAGEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Equipment Notes referred to in the Mortgage (as
defined in the foregoing Equipment Note).
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL
ASSOCIATION, as Mortgagee
By: _____________________________
Name:
Title:
B-6
<PAGE>
SCHEDULE I
TO
EQUIPMENT NOTE
EQUIPMENT NOTE AMORTIZATION
Payment Date Percentage of Original
------------ ----------------------
Amount to Be Paid
-----------------
[See Schedule I to Mortgage
which is inserted upon issuance]
B-7
<PAGE>
SCHEDULE I
MATURITY DATE ORIGINAL AMOUNT INTEREST RATE
------------- --------------- -------------
Series A: 10.41%
Series B: 10.81%
Series C 11.42%
Maximum Aggregate
Original Amount:
Mortgage and Mortgage
Equipment Note Amortization
Percentage of Original
Payment Date Amount to be Paid
------------ ----------------------
I-1
<PAGE>
EXHIBIT 21
Exhibit 21 Subsidiaries of the Registrant.
AirTran Airways, Inc.
ValuJet Investment Corp.
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the: (i) Registration Statement
(Form S-8 No. 33-87658) pertaining to the ValuJet Airlines, Inc. 1993 Incentive
Stock Option Plan and the ValuJet Airlines, Inc. 1994 Stock Option Plan, (ii)
Registration Statement (Form S-8 No. 33-91624) pertaining to the ValuJet
Airlines, Inc. 1995 Employee Stock Purchase Plan, (iii) Registration Statement
(Form S-8 No. 33-98568) pertaining to the Airways Corporation 1995 Stock Option
Plan and 1995 Director Stock Plan, (iv) Registration Statement (Form S-3 No.
333-62863) of AirTran Holdings, Inc., (v) Registration Statement (Form S-3 No.
33-83048) of ValuJet Airlines, Inc. and, (vi) Registration Statement (Form S-8
No. 333-82727) pertaining to the AirTran 1996 Stock Option Plan, of our report
dated January 25, 2000, with respect to the consolidated financial statements
and schedule of AirTran Holdings, Inc. included in the Annual Report (Form 10-K)
for the year ended December 31, 1999.
ERNST & YOUNG LLP
Atlanta, Georgia
March 23, 2000
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 76,171
<SECURITIES> 0
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<PP&E> 292,138
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0
0
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<OTHER-SE> (40,031)
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<INCOME-PRETAX> (96,655)
<INCOME-TAX> 2,739
<INCOME-CONTINUING> (99,394)
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<NET-INCOME> (99,394)
<EPS-BASIC> (1.53)
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